Business news from Ukraine

Olga Kuchmiienko
Ph.D., Attorney-at-Law,
Deputy Head of the International Law Committee of Ukrainian Bar Association

Jake Lowther
Lawyer (Australia)
Co-Founder of Foreign Lawyers Network – Sweden

Introduction
International sanctions remain one of the most effective responses of the international community to violations of international law. Unfortunately, it is also a hot topic for Ukraine in the context of protection from acts of aggression in Eastern Ukraine and the annexation of Crimea. This topic is hotter still in light of the incorrect interpretation by foreign banks of the expression “Ukrainian sanctions” as “sanctions against Ukraine”, increasing the workload for Ukrainian companies and their lawyers. It can be a real headache to clarify that sanctions “aim to protect Ukraine”, so no compliance risk for the bank arises.
Recently, the topic of sanctions made the front pages again when the President of Ukraine imposed sanctions against Ukrainian citizens and associated companies. This raises the question of the power of states to impose sanctions against their own citizens and registered entities. A number of scholarly articles make various conclusions as to how sanctions should be employed and the efficacy of such measures. This article will consider the use of international sanctions from the Australian and Swedish perspectives, with a particular focus on measures implemented in response to the annexation of Crimea.

What are sanctions?
Sanctions can be defined as “measures not involving the use of armed force that are imposed in situations of international concern”. Such measures may be designed inter alia “to bring a situation of international concern to an end by influencing those responsible”, to limit the adverse effects of a situation of international concern, or to penalise those responsible for such a situation. The use of sanctions or other restrictive measures by states and multilateral organisations has increased in recent years in response to inter alia the Arab Spring of 2011, the nuclear programs of Iran and North Korea, as well as Russia’s annexation of the Crimean Peninsula. Indeed, a total of 14 United Nations (UN) sanctions regimes are in operation today, each authorised under Article 41 of the United Nations Charter and administered by a committee chaired by a non-permanent member of the UN Security Council (UNSC).

Australia
Authority and measures
As a member of the UN, Australia imposes multilateral sanctions primarily in line with the orders of the UNSC and pursuant to the Charter of the United Nations Act 1945 (Cth). Australia also imposes its own autonomous sanctions primarily pursuant to the Autonomous Sanctions Act 2011 (Cth) (Australian Sanctions Act) and the Autonomous Sanctions Regulations 2011 (Cth). Sanctions in relation to certain UNSC Resolutions have automatic legal effect. Since 1 January 2020, the Australian sanctions regime has been administered by the Australian Sanctions Office (ASO), which is established under the auspices of the Department of Foreign Affairs and Trade (DFAT). The ASO maintains a “Consolidated List” of all persons and entities the subject of Australian sanctions.
Among the measures that Australia may employ when imposing sanctions are: i) restrictions on the trade of goods and services, e.g. geographically targeted prohibitions on the export and import of goods and services; ii) restrictions on the conduct of commercial activities, e.g. trading of securities; iii) financial sanctions targeted at designated persons and entities, e.g. “freezing” the assets of a designated person or entity; and iv) travel bans on designated persons, preventing entry to Australia. According to DFAT, as at 2021 Australia imposes the following sanctions regimes:

Figure 1

Australia sanctions in relation to Crimea and Eastern Ukraine
In line with the general trend, Australia has imposed an increasing number of sanctions in the last ten years, particularly following the annexation of Crimea in February 2014 and the downing of passenger flight MH17 over eastern Ukraine in July 2014, which had been carrying 38 Australian nationals. Although Australia did not impose sanctions directly in response to this incident, Julie Bishop (L), Australia’s Minister for Foreign Affairs at the time, declared that “everything’s on the table” if Moscow did not accept responsibility for the incident and if it made further interventions in Ukraine.
In March 2015, Australia updated its sanctions regime against Russia, Crimea and Sevastopol in line with earlier sanctions imposed by the European Union (EU) and the United States. In 2019, further measures were imposed against seven Russian nationals for their role in the interception and seizure of Ukrainian naval vessels in the Kerch Strait, as well as against three “leaders” from separatist-controlled parts of the Donetsk and Luhansk regions of Ukraine following “elections” in 2018. The most recent imposition of sanctions occurred on 1 February 2020, targeting seven individuals for “their role in facilitating the so-called ‘elections’ in Crimea and Sevastopol held in September 2019.” The sanctions were imposed by Australia’s current Minister for Foreign Affairs, Marise Payne (L), by legislative instrument. As is apparent from Figure 1, the combined listing of “Russia/Ukraine” which refers to Russia, Crimea and Sevastopol, demonstrates how confusion can arise for entities such as banks attempting to comply with the various international sanctions regimes.
Penalties for violations of the Australian sanctions regime
Severe penalties may be imposed in the event of a contravention of Australia’s sanctions regime, including the giving of false information, including up to ten year’s imprisonment or fines of 2,500 penalty units for individuals or 10,000 penalty units for companies (as of 1 July 2020, one penalty unit is AUD 222.00). Under Australian criminal law, corporate criminal responsibility may be attributed to individual company officers.
As for whether Australian sanctions could be applied against citizens of Australia, section 4 of the Australian Sanctions Act defines “autonomous sanctions” as sanctions “intended to influence… another person or entity outside Australia”. The legislation is intended to apply broadly and it is therefore theoretically possible that Australian sanctions could be directed against Australian citizens who are located outside Australia, in order to influence their activity in line with government policy.
Although definitive statistics are not available, it can be inferred from the attitudes of the Australian media that the population is broadly in support of the use of sanctions to protect human rights and the rule of law, both autonomously and in line with UNSC Resolutions, and that their use will therefore continue in response to international events.
Sweden
Authority and measures
In contrast to Australia, all sanctions effective in Sweden have first been imposed by either the UN or the EU. As a member state of the EU since 1995, Sweden no longer pursues its historical policy of neutrality or non-alignment outside of foreign affairs and there is increasing debate about membership of NATO in response to a geopolitical climate echoing the traditional fear of Russia (Sw. rysskräcken). UN sanctions are now implemented jointly through the framework of the EU Common Foreign and Security Policy and EU regulations, bypassing the need for domestic legislation.
In Sweden, sanctions are put into effect pursuant to the Act on Certain International Sanctions (1996:95) (Swedish Sanctions Act). The Swedish Sanctions Act authorises the Government (Sw. regering) to implement UN sanctions by decree, which is then submitted to Parliament (Sw. riksdagen) for its approval. Such sanctions by decree are limited to certain subjects, including: i) residence in Sweden of foreign nationals; ii) the import and or export of goods, money or other assets; iii) manufacture; iv) communications; v) business activities; and vi) educational and vocational training. Sanctions are coordinated by the UN Policy Department at the Ministry for Foreign Affairs. From the Swedish perspective, sanctions should be temporary, reviewed regularly and removed once their objective has been achieved. Any UN or EU sanctions targeting Swedish citizens will be enforced to the extent that they do not infringe the economic and social security responsibility of the Swedish state.
Penalties for violations of the Swedish sanction regime
Although there is no criminal liability for minor offences, 8 § of the Swedish Sanctions Act provides that in the event of a serious breach of Sweden’s sanctions regime, there penalty is up to four year’s imprisonment, while negligent breaches may result in up to six months’ imprisonment or a monetary fine. Further, any profits derived from the breach may be forfeited, pursuant to 11-12 §§ of the Swedish Sanctions Act.
Practices
Sweden has taken a key interest in refining the global sanctions regime. In 2014, Sweden conducted a high-level review of UN sanctions alongside Australia, Finland, Germany and Greece to examine how the effectiveness of their implementation can be enhanced, such as through improved coordination and information sharing. Sweden has also worked to increase due process protection in the sanctions system, in particular for individuals, collaborating with Germany and Switzerland to produce a report on this subject in 2006. Sweden’s efforts have resulted in some success as procedures have gradually been improved, including regular reviews of sanctions lists and the establishment of the Office of the Ombudsperson in 2010 in respect to the UN sanctions against Al-Qaida.
However, in 2011 it was reported that Sweden took the “very unusual” step of “blocking” efforts by other EU member states to include two telecoms firms in Syria linked commercially to Swedish firm Ericsson on an EU sanctions list in connection with the outbreak of civil war. In response, the then Minister for Foreign Affairs Carl Bildt (M) asserted that “the telephone networks were vital for opponents of the Syrian government to communicate” and the suggestion that Sweden had acted to protect the interests of Ericsson was “ignorant.”
As in the case of Australia, definitive statistics on the Swedish public’s view of sanctions are not available. However, perhaps in part due to the long Swedish tradition of press freedom, the Swedish media can be considered more vocal in calling for sanctions against foreign actors. Nevertheless, as mentioned, Sweden’s ability to impose sanctions is limited to the implementation of EU-wide sanctions and it will instead need to lobby the other member states if it considers new or additional measures are necessary.
Conclusion
Having considered the sanctions regimes of Australia and Sweden, Australia clearly operates a more “independent” sanctions regime as it imposes autonomous sanctions, with broad powers that theoretically could target its own citizens located abroad. However, the aims of each state’s sanctions regimes and measures taken are frequently aligned. Indeed, both states have led joint efforts to improve the UN sanctions system and to enhance protections of the rule of law and human rights. Although Swedish media is more vocal in its support of sanctions, both states will continue to employ their sanctions regimes to address situations of international concern.