President of Ukraine approves new package of sanctions of NSDC

By:

On 17 May 2017 the Ukrainian President enacted order №133/2017 which allowed the National Security and Defense Council of Ukraine (as of 28 April 2017) to impose special economic and other restrictive measures. The Decision establishes sanctions against a number of individuals and entities (residents as well as non-residents). The list of individuals, who are subject to sanctions ("Persons"), is detailed in the annexes to the Decision.

Sanctions are set for one year, three years, or indefinitely. The different type of sanctions include:

  • Freezing of assets
  • Suspension of economic and financial liabilities
  • Limitation of commercial transactions
  • Prevention of the capital withdrawal from Ukraine
  • Prohibition of technologies and intellectual property rights transfer
  • Limitation or termination of telecommunication services provision and public telecommunications networks usage

Problems

Due to the enactment of the Decision, the companies operating in Ukraine may face the following issues, in particular:

  • The legality of the usage of intellectual property rights (including software), that had been purchased from Persons before the Decision came into effect (including software updating and support)
  • The difficulty in blocking access to resources and services of the Internet by operators and providers of telecommunications
  • The possibility of making payments for pre-shipped goods, rendered services if they had been received/rendered before the Decision came into effect
  • The possibility of goods and services receipt from Persons if the payment had been made on a prepaid basis before the Decision came into effect
  • The legality of expenses and input VAT recognition regarding goods and services that were purchased from Persons
  • The risk for operations with Persons to be recognized as ones that contradict the interests of the state and society (art. 228 of the Civil Code)

Recommended actions

In order to minimize the risks associated with the Decision, we recommend:

  • Analyzing the available business relations and operations with Persons (direct or indirect)
  • Evaluating the possible effect of imposed sanctions on business relations and operations with Persons
  • Considering the possibility of restructuring of the contractual relationships with Persons or application of other mitigation measures