Experts discuss the introduction of a mechanism for individual sanctions licences

Ukrainian sanctions legislation requires alignment with European standards as part of the country's path toward EU accession. In addition, existing gaps should be addressed and effective mechanisms established in this area. This was the key message of the expert discussion titled “Introducing a Sanctions Licensing Mechanism as a Necessary Component of Ukraine’s Sanctions Policy Reform.”

The central topic of the discussion was sanctions licences – exceptions to sanctions restrictions that allow individuals and legal entities to conduct financial and economic transactions that would otherwise be prohibited.

The event was organized by the Institute of Legislative Ideas (ILI) analytical centre together with the Ukrainian Bar Association (UBA) Committee on Sanctions and Economic Security, with the support of the European Union and the International Renaissance Foundation within the framework of the joint initiative “Entering the EU Together.”

More than 60 participants joined the discussion, including representatives of the Ministry of Economy, the Ministry of Foreign Affairs, the Ministry of Justice, the National Bank of Ukraine, the legal profession, businesses, civil society organizations, legal experts, and academics. The purpose of the event was to outline the next steps in reforming Ukraine’s sanctions policy and to collect proposals for legislative amendments.

Tetiana Khutor, Head of the ILI Analytical Centre, emphasized the importance of introducing sanctions licences as a tool for ensuring flexibility in sanctions policy. According to her, this mechanism helps avoid negative consequences of sanctions both for the state and for human rights.

“When a state imposes sanctions, it must clearly understand why it is doing so and what consequences those restrictions may have. In certain cases, those restrictions should include exceptions. Practice shows that regardless of the country – whether Ukraine, an EU member state, the United States, or the United Kingdom – exceptions and derogations are always necessary,” the expert stated.

Iryna Serbin, Coordinator of the UBA Committee on Sanctions and Economic Security, highlighted the need to introduce a licensing system that would meet both Ukraine’s security needs and European standards. She also drew attention to a paradoxical gap in the legislation regarding liability for sanctions circumvention.

“Ukrainian companies with sanctioned owners face a number of challenges that complicate their operations. Introducing licences would enable them to operate steadily and continue paying taxes. If the corporate rights of sanctioned individuals are confiscated in favour of the state, Ukraine will inherit functioning enterprises. At the same time, the inevitability of punishment for sanctions violations will motivate businesses to strictly comply with the established restrictions,” Iryna Serbin noted.

Olha Kvashuk, Programme Manager for Europe and the World at the International Renaissance Foundation, added that harmonizing sanctions legislation with European standards is an inevitable step for Ukraine on its path toward EU membership. According to her, the key challenge is finding a balance between strengthening sanctions and safeguarding human rights and business interests.

“One of the key recommendations in last year’s European Union report was that Ukraine should streamline its sanctions legislation and amend the Criminal Code by introducing liability for sanctions circumvention. We will need to continue moving in this direction,” stressed the representative of the International Renaissance Foundation.

Mykola Rubashchenko, Legal Analyst at ILI, presented research on licensing mechanisms in the sanctions policies of the United States, the United Kingdom, and the European Union. In particular, he highlighted the risks of criminalizing sanctions violations and circumvention without simultaneously introducing a licensing mechanism.

“Sanctions licences should be viewed as a tool that allows sanctions policy to be reconciled with the principles of a democratic system. If we introduce criminal liability without introducing a licensing mechanism, the consequences could be severe,” Mykola Rubashchenko warned.

During the presentation of the concept for legislative amendments introducing a licensing mechanism, Andrii Klymosiuk, ILI Project Manager, stated that Ukraine should draw on the experience of its international partners, particularly EU member states. He also emphasized the need to establish liability for abuses of granted licences.

“The introduction of a licensing mechanism must be accompanied by the creation of an effective system of oversight and reporting. This is necessary to ensure that licences do not become a tool for circumventing sanctions. Violations of licence conditions should be punishable under criminal law, as required by the EU Directive,” the ILI Project Manager noted.

Representatives of government bodies responsible for sanctions policy also commented on the initiative. Oleksandr Tyshchenko, Head of the Sanctions Policy Department at the Ministry of Economy, Environment and Agriculture of Ukraine, supported the idea of introducing a system of sanctions licences.

“Before introducing criminal liability, we must ensure that no loopholes remain and that mechanisms for granting individual licences are in place. We should always strive to maintain a balance between the interests of national security, the economy, and third parties,” the Ministry representative emphasized.

Andrii Danyliuk, Head of the Sanctions Policy Department at the Ministry of Foreign Affairs, spoke about the ministry’s work on adapting Ukrainian sanctions legislation to EU law.

“The issue of licences will be raised during upcoming consultations with EU representatives. We will present the mechanism we have developed and listen to their views,” the MFA representative stated.

This material was prepared with the support of the European Union and the International Renaissance Foundation within the framework of the joint initiative “Entering the EU Together.” The content reflects the views of the authors and does not necessarily represent the views of the European Union or the International Renaissance Foundation.