ILI Project Manager Andrii Klymosiuk explained the shortcomings of Ukraine’s sanctions policy using the example of businessman Kostiantyn Hryhorishyn

The case involving suspicion against the beneficial owner of JSC Sumyoblenergo, Kostiantyn Hryhorishyn, has exposed systemic problems in Ukraine’s sanctions legislation. One of the main issues is that sanctions imposed on an individual do not automatically extend to the companies they control. This is discussed in an article by Institute of Legislative Ideas Project Manager Andrii Klymosiuk published in Business Censor.

“Judicial practice, including the position of the Supreme Court, is based on the principle that a legal entity is an independent subject and is not responsible for the obligations of its owner. As a result, companies effectively controlled by sanctioned individuals may continue to freely dispose of assets, while the economic benefit may ultimately flow to the very persons against whom sanctions were imposed,” the expert explained.

At the same time, he noted that the European Union applies a different approach. According to the guidance on the implementation of Regulation (EU) No. 269/2014, if a sanctioned person controls a company, it is presumed that the restrictions effectively extend to its assets as well. In such cases, the company may rebut this presumption by proving the absence of real control or benefit for the sanctioned person.

Another gap highlighted by Andrii Klymosiuk concerns the very definition of the sanction “asset blocking” in Ukraine’s Law On Sanctions. It means a prohibition on using or disposing of existing property, but it does not explicitly prohibit the acquisition of new assets.

“This creates opportunities to circumvent sanctions when sanctioned individuals continue to receive income – for example, salaries or remuneration. Formally, the funds may be blocked after they are credited, but the economic flow itself does not actually stop. At the same time, the EU sanctions system follows a stricter principle: it prohibits providing any funds or economic resources to sanctioned persons – directly or indirectly,” the ILI expert noted.

In addition, he recalled the absence of a system of special permits in Ukraine. In EU countries, sanctions are combined with a licensing mechanism. Competent authorities may allow the use of frozen funds for basic needs – such as medical treatment, food, utilities, or legal assistance.

“In Ukraine, such a mechanism does not exist. As a result, the system does not distinguish between payments for necessary expenses and multimillion payouts, which creates room for abuse and at the same time may generate risks of human rights violations,” Andrii Klymosiuk said.

In the expert’s view, another gap is the absence of administrative and criminal liability for sanctions violations. In the EU, relevant rules are already in place: member states must criminalize the concealment of sanctioned persons’ assets, the use of intermediaries, or other schemes to circumvent sanctions. In Ukraine, the relevant draft law No. 12406 – submitted by the President as urgent – has still not been adopted by parliament.

“The story of a sanctioned businessman receiving a multimillion salary demonstrates that the main problem of Ukraine’s sanctions policy lies not in the lack of political will, but in the imperfection of legal mechanisms. To increase the effectiveness of sanctions, Ukraine needs to harmonize its legislation with European standards – extend sanctions to controlled assets, prohibit the provision of economic resources to sanctioned persons, introduce a licensing system for basic needs, and establish liability for sanctions circumvention,” the publication states. 

Andrii Klymosiuk emphasized that without such changes, even formally frozen assets may continue to leave the economy through schemes similar to the one investigated in the Hryhorishyn case.