On February 24, 2022, the Russian Federation (hereinafter “RF”) launched a full-scale armed aggression against Ukraine.

The invasion of Ukraine by RF military forces was made possible by the actions and decisions of a relatively small group of individuals, including business owners and public figures.

One of the effective non-military tools for depriving Russia of the economic basis for waging an aggressive war against Ukraine and for compensating for the consequences of such actions would be sanctions in the form of freezing and forfeiting assets, as ordered by a court, to the state.

At the same time, until May 24, 2022, the Law of Ukraine “On Sanctions” did not contain any provision providing for the application of such sanction mechanisms as the forfeiture of assets of individuals or legal entities to the state. Moreover, the aforementioned Law did not contain a list of actions that a natural or legal person would have to commit for such sanctions to be applied against them.

The explanatory note to the draft Law of Ukraine “On Amendments to Certain Legislative Acts Regarding the Enhancement of the Effectiveness of Sanctions Related to the Assets of Certain Individuals,” registered by the Secretariat of the Verkhovna Rada on March 22, 2022, under No. 14д9/1-2022/56505, it is stated that to achieve its objectives, the draft law must fulfill the following tasks:

- strengthening the effectiveness of asset freezing as a type of sanction and expanding its scope;

- to codify the exceptional grounds and conditions, as well as the mechanism for applying a new, exceptional type of sanction—the forfeiture of assets to the state pursuant to a court decision.

It is noted that the sanction is of an exceptional nature, as reflected in the exceptional grounds for its application (only against individuals and legal entities whose actions have posed a threat to Ukraine’s national security, sovereignty, or territorial integrity (including through armed aggression or terrorist activities) or have facilitated (including through financing) the commission of such acts by other persons), as well as in the strict limitation of the period of its potential application to the duration of the legal regime of martial law (Article 5-1 of the Law of Ukraine “On Sanctions” as amended by the draft law).

Effective May 24, 2022, the Law of Ukraine “On Sanctions” was amended with new provisions that clarified the grounds under which sanctions in the form of asset freezing and forfeiture to the state may be imposed; which defined the exclusive grounds, special conditions, and the pretrial and judicial (including appellate) procedures for applying this new type of sanction, as well as other procedural matters.

At the same time, effective May 24, 2022, Article 6 of the Law of Ukraine “On Sanctions” (“Final Provisions”) was amended to include a paragraph, subparagraph, and clause specifying the applicability of the new provisions, namely: Paragraph 1-1 of Part 1 of Article 4 and Article 5-1 of this Law, to legal relationships that arose prior to May 24, 2022.

According to Article 58 of the Constitution of Ukraine, “laws and other normative legal acts shall not have retroactive effect, except in cases where they mitigate or abolish a person’s liability. No one may be held liable for acts that were not recognized by law as offenses at the time they were committed.”

In the Supreme Court’s decision of April 6, 2023, in the landmark case No. 260/3564/22, the court examined the issue of the retroactive application of a normative act and concluded that the components of the principle of the rule of law include, in particular, legal predictability and legal certainty, which are necessary so that participants in the relevant legal relationships may foresee the consequences of their actions and be confident in their legitimate expectations that the rights they have acquired under current legislation, and that they will be able to exercise the content and scope of those rights (para. 3 of section 4 of the reasoning section of Decision No. 8-rp/2005 of the Constitutional Court of Ukraine dated October 11, 2005).

This position regarding the necessity of adhering to the principle of legal certainty corresponds to the consistent practice of the European Court of Human Rights under Article 6(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms.

Consequently, state institutions must be consistent with the normative acts they adopt and must maintain a reasonable balance between an individual’s predictability (trust, legitimate expectations, certainty) and the interests for which regulatory changes are introduced. Respect for such confidence, as noted by the European Court of Human Rights, must serve as a measure of legal protection under domestic law against arbitrary interference by state authorities in guaranteed rights (para. 156 of the Judgment in the case of “Kopecky v. Slovakia” dated September 28, 2004, application No. 44912/98).

One of the mechanisms for preventing arbitrary interference by the state and its authorities in the exercise of human rights and freedoms is the principle enshrined in Part 3 of Article 22 of the Constitution of Ukraine: the principle that the content and scope of existing rights and freedoms may not be narrowed when new laws are adopted or amendments are made to existing ones. Thus, granting a normative legal act retroactive effect will not violate the principles of non-retroactivity and legal certainty if these changes do not worsen a person’s legal position: do not establish or increase legal liability, nor do they abolish or restrict existing rights and freedoms.

The Supreme Court reached the same conclusions in its ruling of June 2, 2022, in Case No. 640/20744/19.

A systematic analysis of the cited legal provisions and the factual circumstances indicates that individuals and legal entities cannot be held liable for acts committed prior to May 24, 2022, as listed in Article 5-1 of the Law of Ukraine “On Sanctions,” since, prior to May 24, 2022, the law did not recognize such acts as offenses.

The High Anti-Corruption Court, when resolving similar legal disputes regarding the application of sanctions in the form of asset forfeiture, takes a diametrically opposed position, which boils down to the fact that a sanction in the form of asset forfeiture to the state may be applied to a person who committed or began to commit an act provided for in Part 1 of Article 5-1 of the Law of Ukraine “On Sanctions,” prior to May 24, 2022 (decision of April 18, 2024, in Case No. 991/558/24; decision of May 15, 2024, in Case No. 991/11220/23).

The court explains this position by citing provisions of international law regarding the categorical prohibition of armed aggression, as well as all related acts, which existed and were in force under Ukraine’s national legislation long before the Law of Ukraine “On Sanctions” entered into force.

Furthermore, the very process of imposing sanctions often fails to comply with the principle of transparency, as specific grounds are frequently kept confidential solely on the basis that the information was obtained in the course of operational-investigative, counterintelligence, or intelligence activities—even if such information was derived from open sources.

It appears that the final verdict on these issues must be rendered by international judicial bodies, as individuals subject to sanctions are not deprived of the opportunity to use all available legal mechanisms to protect their rights.