Published on 31 May 2021

FIFTH SECTION

Application no. 18049/18 MSL, TOV against Ukraine lodged on 10 April 2018 communicated on 10 May 2021

STATEMENT OF FACTS

The applicant company, MSL, TOV, is a limited liability company registered in Ukraine. It is represented before the Court by Ms N. Kucheruk , a lawyer practising in Kyiv.

The facts of the case, as submitted by the applicant company, may be summarised as follows.

The applicant company is a major operator of state lotteries in Ukraine. In 2014 it was the biggest payer of the military tax [1] .

Pursuant to decisions of the National Security and Defence Council of Ukraine (“the NSDCU”) of 2 September 2015, 16 September 2016 and 28 April 2017, which were enacted by Presidential Decrees of 16 September 2015, 17 October 2016 and 15 May 2017, the following restrictions were applied in respect of the applicant company under the Sanctions Act (see “Relevant domestic law” below) during the period from 16 September 2015 to 15 May 2018:

“(1) freezing of [its] assets – a temporary restriction on [the applicant company ’ s] right to use and dispose of its assets;

(2) prevention of capital outflow;

(3) suspension of economic and financial obligations;

(4) annulment of licenses and permits for currency valuables ’ import and export, as well as restriction on cash withdrawal from bank cards issued by foreign residents;

(5) prohibition of the registration by the National Bank of Ukraine of a payment system participant where the payment institution is a foreign resident.” [2]

The NSDCU cited Article 3 § 1 (1) of the Sanctions Act (see “Relevant domestic law” below) as grounds for those restrictions.

The applicant company was one of over a hundred entities, to which sanctions were applied. That list included , in particular, the “ Zorya ”, “ Kalmius ”, “ Oplot ”, “Death” and “Somali” battalions recognised as armed separatist groups under the EU Council Decision no. 2014/145/CFSP of 9 February 2015. The sanctions against those battalions were limited to freezing of assets and prevention of capital outflow.

Given that the grounds for the sanctions in respect of the applicant company implied a reference to criminal offences, on 5 October 2015 the applicant company ’ s beneficial owner applied to the State Security Service for investigating the matter and bringing those responsible to criminal liability. On 31 March 2017 the State Security Service issued a decision stating that its investigation had not revealed any indication of criminal offences and was therefore to be discontinued.

The applicant company initiated two sets of administrative proceedings before the Higher Administrative Court (“the HAC”): on 11 March 2016 in respect of Presidential Decree of 16 September 2015 (the first set) and on 28 October 2016 in respect of Presidential Decree of 17 October 2016 (the second set). On 26 May 2017 the HAC stayed the proceedings in the first set. It held that there were doubts as to whether the Sanctions Act complied with the rule of law principle enshrined in the Constitution. Given that it was the prerogative of the Supreme Court to apply to the Constitutional Court for assessment of compliance of legal provisions with the Constitution, the HAC applied to the Supreme Court for initiating such an assessment. On 8 June 2017 the HAC also stayed the proceedings in the second set on the same grounds. The constitutional review of the Sanctions Act was not initiated.

Following a large-scale judiciary reform, on 15 December 2017 the HAC seized existing and the Supreme Court was replaced by a new one, with a new structure and new functions. The Cassation Administrative Court within the new Supreme Court took over the examination of cases earlier dealt with by the HAC. On 2 August 2019 it resumed the proceedings in the first set. They are currently pending. As regards the proceedings in the second set, they remain stayed.

On 14 August 2014 the Verkhovna Rada of Ukraine adopted the Sanctions Act in relation to the situation in Crimea and the Eastern Ukraine.

Its Article 3 reads as follows:

Grounds for and principles of the application of sanctions

“1. Grounds for applying sanctions are as follows:

(1) actions of a foreign state, a foreign legal entity or individual, or other actors, which pose a real and/or potential threat to national interests, national security, sovereignty and territorial integrity of Ukraine, contribute to terrorist activities and/or violate human rights and freedoms, run counter to interests of the society and the State, lead to occupation of a territory, expropriation of property or restrictions on property rights, cause pecuniary damage, create obstacles for sustainable economic development or effective implementation by citizens of Ukraine of their rights and freedoms;

(2) resolutions of the United Nations General Assembly and Security Council;

(3) decisions and regulations of the EU Council; and

(4) facts [disclosing] a violation of the Universal Declaration of Human Rights.

2. The application of sanctions shall be based on the principles of lawfulness, transparency, impartiality, fitness for purpose and effectiveness.

3. Commission of acts indicated in paragraph 1 (1) of this Article by a foreign state, by a foreign legal entity, by a legal entity under the control of a foreign legal entity or a non-resident, by a foreigner, by a stateless person or by entities involved in terrorist activities, shall also constitute grounds for applying sanctions.”

COMPLAINTS

The applicant company complains that the restrictions imposed on it under the Sanctions Act were in breach of Article 1 of Protocol No. 1. It argues , in particular, that they were unlawful given the lack of clarity in the Sanctions Act regarding both the criteria for applying sanctions and the legal procedures used. Furthermore, the applicant company submits that the interference with its property rights was not justifiable in the public interest and, moreover, ran contrary to that interest, given that it had been the biggest payer of the military tax in 2014. The applicant company also argues that the restrictions against it were largely disproportionate. It notes , in particular, that its beneficial owner immediately sought criminal investigation into the supposed criminal activities indicated as grounds for the imposition of sanctions and that the subsequent investigation established the absence of any indication of a criminal offence. The applicant company also observes that the sanctions against it were harsher than those against internationally condemned armed separatist groups.

The applicant company also complains under Article 13 of the Convention that it had no effective domestic remedies in respect of the above complaint.

Lastly, the applicant company complains under Article 6 § 1 of the Convention about the length of the administrative proceedings in its case.

QUESTIONS TO THE PARTIES

1. Is Article 6 of the Convention applicable to the administrative proceedings in the present case? If so, has the length of those proceedings been in compliance with the “reasonable time” requirement of Article 6 § 1 of the Convention?

2. Were the restrictions against the applicant company in compliance with Article 1 of Protocol No. 1? Notably, did they comply with the lawfulness requirement? Were the legal norms upon which the interference was based sufficiently accessible, precise and foreseeable in their application (see, among many other authorities, Beyeler v. Italy [GC], no. 33202/96, §§ 109-10, ECHR 2000 ‑ I)?

3. Did the applicant company have at its disposal an effective domestic remedy in respect of its complaint under Article 1 of Protocol No. 1, as required by Article 13 of the Convention?

[1] A tax introduced in August 2014 to support the Ukrainian Military Forces.

[2] Quotation from the respective NSDCU’s decisions which, in turn, used the wording of parts of Article 4 of the Sanctions Act.