IN RE Crimean Conflict as a Barrier for International Trade Ivan KasynyuK Dmitry Koval is a partner with is an associate with AGA Partners AGA Partners

aving annexed the steps should be taken in future? How ports to foreign vessels and thereby Crimean Peninsula, Rus- Since does the international community re- assigned to them international sta- sia nationalized numer- spond? And what happens de facto on tus. ous facilities, recognized had been the territory of the peninsula’s ports? As we can see, as soon as annexa- as the state property of annexed, the In this article the authors will try to tion occurred, the Russian authori- , which among others, also provide answers to these and many ties promptly carried out a series of includedH seaports located on its terri- other questions. deliberate measures at national and majority of tory — Yevpatoria, , , international level aimed at (i) na- Feodosia and Yalta. the world’s ’s actions tionalization of Crimean ports and (ii) However, the reaction of interna- It all started in March 2014 when recognition by the international com- tional community and, in particular, leading trad- the State Council of the Republic of munity that from now on, the ports of non-recognition of annexation of the ers ceased Crimea nationalized enterprises and Crimea are Russian, not Ukrainian. Crimean Peninsula by the Russian property of Ukrainian seaports lo- Federation, clearly manifested that in to trade cated on the territory of Crimea and What has Ukraine done? the modern world it is not feasible to Sevastopol, and handed them over to From April to May 2014, the physically capture territory and prop- through the newly created company “Crimean Government of Ukraine actively took erty of other country without bearing ports”. In the same month, the al- steps at both national and internation- the relevant consequences for such Crimea, and ready existing Russian (!) Federal al level. At domestic level, Ukrainian aggressive actions. shipowners Agency of Sea and River Transport in authorities, via a series of legislative Since Crimea had been annexed, Crimea appointed new captains of sea acts recognized Crimea as temporar- the majority of the world’s leading refused to ports in the peninsula. ily occupied territory, closed Crimean traders ceased to trade through Cri- Later, in June, the sea ports of seaports for shipping, and imposed mea, and shipowners refused to send send the Yevpatoria, Kerch, Sevastopol, Feo- administrative and criminal liability the vessels to the ports of the penin- dosia and Yalta were included and for violating rules of entry and exit sula. This resulted in a significant vessels to listed in the Register of sea ports of from the peninsula. decrease in turnover of the ports lo- the ports of the Russian Federation. According to new order, those cated on the peninsula. This was followed by a series who violate the order of entry into Realizing this fact, the Russian the peninsula of actions taken to affect the in- the territory of the peninsula and out authorities, mainly through the adop- ternational maritime community. of it, can be punished with fines and tion of various laws at the national The same month, the Russian Federa- administrative arrests (15 days), the level, as well as by addressing inter- tion sent a note to the International confiscation of vehicles, and even im- national organizations, are trying to Maritime Organization (IMO) provid- prisonment of such persons (from 3 “return” the former cargo turnover to ing that starting from this moment, to 8 years of imprisonment). Crimean ports. it undertakes the actual implemen- The government officially report- On the other hand, the Ukrainian tation of security measures in the ed the inability to handle ships and authorities, being in the position of ports of Crimea and their water areas, passengers, to ensure a proper level legitimate owners, have no intention referring to the fact that Ukraine had of navigation safety and to comply to “give up without a fight”. Using the already notified all that Ukrainian with international agreements of principle of “sea blockade”, Ukraine authorities will no longer ensure the Ukraine in the sea ports situated in quite successfully endeavors internal safety of navigation in the ports of the territory of Crimea. Any vessel and external political legal mecha- the peninsula. that sailed into the ports of the pe- nisms, in order to prevent ports from Somewhat later, in September, ninsula does so at its own risk. The functioning normally. the Russian government included owners and crew of a ship that ignore What specific steps and actions the seaport of Sevastopol in the list the ban can be punished by a fine or are taken by Russian and Ukrainian of ports that are allowed to accept even imprisonment. authorities during wartime for the foreigners and stateless persons ar- At international level, Ukraine seaports of Crimea? Whose policy riving to Russia by ferry for the pur- notified the IMO that it no longer is more effective? How and to what poses of tourism. provides proper navigation safety extent has the ongoing conflict in- Immediately thereafter, the Rus- and compliance with international fluenced international trade? What sian government opened Crimean sea obligations arising from the need to

22 May 2016 | The Ukrainian Journal of Business Law | www.ujbl.info Crimean conflict IN RE

preserve human life at sea, search, rescue, as well as the high level of In other property risks in the waters and nearby Crimean seaports. This infor- words, this mation was transmitted to the IMO means that Secretariat and circulated among its Member States and representatives the status of foreign companies accredited by the organization. of Crimean Thus, in the space of a couple of months Ukraine officially closed the ports is no Crimean ports in accordance with the longer in line norms of both international and na- tional law and duly notified the inter- with interna- national community.

tional safety S. Riabokon How did the international standards community respond? shipowners to comply with their de- lists and do not recommend or even One of the most important de- and, theo- cisions. This organization can only prohibit vessels of their member cisions on the “Crimean issue” at recommend to vessels of all member states to visit Crimean ports. international level was made on retically, for states of the IMO to avoid visits to 27 March 2014, when the UN Gen- Crimean sea ports. And those, in turn, Reality: what is actually eral Assembly adopted a resolution every vessel, shall decide to adhere to the recom- happening? on Ukraine, which called upon States, mendations of the maritime commu- In fact, the Crimean ports con- international organizations and other correspond- nity or not. tinue to operate, and vessels of Euro- institutions — not to recognize the ing to such Another significant event was pean countries including those who annexation of Crimea and Sevastopol, that Crimean ports were not includ- voted for the UN resolution, continue refrain from any action that may di- standards, ed in the list of ports authorized to to enter the ports, despite the ban rectly or indirectly be interpreted as issue Ship Sanitation Certificates imposed by Ukrainian authorities recognition of the annexation. This entry into under International Health Regula- and strong recommendations of the resolution was supported by 100 one of these tions, published by the World Health international community, and even member states of the UN. Organization, according to which, all neglecting risks of being detained by It should also be recalled that ports can vessels are required to obtain such the Ukrainian authorities for breach both governments handled their certificates in order to be able to sail of national legislation. notes to the IMO. Ukraine reported subsequently to further ports. Thus, the last published list of on the impossibility of ensuring nav- The EU has also imposed sanc- non-governmental organizations igation safety standards stipulated by become the tions against Crimea and Sevastopol. dealing with tracking of “intrud- international conventions and IMO reason for In particular it banned the import ers” has 216 trading vessels from 16 codes at the peninsula ports, and Rus- of goods originating from Crimea countries. Indeed, the overwhelm- sia, in turn, guaranteed the safety of inspections and the export of certain goods and ing majority of intruders are vessels the Crimean port for shipping in their technologies by Crimean companies. (181 of them) of Russia, Turkey and note to the IMO. or even The EU imposed a ban on investment Greece. However, there are some Eu- However, since the IMO is a spe- in Crimea. Europeans and EU compa- ropean countries, like Germany, Italy, cialist United Nations agency in the detention of nies can no longer buy the property Switzerland, Lithuania and others, field of international commercial a vessel or establish the entities or other or- among the violators. shipping and, accordingly, does not ganizations in Crimea, nor can they It is important to note though recognize the annexation of Crimea finance Crimean companies or pro- that among 105 foreign vessels (not by the Russian Federation, it is un- vide similar services. including the vessels of Russia and likely that the organization will pro- European tour operators are pro- Ukraine), about half — 51 ship — vide the Russian authorities with the hibited from offering travel services committed violations only once and right to ensure the safety of Ukrain- in Crimea and Sevastopol. European have not entered the ports of annexed ian ports to IMO Member States. cruise ships can no longer enter the Crimea since then. This reflects a real In other words, this means that ports of the Crimean Peninsula, only tendency connected both with the ef- the status of Crimean ports is no for emergency. fect of international sanctions, and dis- longer in line with international safe- Therefore, it is evident from the semination of information about “in- ty standards and, theoretically, for above facts that there is a clear posi- truding” vessels in media — foreign every vessel, corresponding to such tion of the world’s leading organiza- shipowners are less and less willing standards, entry into one of these tions with regard to the annexation to enter into the Crimean contracts. ports can subsequently become the of Crimea and the nationalization of Therefore, those are more actively re- reason for inspections or even deten- Crimean ports by the Russian Federa- placed by Russian shipowners. tion of a vessel. tion. International organizations im- The Ukrainian authorities have Unfortunately, the IMO has no pose all sorts of bans and sanctions, already applied to the countries of right to force governments and/or excluding Crimean ports from their “intruders” with a request to explain

www.ujbl.info | The Ukrainian Journal of Business Law | May 2016 23 in re ччччччччччч

the actions of its vessels. Also, the edly entered Crimean ports illegally paid to actions taken by the Ukrainian Prosecutor-General’s Office has Ukraine annexed by Russia, thus violating not mass media and public organizations opened and investigated more than only a number of international rules, monitoring and publishing informa- 69 criminal cases regarding unau- has virtu- but also Ukrainian criminal law. tion about the offending vessels. thorized entry into Crimean ports. During the inspection of another However, in reality, despite im- Some individual governments, for ally com- ship, this time Ukrainian, the state plied sanctions and bans and signifi- instance Moldova, had expressly menced to bodies found that the vessel had en- cantly reduced level of economic ac- reacted to violations of its vessels tered the port of Kerch. In this case, tivity, Crimean ports are still involved and prohibited sea vehicles under use internal the Court considered it sufficient to in international trade. Obviously, in the Moldovan flag from entering limit the punishment by imposing a such circumstances rather than wait the ports of Crimea. mechanisms fine on the whole crew and the ship’s for help from other countries Ukraine However, only in February captain. However, the main point be- must be “tougher” in prohibiting any 2015, almost a year after the an- of protection hind is that the Ukrainian authorities business activity within Crimean nexation, the Ukrainian authorities have actually begun to punish offend- ports and insist on compliance with were able to use the long-awaited ers, and next time the court may not its own national legislation as well as mechanisms for punishing viola- limit itself to fines. pursue for the enforcement of other tors. A Singapore intruder repeat- international sanctions. edly coming to the occupied Crimea Conclusion As we can see, Ukraine has virtu- was detained in the port of Ily- Having nationalized Crimean ally commenced to use internal mech- ichevsk. The detention lasted about ports, Russia has faced with con- anisms of protection. By detaining three days. However, this period demnation and non-recognition of an offending vessel illegally entering was enough for the ship owner to its actions by the international com- Crimean ports, Ukraine has set a prec- suffer losses and make appropriate munity. Moreover, Ukraine has quite edent in practice, thereby preventing conclusions. effectively implemented the mecha- such violations in the future, and giv- Then in March, the court ar- nism of “sea blockade” of the penin- ing effect to the principle of inevitabil- rested a Turkish vessel for enter- sula ports, thereby creating obstacles ity of punishment for violations. ing one of the ports of Crimea. As for Russia to benefit from owing the it turned out, the vessel has repeat- ports. Special attention should be END ■

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24 May 2016 | The Ukrainian Journal of Business Law | www.ujbl.info