The CAS of the Supreme Court commented on the suspension of a special license for subsoil use when sanctions are imposed on the ultimate beneficial owner of the subsoil user.

The Law of Ukraine dated December 1, 2022, No. 2805-IX "On Amendments to Certain Legislative Acts of Ukraine to Improve Legislation in the Field of Subsoil Use," which was published on December 28, 2022, and came into force on March 28, 2023, particularly adds to the Code of Ukraine on Subsoil the basis for suspending the action of a special permit, such as the application of special economic and other restrictive measures against the ultimate beneficial owner of the subsoil user, is applicable to existing personal sanctions.

The legislator provided for a three-month delay in the entry into force of this Law from the date of publication, meaning from March 28, 2023, specifically to allow the subsoil user to take measures aimed at changing the ultimate beneficial owner to avoid negative consequences such as the suspension of special permits.

The Supreme Court made such conclusions in the composition of the panel of judges of the Cassation Administrative Court in the case dated October 18, 2024, No. 160/8773/23 (administrative proceedings No. K/990/12283/24).

The LLC challenged in court the order of the State Service of Geology and Subsoil of Ukraine dated March 28, 2023, regarding the suspension of the special permit for subsoil use granted to this LLC.

The first-instance court denied the claim. Granting the claims, the appellate court noted that, by adopting the contested order on March 28, 2023 (the day the Law No. 2805-IX came into force), the respondent deprived the claimant of the opportunity to take actions to change the ultimate beneficial owner. The court also indicated that the provisions of this Law are applicable from March 28, 2023, but with an additional 30-day period for the subsoil user to take actions regarding the change of the ultimate beneficial owner who is subject to sanctions.

The Administrative Cassation Court of the Supreme Court disagreed with such conclusions, canceled the ruling of the appellate court, and upheld the decision of the first-instance court.

The Supreme Court indicated that the application of sanctions against the ultimate beneficial owner of the LLC before the relevant amendments to the Code of Ukraine on Subsoil came into force does not affect the possibility of suspending the special permits granted to the claimant for subsoil use.

Since the sanctions imposed by the Decree of the President of Ukraine remained in effect at the time of the introduction of the amendments to the Code of Ukraine on Subsoil by Law No. 2805-IX, the actions of the respondent in the disputed legal relations fully comply with the requirements of Article 58 of the Constitution of Ukraine.

The panel of judges noted that Law No. 2805-IX was officially published and communicated in accordance with the established procedure to the public, including business entities, on December 28, 2022. Therefore, starting from this date, the consequences of applying the norms of this Law were foreseeable for the claimant, allowing them to take measures in advance aimed at changing the ultimate beneficial owner to avoid the suspension of the special permit for subsoil use.

At the same time, the previous courts established that neither during the period from December 28, 2022, to March 28, 2023, nor at the time of the adoption of the contested judicial decision, was the claimant deprived of the opportunity to fulfill the requirements of the legislation to eliminate the grounds for suspending the special permit and restoring its action; however, they did not take any measures aimed at changing the beneficial owner (controller).

Thus, the Supreme Court concluded that given the specific nature of the changes made to Articles 13 and 57 of the Code of Ukraine on Subsoil, namely the consequences provided for subsoil users in the form of suspension of the special permit in case of personal sanctions imposed on the beneficial owner, the legislator, maintaining a balance of interests of the state (in terms of national security protection) and business (extraction and sale of mineral resources), provided for a delay in their entry into force, namely three months from the date of publication, that is, from March 28, 2023, specifically to allow the subsoil user to eliminate the specified ground for the suspension of the special permit granted to them.