ECONOMIC AND FINANCIAL SANCTIONS REGIME IN EU AND HOW EU REACTS TO US SANTIONS

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1 ECONOMIC AND FINANCIAL SANCTIONS REGIME IN EU AND HOW EU REACTS TO US SANTIONS Arnaud de Corbière Arnaud de Corbière 17 rue de la Paix Paris Tél:

2 Preamble expansion and upgrade by the UE of its activities in the security sphere, increasing use of the instrument of sanctions or of restrictive measures, as a form of coercive diplomacy. It is now possible to speak of an EU sanctions policy. +33(0) Mob:

3 Tool to fight terrorism, nuclear proliferation activities or human rights violations. Arnaud de Corbière 17 rue de la Paix Paris Tél:

4 TargeSt: governments of non-eu countries because of their policies, entities (companies) providing the means to conduct such policies, groups or organizations such as terrorist groups, individuals, those that support the targeted policies, individuals involved in terrorist activities etc. Arnaud de Corbière 17 rue de la Paix Paris Tél:

5 Recent practice: conjunction with unilateral measures by the United States or by other countries or regional organizations. Latest examples: Syria, Russia/Ukraine. Indeed the vast majority of EU autonomous measures are imposed alongside Washington. 29/10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

6 Still, the specific measures imposed by Washington and Brussels do not always coincide. For instance, the extraterritorial application of US sanctions on Cuba, vocally opposed by the EU.

7 I How EU applies its own sanctions Three different major types of EU sanctions applied:

8 1/ Implementing sanctions : EU as implementer of UN sanctions All members of the UN are obliged to implement sanctions measures adopted under Chapter VII of the UN Charter, after the EU gives such measures standing in European law through two pieces of legislation: - A Council decision under the CFSP - followed by the adoption of a regulation.

9 E xemples : sanctions on: Liberia, Angola, Guinea Bissau, Somalia, the Democratic Republic of the Congo (DRC), the Central African Republic (CAR), and South Sudan

10 2/ Supplementary EU sanctions: EU may reinforce UN sanctions by applying stricter and additional measures These are additional measures taken to strengthen UN sanctions regimes. 29/10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

11 For example, when the UN Security Council urges member states to exercise vigilance with regard to the implementation of sanctions taken under Chapter VII, the EU may decide to add supplementary sanctions. 29/10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

12 Examples of this type of EU sanctions: The EU sanctions on Iran since 2010, the Democratic People s Republic of Korea (DPRK), Libya in 2011, and Côte d Ivoire in /10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

13 3/ Autonomous EU sanctions : They also serve as an instrument of EU foreign policy, with a view to expressing concern about what is believed to be unacceptable behavior and to reaffirming EU values on the international scene.

14 Examples: EU sanctions on: Syria, Russia, Ukraine, Burma/Myanmar, Zimbabwe, Belarus, China, Uzbekistan or the Comoros Arnaud de Corbière 17 rue de la Paix Paris Tél:

15 Adoption and entry into force: Restrictive measures are laid down in Common Foreign Security Policy (CFSP) Council decisions. adopted by unanimity on a proposal made by the High Representative of the Union for Foreign Affairs and Security Policy (HR). Arnaud de Corbière 17 rue de la Paix Paris Tél:

16 Then In the Council: The proposed measures are examined and discussed by the relevant Council preparatory bodies: the Council working party responsible for the geographical region to which the targeted country belongs (for example the Eastern Europe and Central Asia Working Party (COEST) for Ukraine or Belarus; the Mashraq/Maghreb Working Party for Syria, etc.), the Foreign Relations Counsellors Working Party (RELEX), the Political and Security Committee (PSC), the Committee of Permanent Representatives (COREPER II). Arnaud de Corbière 17 rue de la Paix Paris Tél:

17 Entry into force Decision enters into force on the day of publication in the Official Journal of the European Union. Measures such as arms embargoes or restrictions on admission are implemented by the member states, which are legally bound by the provisions of the Council decision. 29/10/2016 Arnaud de Corbière - Avocat à Paris - Tél +33 (0)

18 If the Decision includes concerns an asset freeze and/or other types of economic and/or financial sanctions, it needs a Council regulation.

19 Adoption of Council regulation The Council regulation is adopted pursuant to Article 215 of the Treaty on the Functioning of the European Union, on a joint proposal from the HR and the Commission examined by RELEX and forwarded to COREPER and Council for adoption. 29/10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

20 The Council informs the European Parliament of the adoption of the Council regulation. Often the CFSP Council decision and the Council regulation are adopted together to allow for both legal acts to produce their effects at the same time (for asset freeze mainly). The regulation is binding on any person or entity (economic operators, public authorities etc.) within the EU. 29/10/2016 Arnaud de Corbière 17 rue de la Paix Paris Tél:

21 Where do EU sanctions apply? - effects in third countries. - but EU restrictive measures only apply within the jurisdiction of the EU, that is:

22 within EU territory, including its airspace, to EU nationals, whether or not they are in the EU, to companies and organizations incorporated under the law of a member state, whether or not they are in the EU, and including branches of EU companies in third countries,

23 to any business done in whole or in part within the European Union, on board of aircrafts or vessels under the jurisdiction of a member state. The EU does not adopt legislation with extraterritorial application in breach of international law. EU candidate countries are systematically invited to align themselves with EU restrictive measures.

24 The category of sanctions (four) Arms embargoes : prohibition to sell weapons and services to strengthen the military capacities, Travel bans : prohibition to issue visas to certain individuals,

25 Economic measures : restrictions and prohibitions on financial transactions, export credits or investment, Financial measures: freezing of assets. Concerns funds and economic resources owned or controlled by individual, group or entities.

26 The most common sanction pronounced is the travel bans, followed by the arms embargoes, pronounced against countries or regions or actors in such regions. The third most applied sanction is Financial Restrictions, then commodity and service boycotts.

27 Judicial remedies against EU imposed sanctions - Notification to the persons and entities targeted by an asset freeze or travel ban of the measures taken against them.

28 At the same time, it brings the available legal remedies to their attention: They can, according to art. 215 TFEU : - ask the Council to reconsider its decision, by providing observations on the listing; - challenge the measures before the General Court of the EU.

29 Examples : The first judgments that focused on the general, formal deficiencies in the listing and delisting procedures, amounting to a violation of the human rights of listed individuals (KADI I), have open the way to the more recent wave of decisions (KADI II; Iranian cases) in which full judicial scrutiny of both the lawfulness and of the merits of each measure is carried out.

30 EU courts now routinely exert substantive judicial review of the merits of each measure, even if implementing a UNSC decision, and they annul sanctions not supported by adequate evidence.

31 II / HOW EU REACTS TO US EXTRATERRITORIALITY SANCTIONS The of EU autonomous measures are imposed alongside with US but EU and US are not agreeing as they may have different political and economic interests. Problem : the extraterritoriality of US sanctions

32 Until recently, US applied to all US persons, i.e.: all US citizens and permanent residents located anywhere in the world, companies organized in the United States of America, foreign branches of US companies and individuals, entities, and property located in the United States of America.

33 With limited exceptions (such as Cuba) the sanctions did not apply extraterritorially. But US sanctions became increasingly extraterritorial in scope and effect. European Union reaction to this extraterritoriality has evolved since 1996, date of the first laws containing extraterritorial provisions, from opposition to willingness.

34 Indeed, since 2004, a lot of European banks have been convicted or forced to compromise with US authorities, Crédit agricole, HSBC, Standard Chartered, ING, Crédit suisse, ABN Amro, Lloyds, Barclays, Commerzbank, and European firms also, such as Alstom (France), BAE Systems (UK), Vimpelcom (Nederland), Panalpina (Italie), Daimler (German), without real EU opposition.

35 Main recent example: the French bank BNP PARIBAS convicted in 2014, to pay a fine of $140 million and almost $9 billion to resolve accusations of U.S. violations sanctions against Sudan, Cuba and Iran

36 THE FIRST POSITION OF THE EU : OPPOSITION TO US SANCTIONS 1996: US enacted the Cuban Liberty and Democratic Solidarity Act under which any individual or firms having an economic ties with Cuba was potentially concerned, and the Iran and Libya Sanctions Act (ILSA) pursuant which the US President could punish any person who invested more than $40 million in petroleum resources.

37 In response, the European authorities chose to adopt a blocking statute : Council Regulation 2271/96 and Joint Action 96/668/CFSP, which provides: The extraterritorial effect of the foreign laws that are enumerated in the annex to the regulation (i.e. the Cuban Liberty and Democratic Solidarity Act and ILSA) are invalid for individuals who reside on European soil and hold the nationality of one of its member states.

38 The same logic applies to firms (legal persons) established under EU jurisdiction. Article 4 provides a mechanism for judicial protection: no judgements or requests from a third state shall be recognized if they are based on one of the legal texts listed in the annex to the regulation. In reaction to the European defensive position, the USA decided to comprise with European, and both signed in April 1997 a memorandum of understanding (MOU)

39 THE SECOND POSITION OF THE EU : ACCEPTANCE OF US SANCTIONS 2000: US enacted the Iran Non Proliferation Act which included any person involved in the manufacture by Iran of a weapon mass destruction.

40 The EU complained about the legislation before its adoption as the Commission perceived it to be a breach of the 1997 EU US MOU. However, no European firm was threatened under the law. The blocking statute was not modified and therefore not applied. But this issue was different as there was international consensus about the weapon mass destruction risk.

41 2010: Enactment of the Comprehensive Iran Sanctions, Accountability and Divestment Act (Cisada) which prohibited investment in the Iranian petroleum industry and established limitations on financial transactions and banking services.

42 Another example : Russia (since Ukaraine crisis) The US has less economic interdependence with Russia and has applied wider and harsher sanctions than the EU. This can contribute to opening a bargaining space for the EU, as evidenced for example by the Minsk Process, since EU members have less extensive sanctions (and use less vehement rhetoric) than the US.

43 Thank you