On 13 December 2021, the Council of the EU adopted restrictive measures against the Wagner group, a Russia-based unincorporated private military entity, as well as eight individuals and three connected entities charged with serious human rights violations and the performance of destabilising activities in three countries.
What is new?
These measures were implemented by amending four sanctions regimes (namely, by adding names to the lists of sanctioned persons though the adoption of implementing regulations):
- the sanctions regime already in force relating to Ukraine’s territorial integrity (Regulation (EU) 269/2014, Implementing Regulation (EU) 2021/2193),
- the sanctions regime relating to the situation in Libya (Regulation (EU) 2016/44, Implementing Regulation (EU) 2020/1481),
- the sanctions regime relating to the situation in Syria (Regulation (EU) 36/2012, Implementing Regulation 2021/2194) and
- the EU Global Human Rights Sanctions Regime (Regulation (EU) 2020/1998, Implementing Regulation (EU) 2021/2151).
That is the latest development in the increasing EU activity in the area of restrictive measures on third countries and perpetrators of serious human rights violations and abuses.
A new trend?
Restrictive measures are instruments that serve the EU’s common foreign and security policy (CFSP).
Within this policy the EU has implemented, on the one hand, sanctions regimes linked to specific territories and to the (geo)-political situations in those areas (currently over forty). These regimes aim to prevent conflict or respond to emerging or current crises (for instance, EU restrictive measures relating to Russia and the situation in Ukraine). The sanctions under these regimes put pressure on key persons (linked to the political administration) and on strategic economic areas. Some of these restrictive measures are mandated by the United Nations Security Council, while others were adopted autonomously by the EU.
On the other hand, the EU more recently adopted the EU Global Human Rights Sanctions Regime, which allows it to target serious human rights violations and abuses worldwide irrespective of where they occur (whereas existing sanctions regimes focus on specific countries). The targeted individuals and entities can be both state and non-state actors, regardless of where they are, and regardless of whether they commit the relevant violations and abuses in their own state, in other states or across borders. Before the Wagner case (the latest development in this area), the EU Global Human Rights Sanctions Regime had already been applied twice, in March 2021.
In spite of these differences, the specific restrictive measures and the EU Global Human Rights Sanctions Regime also have something in common: they have an effect in non-EU countries and impose obligations on EU nationals and other persons located in the EU, or those doing business there, through measures like asset freezing and prohibitions on providing funds or economic resources to listed persons and entities. For both of these legislative techniques, the targeted person helping to perpetrate human rights violations and abuses must also appear on a list by a decision of the Council of the EU.
It seems that in recent months, the EU has (uncommonly) been incredibly proactive in the field of restrictive measures.
For instance, progressively since October 2020 and more intensively in 2021, the EU has adopted and strengthened new sanctions against Belarus under Council Regulation (EC) 765/2006 of 18 May 2006. The latest changes to the Belarus regime were intended to sanction human rights violations and abuses.
A total of 183 individuals and 26 entities organising or contributing to activities carried out by the Lukashenko regime have been designated under the sanctions regime for Belarus.
Regarding financial sanctions, listed persons are subject to asset freezing, and EU citizens and companies are prohibited from making funds available to them.
In addition, the Council has introduced both a travel ban for natural persons and a ban on overflight of EU airspace and on access to EU airports by Belarusian carriers.
The character of the sanctions on both Russia and Belarus include this “territorial” aspect because they are meant to intervene in a highly tense geopolitical context at an external EU border. These sanctions regimes are typically very dynamic, evolving rapidly as tensions escalate.
As it did for the Wagner group and a number of related entities and individuals, the EU may opt to cumulatively apply territorial sanctions regimes and the EU Global Human Rights Sanctions Regime, rather than supplementing territorial sanctions regimes with human rights aspects (as in the case of the Belarus sanctions regime).
This intensifying trend may bring economic uncertainty and impact EU companies’ relations with counterparts in third countries.
How could sanctions affect your business?
Once a company established in the EU intends to:
- do business with listed entities of third countries,
- supply certain goods or services to operators established in these third countries (even if not listed) or
- ease the financing of certain operators established in third countries,
it must ensure that the targeted entities are not subject to a prohibition or authorisation procedure.
Any EU undertaking must comply with each of these restrictive measures, which can raise practical issues for undertakings that already have, or intend to do, business with newly sanctioned entities, directly or indirectly. For example:
Due to the complexity of international operations, parts of a single transaction may occur in several different countries. As Luxembourg is an important financial centre for the EU, it may be that all or part of the financial aspects of a transaction are carried out in Luxembourg.
In that case, it will be necessary to determine from a legal standpoint whether there is a link, however minor, that implies the application of sanctions and, consequently, whether the Luxembourg authorities are therefore competent to intervene.
When a listed person has control over a company, the latter will be “frozen”. Needless to say, this affects day-to-day business activities (especially when bank accounts freeze).
Thus, when a listed person appears in a company’s shareholding or management structure, it will be necessary to demonstrate (case by case) that the person does not have control over the company.
PHILIPPE-EMMANUEL PARTSCH, Partner EU Financial & Competition Law
MARIANNE BRESART, Senior Associate EU Financial & Competition Law