In light of recent political developments in Burma/Myanmar, a number of countries are progressively suspending or easing sanctions against the country. The EU has announced a suspension of all sanctions measures against the country, with the exception of the embargo on arms and equipment that could be used for internal repression, for one year.
This alert outlines the latest developments in the EU, the US, Canada, Switzerland and Australia in relation to sanctions measures against Burma/Myanmar.
A gradual process of political and democratic reforms has taken place in Burma/Myanmar over the last few years, culminating in by-elections for 45 parliamentary seats which were held in Burma/Myanmar on 1 April 2012. The NLD (led by opposition leader Aung San Suu Kyi) won 43 out of the 44 seats that it contested. The by-elections prompted a series of important announcements by world leaders and officials in relation to the easing of sanctions against the country, in recognition of the reforms that the government has introduced.
The current EU sanctions are set out in Regulation 194/2008, which lays out extensive sanctions measures against Burma/Myanmar through:
- A prohibition on the sale, supply, transfer or export to Burma/Myanmar of arms or equipment that could be used for internal repression, and any related financing, financial assistance or technical assistance.
- A freeze on funds and economic resources, and a ban on making funds or economic resources available, directly or indirectly, to or for the benefit of persons, entities and bodies listed in the Regulation.
- Investment bans, including the granting of financial credit to, acquisition or extension of a participation in, or creation of a joint venture with enterprises listed in the Regulation.
- Sanctions against various industries which had provided sources of revenue to the former military regime, in particular, the timber and extractive industries.
- Travel bans on individuals listed in the Regulation. Note that those individuals listed in the Regulation are largely members of the government and military.
A fuller summary of the current EU sanctions that are being suspended are set out in our previous 2008 alert accessible here.
Through Decision 2012/225/CFSP of 26 April 2012, the EU has announced a suspension of all of these current sanctions measures for one year, with the exception of the ban on the export, sale, supply or transfer of arms or equipment which could be used for internal repression, and related technical and financial assistance. Please note that the current sanctions will technically continue to apply pending the publication in the EU Official Journal of a directly applicable EU Regulation, which will formally suspend the obligations in the current sanctions Regulation 194/2008.
The EU has also removed 31 people from the list of individuals subject to the asset freeze and travel ban. Since the asset freeze and travel ban has been lifted for one year, this decision to remove certain individuals from the list will become significant if the EU decides to resume sanctions measures in the future. If sanctions measures are resumed in the future, these 31 people will not be subject to the asset freeze and travel ban, but the remaining individuals listed in the Regulation will be.
The suspension of sanctions measures will last until 30 April 2013. The EU has the ability to reintroduce the sanctions measures if progress on democratic and human rights issues is not maintained.
The effect of the decision to suspend these sanctions measures is that it opens up many possibilities for businesses to engage with Burma/Myanmar. Businesses are now able to trade with Burma/Myanmar, invest in previously sanctioned industries, particularly the timber and extractive industries, and engage in corporate transactions with previously sanctioned entities. However, businesses should be mindful of the fact that controls on arms and equipment which could be used for internal repression remain in place. It is important to note that the internal repression controls can have a significant impact on oil and gas, mining and other extractive companies given that the list includes, amongst other items, detonators, igniters, detonating charges, explosives charges and other explosives.
Following the victory of Aung San Suu Kyi, U.S. Secretary of State Hillary Clinton announced plans for a gradual lifting of U.S. sanctions against Burma in response to continued democratic reforms. In particular, Secretary Clinton said that the U.S. government would engage in "targeted easing" of the sanctions on export of U.S. financial services and investment as "part of a broader effort to help accelerate economic modernization and political reform." Secretary Clinton also advised that future changes to U.S. sanctions against Burma will follow an "action with action" strategy, in which the U.S. government will reward the Burmese government for its continuing reform efforts while leaving open the option of reapplying sanctions if reform efforts stall or backtrack.
The U.S. government currently maintains limited restrictions on U.S. persons' dealings with Burma, imposed primarily pursuant to the Burmese Sanctions Regulations (the "BSR") administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"). The BSR prohibit U.S. persons (i.e., any entity organized under U.S. law or their foreign branches, any person in the United States, or any U.S. citizen or permanent resident, wherever located) from directly or indirectly engaging in any of the following transactions:
- Making any "new investment" in Burma, broadly defined to include, among other things, entering into a contract providing for the participation in royalties, earnings, or profits in the economic development of resources located in Burma. The definition of "new investment" expressly excludes contracts to sell or purchase goods, services, or technology (provided such contracts do not otherwise meet the definition of "new investment");
- Exporting/reexporting financial services (including funds, insurance, investment or brokerage services, loans, guarantees, letters of credit, and extensions of credit) to Burma by U.S. persons or from the United States, except where such activities are "incidental" to permissible exports to Burma (e.g., payment for goods exported to Burma);
- Dealing with Specially Designated Nationals ("SDNs"), wherever located, whose assets have been frozen under OFAC's Burma sanctions, including certain Burmese government officials and entities;
- Importing Burmese-origin products into the United States; and
- Facilitating, approving, financing, or guaranteeing any transactions, including new investments, by non-U.S. persons that would be prohibited under the BSR if performed by a U.S. person.
On 17 April 2012, OFAC took the first step in the process of "targeted easing" of sanctions by issuing General License No. 14-C to authorize the export/reexport of financial services by U.S. persons or from the United States in support of certain not-for-profit activities in Burma as follows: (1) projects to meet basic human needs, (2) democracy building and good governance projects, (3) educational activities, (4) sporting activities, (5) non-commercial development projects directly benefiting the Burmese people, and (6) religious activities. General License No. 14-C supersedes and replaces General License No. 14-B, which previously authorized exports/reexports of financial services in support of not-for-profit humanitarian and religious activities in Burma. General License No. 14-C extends this authorization to include support of additional not-for-profit activities, as described above, and to remove the restriction on export/reexport of financial services to the Burmese government. Note that General License No. 14-C does not authorize the export of financial services involving any SDNs blocked under the Burma sanctions.
Significantly, General License No. 14-C does not authorize export/reexport of financial services in support of commercial activities in Burma, even if they include any of the six activities identified in the general license. Further, U.S. companies should still exercise caution when considering business in Burma because of the continued application of U.S. sanctions. Nonetheless, General License No. 14-C demonstrates some movement toward relaxing of the sanctions as Burma pursues political reforms.
On 24 April 2012, Canada eased its economic sanctions against Burma/Myanmar. Many sanctions have been removed. However, sanctions remain on certain individuals and entities, and an embargo on arms and related material, as well as technical assistance and financial assistance and services related to the provision of arms and related materials remains in place.
The Swiss sanctions against Burma/Myanmar had already relatively recently (effective as of 3 April 2012) been amended by lifting travel bans against 87 designated persons. On 25 April, the Swiss government also decided to ease its Burma/Myanmar sanctions, but has not yet published details.
Australia has also announced its intentions to ease sanctions on Burma/Myanmar following the recent political developments. Financial sanctions and travel restrictions will be removed on Myanmar's civilian leaders, but will remain in place against military figures and "individuals of human rights concerns". The revised list has yet to be released, but is expected soon, and will reduce the list from 392 to about 130 individuals. Australia will also maintain its embargo on the sale of arms to Burma/Myanmar.