The EU has recently expanded its sanctions against the Democratic People’s Republic of Korea (“DPRK”), reflecting the adoption of Resolution 2270 (2016) by the UN Security Council (the “UNSC”) in March 2016. The EU’s measures, as summarised in this briefing, include extensive new trade sanctions against DPRK and, going beyond the UNSC measures, additional measures targeted at the financial sector.
1. UN Security Council sanctions
On 2 March 2016, the UNSC published Resolution 2270 (2016) in respect of the nuclear test conducted by DPRK in January 2016, and its ballistic missile launch in February 2016. The measures contained in this Resolution were described by representatives of the US and the UK as some of the toughest restrictions ever imposed by the UNSC.
The UN restrictions include:
- a requirement for all states to inspect cargo destined for, or originating from, DPRK;
- a prohibition on registering vessels in the DPRK;
- prohibitions on the granting of permission for take-off, landing and overflight of aircraft containing items subject to UN trade sanctions;
- a prohibition on the procurement from DPRK of coal, iron, iron ore, gold, titanium ore, vanadium ore and rare earth minerals;
- a prohibition on the sale or supply of aviation fuel to DPRK; and
- a requirement for states to expel diplomats and other government officials who have assisted in the evasion of sanctions and to prevent training of DPRK nationals in disciplines that could contribute to nuclear proliferation.
2. EU sanctions
Following publication of Resolution 2270 (2016), the EU's High Representative stated that the EU would swiftly transpose the Resolution into EU law and consider whether additional autonomous restrictions were called for. The relevant EU measures were published on 1 April 2016 and 3 May 2016: Council Decision (CFSP) 2016/476(the "Decision") and Council Regulation (EU) 2016/682 (the "Regulation"). These measures amend Council Decision 2013/183/CFSP and Regulation (EC) No 329/2007, respectively. As can be seen from the below summary (and as alluded to by the High Representative), some of the EU's measures go beyond those agreed by the UNSC.
The Decision and Regulation impose a series of restrictions which apply to nationals of EU member states and EU-incorporated companies, and in relation to any acts done within the physical territory of the EU. An overview of the new restrictions appears below.
1. Financial services restrictions: EU financial institutions have been prohibited from carrying out certain activities relating to DPRK since 2013, including the opening of new bank accounts or new correspondent relationships with DPRK financial institutions, opening representative offices, branches or subsidiaries in DPRK, and establishing joint ventures with DPRK institutions. The Regulation now requires EU financial institutions to do the following by 31 May 2016:
Click here to view table.
The obligations in (a) and (c) above apply in cases where the competent authority of the relevant Member State has determined that these activities could contribute to DPRK's nuclear or ballistic missile programmes and has communicated this determination to the relevant financial institution. Member States may authorise certain representative offices, subsidiaries or bank accounts to remain operational on humanitarian or diplomatic grounds, with approval from the UNSC Sanctions Committee.
2. Dealing with DPRK government: EU persons are prohibited from providing funds or economic resources to persons, entities or bodies of the government of DPRK, the Worker's Party of Korea, persons or entities acting on their behalf or at their direction, or entities owned or controlled by them, where it has been determined that such persons, entities or bodies are associated with DPRK's nuclear or ballistic missile programmes. This restriction does not apply where the funds are required for certain diplomatic purposes or humanitarian assistance. The drafting of this provision is somewhat curious as the Decision appears to envisage this to be an additional ground for adding persons to the asset freeze list, whereas the Regulation (in new article 6(6)) does not clarify how this "determination" ties into the provisions for listing persons under Annexes V and Va (the EU unilateral lists) or whether the reference to "providing funds or economic resources" is deliberately different from the language usually used in imposing asset freezes.
3. Joint ventures: it is prohibited to enter into a joint venture or other business arrangement with any entity listed in Annex IV of the Regulation (which is a list of persons already subject to a UN-derived asset freeze), or any individuals or entities acting on behalf of, or at the direction of, an Annex IV entity.
4. Financial assistance: it is prohibited to provide financial support for trade with DPRK, including the granting of export credits, guarantees or insurance, where this support could contribute to DPRK's nuclear or ballistic missile programmes.
5. General exports: it is prohibited to sell, supply, transfer or export to DPRK, or to purchase, import or transport from DPRK, any items other than food or medicine in circumstances where the exporter knows or has reasonable grounds to believe that the item is destined (directly or indirectly) for DPRK's armed forces or the export could support or enhance the operational capabilities of the armed forces of a state other than DPRK. Member States may authorise transactions under specific circumstances.
6. Nuclear/ballistic missile-related goods and technology: it is prohibited to sell, supply, transfer or export listed items to any natural or legal person, entity or body in, or for use in DPRK, and to purchase, import or transport the listed items from DPRK.
7. Aviation fuel: it is prohibited to sell, supply, export or transfer aviation fuel (as defined in Annex Ie of the Regulation) to DPRK, or to transport to DPRK aviation fuel on board EU Member State vessels or aircraft. This prohibition is subject to exemptions regarding: (a) the sale or supply of aviation fuel to civilian passenger aircraft outside DPRK (exclusively for consumption during a flight to DPRK and return); and (b) the transfer of aviation fuel for verified essential humanitarian needs, in which case Member States may authorise transactions on a case by case basis, with advance approval of the UNSC.
8. Coal, gold and rare earth minerals: it is prohibited to purchase, import, transfer or transport gold, titanium ore, vanadium ore, rare earth minerals, coal, iron or iron ore (as listed in Annexes Ic and Id of the Regulation) from DPRK. Member States may authorise certain transactions which are unrelated to generating revenue for DPRK's nuclear or ballistic missile programmes.
9. Cargo inspections: the Regulation provides that cargo within the EU will be liable for inspection where it has originated in, or is destined for, DPRK, where the cargo has been brokered or facilitated by DPRK or persons listed in Annex IV of the Regulation, or where transported on DPRK or stateless vessels or aircraft.
10 Vessels and aircraft: various categories of vessels are to be denied access to EU ports, including those owned by persons listed in Annex IV of the Regulation, those containing items which are subject to UNSC trade sanctions, and vessels flying the DPRK flag. Similarly, aircraft are prohibited from taking off, overflying or landing in the EU where there are reasonable grounds to believe that the aircraft is carrying restricted items. EU persons are also prohibited from leasing or chartering vessels or aircraft, or providing crew services to DPRK entities, unless authorised by the relevant Member State.
11. Member State-specific measures: the Decision also imposes certain requirements on Member States themselves (as opposed to restrictions which apply to all EU persons). As envisaged by UNSC Resolution 2270 (2016), these include a requirement for EU Member States to expel DPRK diplomats or other officials working on behalf of or at the direction of EU designated persons and a requirement to exercise vigilance and prevent teaching or training of DPRK nationals in matters which would contribute to DPRK's nuclear activities or ballistic missile programmes.
In the UK, HM Treasury have published a notice regarding the financial sanctions introduced by the Regulation. This notes that the UK Statutory Instrument imposing penalties for breach of the new restrictions has yet to be introduced, but reminds UK persons of the fact that the Regulation has direct effect in the UK. Given the scope of the new restrictions, companies, and particularly financial institutions, should carefully review the nature of any interactions they may have with DPRK to ensure that they are in compliance with the new restrictions.