The EU has recently published a new Regulation (Regulation 697/2013 of 22 July 2013 ("Regulation 697/2013")) which amends Regulation 36/2012, the key piece of legislation setting out the EU's sanctions against Syria. In this briefing we analyse the new provisions and provide an update on other recent changes to EU and US sanctions.
Relaxations to trade sanctions
As mentioned in our previous update, in April this year the EU issued a Decision easing certain EU sanctions against Syria, including the oil embargo, so as to help the civilian population and support the opposition in that country. Regulation 697/2013 implements those measures.
The competent authorities in EU Member States are now permitted to authorise certain prohibited transactions, under certain circumstances. The new derogations apply to:
- the import, purchase or transport of Syrian crude oil or petroleum products or the provision of financing or financial assistance (including insurance or re-insurance) in connection with these activities;
- the sale, supply, transfer or export of key equipment and technology for the oil and gas sector in Syria or the provision of technical assistance, brokering services, financing or financial assistance in relation to such equipment; and
- the financing (by means of a financial loan or credit, the acquisition or extension of a participation, or the creation of a joint venture) of Syrian persons, entities or bodies involved in the exploration, production or refining of crude oil or the construction or installation of new power plants for electricity production.
In each of the above cases, the competent authority may authorise the relevant activity if the following conditions are met:
the competent authority determines that it is reasonable to conclude (on the information available to it) that:
- the activities concerned are for the purpose of providing assistance to the Syrian civilian population;
- the activities concerned do not entail funds or economic resources being made available, directly or indirectly, to or for the benefit of designated persons (i.e. they do not contravene the asset freezing provisions of Regulation 36/2012); and
- the activities concerned do not breach any other prohibitions in Regulation 36/2012;
the Member State concerned has consulted in advance the person, entity or body designated by the Syrian National Coalition for Opposition and Revolutionary Force (and has received its views) as regards:
- the competent authority's conclusions above; and
- the availability of information indicating that the activities might entail funds or economic resources being made available, directly or indirectly, to or for the benefit of a person designated under the EU anti-terrorism measures directed against persons and entities associated with the Al-Qaida network;
- if no views are received from the Syrian opposition within 30 days of the request being made, the competent authority can proceed with its decision on whether or not to authorise the activities; and
- the relevant Member State is required to inform the other Member States and the Commission within two weeks of any authorisations that it grants.
New derogation from financial sector restrictions
In addition to the above relaxations, Regulation 697/2013 also provides new licensing powers in respect of the prohibitions on dealing with the Syrian financial sector contained in Article 25 of Regulation 36/2012. The competent authorities of Member States are now permitted to authorise (under such terms or conditions as are deemed appropriate) EU financial institutions to open new bank accounts with Syrian banks, open representative offices in Syria or establish branches or subsidiaries in Syria, provided that the same conditions referred to above in relation to the relaxations of the trade sanctions are met (i.e. that the activities are for the purpose of providing assistance to the Syrian population, no other sanctions are breached and that the Syrian opposition is consulted). HM Treasury have issued a notice in respect of these new measures.
Amendments to restrictions applying to military and dual-use goods
Regulation 697/2013 also amends the provisions relating to the supply to Syria of equipment that may be used for internal repression. There remains a prohibition on the sale, supply, transfer or export of, or the provision of technical assistance, brokering services, financing or financial assistance in relation to, goods and equipment listed in Annex IA to Regulation 36/2012 (although Member States may authorise transactions intended for humanitarian purposes or for the benefit of UN or EU personnel) and a requirement for authorisation for the sale, supply, transfer or export of equipment, goods or technology listed in Annex IX. However, restrictions on certain other types of military and internal repression equipment that were previously restricted are now left to the discretion of Member States; Regulation 697/2013 merely provides that Member States may impose a prohibition or authorisation requirement on any such items not listed in Annex IA or Annex IX or on any dual-use items listed in the EU dual-use regulation (Regulation 428/2009).
Finally, Annex IX which, as noted above, lists certain items which may be used for internal repression, has been amended so as to exclude products identified as consumer goods packaged for retail sale for personal use or packaged for individual use. The only exception to this carve-out is isopropanol which remains subject to prior authorisation even where supplied as a consumer good. Certain additional items have also been added to Annex IX.
Although the above measures represent a slight relaxation of the Syrian sanctions, licences will only be available in specific circumstances and for the purpose of assisting the Syrian population. The situation in Syria remains a key concern for the EU, with further developments expected in the short/medium term.
2. North Korea
Financial sector restrictions
With the introduction of Regulation 696/2013 of 22 July 2013 ("Regulation 696/2013"), the EU has amended the measures against North Korea contained in Regulation 329/2007, implementing Decision 2013/183/CFSP of 22 April 2013.
New restrictions have been imposed on the EU financial sector such that, in addition to the existing prohibitions on opening representative offices, branches or subsidiaries in North Korea, or establishing new joint ventures with North Korean credit or financial institutions, EU credit and financial institutions are now prohibited from:
- opening new bank accounts with credit or financial institutions domiciled in North Korea or listed in Annex VI to Regulation 329/2007;
- establishing a new correspondent banking relationship with any such institutions; and
- maintaining correspondent banking relationships with such institutions if there is information that provides reasonable grounds to believe that this could contribute to North Korea's nuclear-related, other weapons of mass destruction-related or ballistic missile-related programmes, or other activities prohibited by the EU sanctions.
Extension of asset freeze
The EU asset freeze has also been extended to apply to persons listed on a new Annex Va. Annex Va does not currently list any individuals or entities but is intended to apply to persons, entities or bodies not covered by the existing Annexes IV and V (which cover individuals and entities designated by the UN and those designated by the EU as responsible for North Korea's nuclear and other weapons programmes, providing financial services or the transfer of assets which may support these programmes or supplying arms etc. to North Korea) who are working on behalf of, or at the direction of, designated persons listed in Annexes IV or V, or persons assisting in the violation of relevant sanctions.
Regulation 696/2013 also makes various amendments to the trade sanctions against North Korea.
- New prohibited items have been added to Annex Ia (which relates to nuclear, weapons of mass destruction and ballistics programmes).
- There is a new prohibition on the provision of bunkering, ship supply or other vessel services to North Korean vessels where the service providers have information providing reasonable grounds to believe that the vessels carry prohibited items, unless the provision of such services is necessary for humanitarian purposes.
- Unless prohibited under UN sanctions, Member States' competent authorities may authorise transactions in relation to the supply of dual-use items in Annexes I, Ia and Ib or the provision of assistance or brokering services relating to goods on the Common Military List or the above Annexes provided the transaction is for food, medical or other humanitarian purposes.
- There is also a new prohibition preventing aircraft flying over, taking off from or landing in, the EU where there are reasonable grounds to believe that they contain prohibited items.
Finally, Regulation 696/2013 inserts a provision into Regulation 329/2007 providing that no liability can arise on the part of persons or bodies (or their directors or employees) implementing the asset freeze save where funds or economic resources are frozen or withheld as a result of negligence. This article also provides that no liability can arise where a person did not know and had no reasonable cause to suspect that their actions would infringe the sanctions. These measures follow the same format as those included in the EU sanctions in respect of many other jurisdictions.
On 16 May 2013, Iran Transfo, an Iranian manufacturer of electrical substations, transformers and other equipment, successfully obtained judgment in the General Court of the EU annulling the EU Decision subjecting it to the EU asset freeze in respect of Iran. The prohibition on making funds or economic resources available to Iran Transfo has therefore been lifted.
HM Treasury have issued a notice in relation to this development which also contains a link to the May 2013 judgment.
This is one of a number of recent successful challenges to EU listings on a variety of procedural and substantive grounds; the trend of EU judgments in this area is reportedly causing concern in the US about the robustness of the EU sanction regimes.
The Tunisian asset freeze list has been amended with effect from 31 July 2013 so as to include additional identifying information in respect of three individuals subject to the asset freeze. The additional information includes details of the investigations by the Tunisian authorities to which the designated persons are subject.
HM Treasury have issued a notice which shows the changes to the identifying information for these individuals.
These changes have been introduced following the annulment of these individuals' listings in May 2013. At that time, the EU General Court held that the previous listings were not sufficiently justified. The requirement for designation under the Tunisian sanctions regime is that the individual in question is responsible for misappropriating state funds whereas the original designation referred to an investigation for money laundering. The new designations refer to the individuals' undue influence over a public official causing a loss to the administration.
The individuals have the opportunity to challenge the new designations.
On 7 August 2013, President Obama issued a new Executive Order ("EO") in relation to Myanmar. This follows the expiration on 28 July 2013 of the Burmese Freedom and Democracy Act's ban on imports from Myanmar.
The new EO repeals the provisions of EO 13310 that implemented the import ban. It also reimposes the ban on the import of jadeite or rubies mined or extracted from Myanmar (and any items of jewellery containing such jadeite or rubies) which was originally imposed by the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008.
Other sanctions on Myanmar, including in particular the quite extensive list of persons (SDNs) who are subject to the asset freeze, remain in place.
Separately, the EU Foreign Affairs Council has endorsed a Comprehensive Framework for the EU's policy and support to Myanmar, setting out the EU's priorities for supporting Myanmar's reforms over the next three years. This is available here.
The South African Development Community has recently reported on the Zimbabwe presidential elections, concluding that they were "free and peaceful". There are mixed views on the subject, with the US and UK both expressing concern over the fairness of the elections. As further anticipated relaxations to the sanctions regime had been linked to a "free and fair" election, the likelihood of additional de-listings is now in some doubt.