Following the recent presidential elections in the Ivory Coast, President Laurent Gbagbo's refusal to hand over power has resulted in ongoing civil and political chaos in the country.
The EU has decided to take action and adopted Council Regulation (EU) No 25/2011 on 14 January 2011 amending Regulation (EC) No. 560/2005 (the amended text referred to hereinafter as the "Regulation").
Both the Port of Abidjan and the Port of San Pedro are now sanctioned parties. Other notable sanctioned parties include PETROCI, the National Petroleum Operations Company of Côte d'Ivoire, and SIR, the Ivorian Refining Company. The sanctioned parties are subject to an asset freeze and there is almost a complete prohibition on making funds and economic resources available to the sanctioned parties.
As set out in Article 13, the Regulation applies:
- "within the territory of the Union, including its airspace;
- on board any aircraft or any vessel under the jurisdiction of a Member State;
- to any person inside or outside the territory of the Union who is a national of a Member State;
- to any legal person, entity or body which is incorporated or constituted under the law of a Member State;
- to any legal person, entity or body in respect of any business done in whole or in part within the Union."
Making funds or economic resources available
The key provision of the Regulation is Article 2, which reads as follows:
- "All funds and economic resources belonging to, owned, held or controlled by the natural or legal persons, entities and bodies listed in Annex I or Annex IA shall be frozen.
- No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of the natural or legal persons, entities and bodies listed in Annex I or Annex IA..."
The newly sanctioned parties are listed in Annex 1A. The above provision is intentionally widely drafted and adopts the language commonly used in sanctions legislation. "Economic resources" is defined as "assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but can be used to obtain funds, goods or services".
There is the potential to obtain authorization from the competent authority within the Member State1 to make funds or economic resources available to a sanctioned party but the grounds on which such permission can be granted are extremely limited.
Perhaps of most relevance is the ability for permission to be obtained where it is established that the economic resources or funds are "extraordinary expenses" although there is a lack of guidance as to the intended meaning of that phrase. It is unlikely that this can be invoked in the case of routine disbursements.
Article 6 provides that "frozen accounts" can be added to with "payments due under contracts, agreements or obligations that were concluded or arose prior to the date on which those accounts became subject to this Regulation". In practice, however, this is of no assistance when the payment is to be made to an account, for example, within the Ivory Coast rather than a frozen account, which are those within the jurisdiction of the EU. There is no generic carve out for contracts which pre-date the Regulation.
Calling at Abidjan or San Pedro
By a vessel calling at one of these ports, an offence would be committed if an EU corporate (or national) made payment of port dues or other disbursements/expenses to the port. An offence would still be committed if the port dues are paid by that party's agent. Note also that the Regulation applies to vessels registered in the EU.
Extreme caution should be exercised because it is not necessary for payment or assets to be made available directly to the sanctioned party in order to be caught.
It is an offence to attempt to circumvent the restrictions set out in the Regulation and as such it will not be possible for parties to structure payments, or future contracts, so as to try to evade the provisions.
Shipowners should also be aware that the sanctions could prevent insurers subject to the Regulation providing security to a sanctioned party, so, for example, to the port in the event that a vessel was arrested amidst allegations of damage to the port.
There are already differing accounts of the impact of the Regulation, it being reported both that there is a complete prohibition on "EU vessels" calling at Ivory Coast ports and that it remains business as usual.
Whilst in our view the new Regulation does not impose an absolute prohibition upon vessels calling at the ports, it may well have that effect as it is likely that all calls will require a party to pay port charges to a sanctioned person. If you are subject to the Regulation and trade in the Ivory Coast, we therefore suggest that legal advice be obtained.