Sanctions and contra-sanctions in the EU | European Commission

Europe is taking action against unlawful extraterritorial application of unilateral measures by third countries (‘contra-sanctions’) and is working on its own sanctions system. On this subject the press release of 19 January 2021 by the European Commission informs us as follows:

2. Further developing EU financial market infrastructures and improving their resilience, including towards the extraterritorial application of sanctions by third countries. The Commission, in cooperation with the ECB and the European Supervisory Authorities (ESAs), will engage with financial-market infrastructure companies to carry out a thorough analysis of their vulnerabilities as regards the unlawful extraterritorial application of unilateral measures by third countries and take action to address such vulnerabilities. The Commission will also establish a working group to assess possible technical issues related to the transfer of financial contracts denominated in euro or other EU currencies cleared outside the EU to central counterparties located in the EU. In addition to this, the Commission will explore ways to ensure the uninterrupted flow of essential financial services, including payments, with EU entities or persons targeted by the extra-territorial application of third-country unilateral sanctions.

3. Further promoting the uniform implementation and enforcement of the EU’s own sanctions. This year, the Commission will develop a database – the Sanctions Information Exchange Repository – to ensure effective reporting and exchange of information between Member States and the Commission on the implementation and enforcement of sanctions. The Commission will work with Member States to establish a single contact point for enforcement and implementation issues with cross-border dimensions. The Commission will also ensure that EU funds provided to third countries and to international organisations are not used in violation of EU sanctions. Given the importance of monitoring the harmonised enforcement of EU sanctions, the Commission will set up a dedicated system allowing for the anonymous reporting of sanctions evasion, including whistleblowing.

In a document with questions and answers, the Commission writes the following on sanctions:

In addition, the EU should develop measures to shield its financial sector and critical financial-market infrastructure against interference from abroad. This relates to infrastructure which is indispensable for the functioning of the financial system: stock exchanges, banks, central counterparties, central securities depositories etc.
Finally, the full and uniform implementation of EU sanctions will substantially contribute to the EU’s strategic weight, by increasing the EU’s credibility as a regulatory power, preserving the integrity and the level-playing field of the EU Single Market, and removing incentives and opportunities for third countries to unlawfully apply their sanctions extraterritorially on EU individuals and entities.

(…)

There are a few EU-based financial market infrastructures with global operations that provide depository and messaging services. Their international operations by definition make them subject to foreign laws and policies. This also makes them vulnerable to disruptive actions by third countries, including through the unlawful extraterritorial application of unilateral sanctions. It is important for the EU to preserve the global reach of these infrastructures, while safeguarding the open strategic autonomy of the EU.

What does the Commission propose to increase the resilience of Europe’s financial market infrastructures and related critical service providers to counter the effects of the unlawful extraterritorial application of third-country sanctions?
As a first step, and within a broader EU response to third-country sanctions preventing EU legitimate activities, existing vulnerabilities need to be assessed. As a second step, tools need to be developed to counteract the effects upon EU operators of the unlawful extraterritorial application of unilateral measures by a third country.

More specifically, the Commission will pursue the following actions:
• Together with the ECB and the relevant European Supervisory Authorities, the Commission will engage with financial market infrastructure companies to carry out a thorough analysis of their vulnerabilities as regards the unlawful extraterritorial application of unilateral measures by third countries. The Commission will assess the need for issuing related recommendations and contribute to the EU’s range of tools to prevent and effectively counter interference by third countries with EU-based financial market infrastructures.
• The Commission will explore ways and means to ensure the uninterrupted flow of essential financial services, including payments, with EU entities or persons targeted by the extraterritorial application of third-country unilateral sanctions.

Regarding European sanctions, what initiatives does the Communication propose?
The Commission proposes to improve the implementation of EU sanctions, notably by:
• reinforcing the information exchange mechanism between Member States and the Commission,
• creating a single contact point for enforcement and implementation issues with a cross-border dimension, and
• making sure that EU funds provided to third countries and to international organisations are not used in violation of EU sanctions.

The Communication stresses the importance of the Commission’s role in monitoring the harmonised enforcement of EU sanctions. In this regard, the Commission will set up a dedicated system allowing for the anonymous reporting of sanctions evasion, including whistleblowing.

(…)

What is the role of Member States with regard to the Common Foreign and Security Policy initiatives set out in the Communication? (…)
In this regard, the Commission will set up an expert group on sanctions and extraterritoriality, composed of representatives of Member States. The group’s mandate will cover issues of technical implementation of EU sanctions and of Regulation (EC) No 2271/96 (“Blocking Statute”).

Iran Blocking Statute
The Commission in its message of 19 January is referring to a press release of 2018 regarding the European Blocking Statute against the US sanctions on Iran. In the q&a document it says:

What actions does the Communication propose with regard to the Blocking Statute?
The Blocking Statute is the EU’s unified response to the extra-territorial application of third-country measures, in particular secondary sanctions, on EU operators. In this Communication, the Commission suggests measures to make a better use of the existing tools as well as creating new tools.

In relation to existing tools, the Commission proposes to:

• clarify the procedures for the application of Article 6, which allows individuals and entities subject to the Blocking Statute to recover in court damages suffered as a result of the listed extra-territorial measures;
• strengthen national measures to block the recognition and enforcement of foreign decisions and judgments based on the listed extraterritorial measures (pursuant to Article 4);
• streamline the processing of authorisation requests pursuant to Article 5, second paragraph; and
• consider intervening in foreign proceedings in support of EU companies and individuals.

The Commission will also consider further tools to shield EU operators’ legitimate operations under EU law.

Over Ellen Timmer, advocaat ondernemingsrecht @Pellicaan

Verbonden aan Pellicaan Advocaten, http://www.pellicaan.nl/, kantoor Rotterdam, telefoon 088-6272287, fax 088-6272280, e-mail ellen.timmer@pellicaan.nl ||| Weblogs: algemeen: https://ellentimmer.com/ || modernisering ondernemingsrecht: http://flexbv.wordpress.com/ ||| Motto: goede bedoelingen rechtvaardigen geen slechte regels
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