JURISDICTIONAL SCOPE OF THE EU AND MEMBER STATES …...EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK EU...

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#ACISanctions ACI’s 7 th Advanced Forum on Economic Sanctions Enforcement & Compliance Pinar GUNGOREN-CHEDRU Global Head of Economic Sanctions Compliance Société Générale [email protected] JURISDICTIONAL SCOPE OF THE EU AND MEMBER STATES SANCTIONS REGIMES April 30- May 1, 2014 Tweeting about this conference?

Transcript of JURISDICTIONAL SCOPE OF THE EU AND MEMBER STATES …...EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK EU...

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ACI’s 7th Advanced Forum on Economic Sanctions Enforcement & Compliance

Pinar GUNGOREN-CHEDRU

Global Head of Economic Sanctions Compliance

Société Générale

[email protected]

JURISDICTIONAL SCOPE OF THE EU AND MEMBER STATES SANCTIONS REGIMES

April 30- May 1, 2014

Tweeting about this conference?

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CONTENTS

• LEGAL FRAMEWORK & ITS IMPLEMENTATION

• OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

• THE COURT OF JUSTICE & LEGAL REMEDIES WITH RECENT CASES

• CONSEQUENCES FOR THE EUROPEAN INSTITUTIONS

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK

EU Treaties:

• The European Union is based on the rule of law. This means that every action taken by the EU is founded on treaties. For example, if a policy area is not cited in a treaty, the Commission cannot propose a law in that area.

• The Treaty on the European Union (TEU) precises general provisions on the Union's external action and specific provisions on the Common Foreign and Security Policy.

• The Treaty on the Functioning of the European Union (TFEU) determines the areas of, delimitation of, and arrangements for exercising its competences.

• These two Treaties have the same legal value. 3

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK

• The aims set out in the EU treaties are achieved by several types of legal act. These legislative acts include regulations, directives, decisions, recommendations and opinions. Some are binding, others are not. Some apply to all EU countries, others to just a few.

• EU law - which has equal force with national law - confers rights and obligations on the authorities in each member country, as well as individuals and businesses. The authorities in each member country are responsible for implementing EU legislation in national law and enforcing it correctly.

• EU case-law is made up of judgments from the European Union's Court of Justice, which interpret EU legislation.

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK

DIFFERENT TYPES OF LEGAL ACT: • Regulations A "regulation" is a binding legislative act. It must be

applied in its entirety across the EU. • Directives A "directive" is a legislative act that sets out a goal that

all EU countries must achieve. However, it is up to the individual countries to decide how.

• Decisions A "decision" is binding on those to whom it is

addressed (e.g. an EU country or an individual company) and is directly applicable. 5

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK • While the “decisions” contain all measures imposed,

additional legislation may be needed to give full legal effect to the sanctions (the Council Implementing Regulation);

• Certain sanctions, such as arms embargoes and travel bans, are implemented directly by the member sates upon the “decision” of Council which is directly binding on EU member states;

• Other sanctions, for instance asset freezes and export bans, require separate implementing legislation in the form of a Council Regulation which is directly binding on EU citizens and businesses;

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK

• The EU applies restrictive measures (sanctions) to reach the specific objectives of the Common Foreign and Security Policy (CFSP) as set out in Article 21 of the Treaty on the EU, namely: • to safeguard the common values, fundamental interests, security,

independence and integrity of the Union;

• to preserve peace, prevent conflicts and strengthen international security, in accordance with the principles of the United Nations Charter and the Helsinki Final Act , and the objectives of the Paris Charter, including those on external borders;

• to promote international cooperation;

• to consolidate and support democracy, the rule of law and respect for human rights and the principles of international law.

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EU RESTRICTIVE MEASURES- LEGAL FRAMEWORK

Article 215 of The Treaty on the Functioning of the EU: • Where a decision, adopted in accordance with

the Treaty on European Union, provides for the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries, the Council, acting by a qualified majority on a joint proposal from the High Representative of the Union for Foreign Affairs and Security Policy and the Commission, shall adopt the necessary measures. It shall inform the European Parliament thereof.

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APPLICABILITY OF EU RESTRICTIVE MEASURES • EU restrictive measures only apply within the

jurisdiction of the EU, that is: • Within EU territory, including its airspace;

• To EU nationals, whether or not they are in the EU;

• To companies and organizations incorporated under the law of a member state, whether or not they are in the EU. This also includes branches of EU companies in third countries;

• To any business done in whole or in part within the European Union;

• On board of aircrafts or vessels under the jurisdiction of a member state.

The EU does not adopt legislation with extra-territorial application. 9

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

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Executive

EUROPEAN COMMISSION

EUROPEAN COUNCIL

Council of Heads of State or Government

THE COUNCIL OF THE EU

Council of Ministers

Legislative

EUROPEAN PARLIAMENT,

(Strasbourg)

Judicial

EUROPEAN COURT OF JUSTICE

(Luxembourg)

Jointly decide on

the legislation

Proposes Legislation

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

• The European Council defines the general political direction and priorities of the EU. It does not exercise legislative functions. It consists of the Heads of State or Government of the Member States. It meets twice every six months. The European Council shall act unanimously except where the Treaties provide otherwise.

• The Council of the European Union is the EU's decision-making body, jointly or by co-decision with the European Parliament. It meets at ministerial level in nine different configurations depending on the subjects being discussed. It has legislative, executive and budgetary powers. All the Council's work is prepared or coordinated by the Permanent Representatives Committee (COREPER).

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES • High Representative for Foreign Affairs and Security Policy

conducts the Common Foreign and Security Policy, contributes by her proposals to the development of that policy, chairs the Foreign Affairs Council, and shall ensure implementation of the decisions adopted by the European Council.

• The High Representative shall conduct political dialogue with third parties on the Union's behalf and shall express the Union's position in international organisations and at international conferences.

• The High Representative exercises authority over the European External Action Service (EEAS) and over the Union delegations in third countries and at international organisations.

• In fulfilling her mandate, she is assisted by EEAS. 13

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES • European External Action Service (EEAS): It helps the

High Representative to develop proposals and to implement policies approved by the Council.

• This service shall work in cooperation with the diplomatic services of the Member States and shall comprise officials from relevant departments of the General Secretariat of the Council and of the Commission as well as staff seconded from national diplomatic services of the Member States.

• It also assists the President of the European Council in their functions in the area of external relations.

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

• European Commission is fully involved in the work of the Common Foreign and Security Policy (CFSP). It sits as an observer on the Political and Security Committee (PSC) and on the various working groups, and can issue proposals in this capacity but is not entitled to vote.

• Political and Security Committee (PSC): Bringing together the ambassadors representing the 28 EU Member States, it monitors the international situation in the policy areas covered by the CFSP and the Common Security and Defense Policy (CSDP) and issues 'opinions' to the Council (proposals for policy objectives and recommendations for strategy options).

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OVERVIEW OF THE MAIN EUROPEAN INSTITUTIONS, BODIES AND AGENCIES

• Foreign Relations Counsellors Working Group (RELEX): This working group is responsible for discussing all horizontal aspects of preparing and implementing Council decisions, particularly the institutional, legal, logistical and budgetary dimensions of missions and operations.

• The Permanent Representatives Committee (COREPER): is responsible for preparing Council meetings at ministerial level and works in two configurations: • Coreper I, consisting of the deputy permanent

representatives, deals with technical matters; • Coreper II, consisting of the ambassadors, deals with

political, commercial, economic or institutional matters.

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EU RESTRICTIVE MEASURES- INTERNATIONAL COOPERATION

• In international organisations and at international conferences where not all the Member States participate, those which do take part shall uphold the Union's positions.

• Member States which are members of the Security Council will, in the execution of their functions, defend the positions and the interests of the Union, without prejudice to their responsibilities under the provisions of the United Nations Charter.

• When the Union has defined a position on a subject which is on the United Nations Security Council agenda, those Member States which sit on the Security Council shall request that the High Repre sentative be invited to present the Union's position.

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APPLICABILITY OF EU RESTRICTIVE MEASURES • EU restrictive measures only apply within the

jurisdiction of the EU, that is: • Within EU territory, including its airspace;

• To EU nationals, whether or not they are in the EU;

• To companies and organizations incorporated under the law of a member state, whether or not they are in the EU. This also includes branches of EU companies in third countries;

• To any business done in whole or in part within the European Union;

• On board of aircrafts or vessels under the jurisdiction of a member state.

The EU does not adopt legislation with extra-territorial application. 18

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THE COURT OF JUSTICE OF THE EU

Article 263 of TFEU: • The Court of Justice of the European Union shall review the legality

of legislative acts intended to produce legal effects vis-a -vis third parties.

• It shall also review the legality of acts of bodies, offices or agencies of the Union intended to produce legal effects vis-a-vis third parties.

• It shall for this purpose have jurisdiction in actions brought by a Member State, the European Parliament, the Council or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaties or of any rule of law relating to their application, or misuse of powers.

• The institution whose act has been declared void or whose failure to act has been declared contrary to the Treaties shall be required to take the necessary measures to comply with the judgment of the Court of Justice of the European Union.

The Court of Justice of the European Union consists of three courts: the Court of Justice, the General Court and the Civil Service Tribunal.

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LEGAL REMEDIES

• In accordance with Article 16 of the Treaty on the Functioning of the European Union, the Council shall adopt a decision laying down the rules relating to the protection of individuals with regard to the processing of personal data by the Member States and the rules relating to the free movement of such data. Compliance with these rules shall be subject to the control of independent authorities.

• The Council notifies persons and entities targeted by an asset freeze of the measures taken against them.

• At the same time, it brings the available legal remedies to their attention, that is:

• They can ask the Council to reconsider its decision, by providing observations on the listing;

• They can also challenge the measures before the General Court of the EU. 20

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LEGAL REMEDIES

• The introduction and implementation of restrictive measures must always be in accordance with international law.

• They must respect human rights and fundamental freedoms, in particular due process and the right to an effective remedy.

• The measures imposed must always be proportionate to their objective.

• The decision to subject a person or entity to targeted restrictive measures requires clear criteria, tailored to each specific case, for determining which persons and entities may be listed, which should also be applied for the purpose of removal from the list. 21

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SOME EXAMPLES OF LEGAL REMEDIES

• In 2013, there have been a number of decisions by the European courts in Luxembourg regarding the legality of imposing EU sanctions on certain individuals or entities. These have covered the Iranian, anti-terrorism, Tunisian and Ivory Coast sanctions regimes.

• Some cases on Iranian entities who challenged their listing: Bank Saderat and Bank Mellat • The European Council relied on classified and confidential information as

evidence in determining that the entity should be included in the list of sanctioned entities;

• This evidence could not be placed before the Court; • The Court was unwilling to attach any weight to such evidence and held

that basing a listing on such evidence was an infringement to the applicants rights.

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SOME EXAMPLES OF LEGAL REMEDIES

• In the cases of Post Bank Iran, Iran Insurance Company, Good Luck Shipping and the Export Development Bank of Iran, the General Court held that the EU Council was unable to provide sufficient evidence that these entities provided support to Iran’s nuclear program.

• In the case of Persia International Bank, the General Court held that the reasons for listing given by the EU Council did not justify the listing. It was its 60% ownership by a designated entity, Bank Mellat.

• In the case of IRISL, the Court determined that while the EU established that IRISL has been involved in exports of arms from Iran, that activity was not alone sufficient to support the imposition of sanctions. 23

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SOME EXAMPLES OF LEGAL REMEDIES

• These Iranian cases demonstrate that the evidentiary basis for sanctions listing can be tested in the courts and that the EU Council will not be permitted to rely on undisclosed evidence. The European Court of Justice is currently considering the adoption of special procedures to allow it to hear classified or secret evidence.

• If the judgment of the General Court is not appealed and the entity is not re-listed, the effect of the judgment is retrospective, in that it will effectively remove the entity from the listing regulation with effect for the entire period since its promulgation.

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CONSEQUENCES FOR THE EUROPEAN INSTITUTIONS • The European Court of Justice has signaled that EU

sanctions are subject to standards of proof that cannot be broadly construed to incorporate all types of economic activity.

• The General Court requires that the EU regulators to bring stronger evidence to justify the imposition of sanctions. Failure to do so may enlarge the gap between U.S. and EU sanctions.

• The judgments seek to instill more transparency and fairness into the EU sanctions regime.

• Retrospective application of these decisions may lead to companies seeking damages for their losses. Example : Bank Mellat is currently seeking GBP 500 million from UK Treasury.

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CONCLUSION

• Complicated legal framework and organization involving many actors;

• Decisions taken unanimously by 28 member states having different economic and political concerns;

• Significant differences in the methodology, implementation and applicability between U.S. and EU sanctions;

• Possibility to challenge EU Council decisions with significant impacts on the European institutions.

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