EU TO IMPOSE SANCTIONS ON UKRAINE SEPARATIST LEADERS

On 27 November 2014, the Council of the EU agreed to add 13 Ukrainian separatists involved in the disputed elections in eastern Ukraine and five organisations linked to the separatists to the EU Ukrainian sanctions list.

The separatists will be targeted with asset freezes and travel bans due to their alleged involvement in undermining the territorial integrity of Ukraine.

The list of new sanctions subjects is expected to be published in the Official Journal of the EU on 29 November 2014.

YASSIN KADI REMOVED FROM US SANCTIONS AFTER 13 YEARS

The US Treasury Department announced today that it has removed a number of individuals from its “specially designated nationals” list, including Yassin Kadi.

Mr Kadi, who had been added to the USA’s “SDN” list in October 2001, had already been de-listed by the United Nations Security Council and in the European Union.

He was the successful applicant in the well known Kadi litigation summarised on this blog (see e.g. here) which led to the creation of the Office of Ombudsperson to the UN Sanctions Committee Al Qaida list and is arguably the leading judgment on the relationship between international and EU law, and on due process in EU sanctions regimes.  He lost a legal challenge to his designation in the US District Court in 2012 (judgment here).

UK EXPORTER WHO BREACHED IRAN SANCTIONS ORDERED TO REPAY PROFIT

On 21 November 2014, a judge at the Central Criminal Court in London made two confiscation orders against a Managing Director and his company to pay a total of £1.14 million, after breaching trade sanctions with Iran.

The Managing Director, Gary Summerskill, received a 30 month prison sentence in March 2014, after pleading guilty to knowingly exporting alloy valves illegally to Iran, via his company Delta Pacific Manufacturing Limited. The total value of the exports to Iran was in excess of £3 million.

The court had found that Delta Pacific Manufacturing Limited made three illegal shipments of alloy valves to Iran without an export licence and tried to conceal the breach by diverting the components through Hong Kong and Azerbaijan. The export of alloy valves to Iran is currently subject to EU sanctions (EC Regulation No 428/2009), due to their potential for use in the construction of weapons.

Mr Summerskill has been ordered to pay £68,000 in confiscation, within six months or serve a further 15 months in prison. His company, Delta Pacific Manufacturing Limited, was ordered to pay £1,072,000 after having already been fined £225,000 in March 2014.

Peter Millroy, assistant director, criminal investigation, HM Revenue & Customs said “Summerskill knew that he was acting illegally – he manipulated a system which has been put in place to protect public safety simply to line his own pockets. He has not only paid the price by losing his liberty but he now has to pay back the money he has made from his criminal activities or face more time in jail.”

 

EU COURT AWARDS DAMAGES FOR 1st TIME IN A SANCTIONS CASE

The General Court of the EU (First Chamber) has awarded damages today for the first time in a sanctions case, in Case T-384/11 Safa Nicu Sepahan v Council (25 November 2014).

Context: The case follows the pattern of a number of recent sanctions cases in the European court that will be familiar to readers of this blog. The applicant, an Iranian company, was included in 2011 in the EU’s targeted sanctions concerning Iran. It said that the reasons given for its inclusion (that is a “communications firm that supplied equipment for the Fordow (Qom) facility built without being declared to the IAEA”) were incorrect, that it was not a communications firm and was not involved in the supply of equipment to that facility. The Council of the EU had no evidence, other than the listing proposal from a Member State, to support its reasons, and therefore the Court annulled the company’s designation on the grounds that the Council had “manifestly erred” in including the applicant and had not discharged its burden of proof. The Court ordered the Council to bear its own costs and pay half of the applicant’s costs.

Damages: In a number of previous cases summarised on this blog, the European court has annulled listings but declined to award damages under Article 340 of the Treaty on the Functioning of the European Union, either because the Court has not found the breach of EU law by the Council to be “sufficiently serious” (a precondition for damages) or because the applicant had not proved that its inclusion on an EU sanctions measure caused its loss.

However, in this case the Court allowed part of the applicant’s damages claim. It found that that Council’s error was sufficiently serious, had caused damage to the company’s reputation, affecting the way in which third parties, located mainly part outside the EU, behaved towards it, and that annulling the company’s listing was not enough to compensate it for the damage caused to its reputation. A few notable aspects of the judgment are as follows:

1) The breach that the Court classified as “sufficiently serious” was the same breach that the Court has found in a large number of recent sanctions cases, namely that the Council had apparently failed to check its facts and gather evidence to prove the accuracy of reasons given for the listing.

2) The damages awarded were modest. Safa Nicu Sepahan Co had claimed €7.66 million plus interest, including €2 million as damage to its reputation (and interest at 5% for a 3 year period), but the Court awarded it €50,000 plus default interest from the date of judgment until full payment of compensation, at the rate set by the European Central Bank for main refinancing operations, increased by 2%. There is no analysis by the Court as to how it reached this figure, except the statement that the Court had evaluated the harm suffered “ex aequo et bono” (i.e. according to what seemed just and fair).

3) The Court made a number of remarks about the serious reputational damage that can result from being included in a sanctions measure that makes an official EU statement in the Official Journal that an entity is linked with nuclear proliferation.

4) The Court rejected in its entirety the applicant’s claim for material damage arising from the closure of some of its bank accounts and the suspension of its payments in euros by European banks, the discontinuance of commercial relations by its European suppliers and the fact that it was impossible to perform 4 contracts entered into with its customers. The Court rejected those claims essentially because it found that the applicant had not made them out as a matter of evidence.

IRAN SANCTIONS TALKS EXTENDED BY ANOTHER 7 MONTHS

We previously reported on the Joint Plan of Action, under which Iran and the P5+1 or EU3+3 countries (China, France, Germany, the Russian Federation, UK and USA) agreed a number of measures in November 2013 towards lifting sanctions in exchange for undertakings about Iran’s nuclear programme.  The sanctions provisions in the Joint Plan of Action are here.

The E3+3 and Iran have been engaged in negotiations to try reach a long term comprehensive agreement on Iran’s nuclear programme and sanctions.  The Joint Plan of Action was extended in July until 24 November 2014 (today).  The long term solution, in which the Joint Plan of Action is supposed to be the first step, aims to result in “the comprehensive lifting of all UN Security Council sanctions, as well as multilateral and national sanctions relating to Iran’s nuclear programme” while ensuring that “Iran’s nuclear programme will be exclusively peaceful” and in which Iran “reaffirms that under no circumstances will Iran ever seek or develop any nuclear weapons”.

Those countries have announced today that they have failed to reach a long-term agreement after talks in Vienna, and will again extend the JPA until the end of June 2015.  Reports suggest that the terms of the extension of time are that Iran will continue to see $700 million of its assets unfrozen from international bank accounts every month, in exchange for an ongoing halt to uranium enrichment beyond 5%.

All other EU sanctions and restrictions remain in place and in force.  The European Union’s sanctions relating to Iran are on the ‘sanctions in force’ section of this blog.

UAE IMPOSES SANCTIONS ON ‘TERRORIST’ ORGANISATIONS

The UAE has announced that it has added 86 terrorist organisations and groups to its sanctions list aimed at ‘combatting terrorist crimes’ (pursuant to Federal Law No. 7 of 2014).

The groups now listed include ISIS, Al-Qaida, the Yemeni Houthi movement, the Muslim Brotherhood and a number of civil society organisations and think tanks. The effect of their inclusion is that the organisations cannot operate in or receive funds from the UAE.

The US government has rejected the UAE’s labelling of two US Muslim groups (the Council on American-Islamic Relations (CAIR) and the Muslim American Society) as ‘terrorist’ groups. After several organisations criticised their inclusion in the list, a senior UAE official announced that groups placed on the list can appeal against their designation if their “approach has changed”.

UN SANCTIONS ANSAR AL-SHARIA

On 18 November 2014, the United Nations Security Council’s Al-Qaida Sanctions Committee imposed targeted sanctions on the Libyan Islamic militant group Ansar al-Sharia. Both the organisation’s Benghazi and Derna branches are now subject to restrictive measures.

The sanctions consist of an asset freeze, travel ban in UN Member States and an arms embargo. The groups have been listed because of their association with Al-Qaida and their role in ‘[running] training camps for foreign terrorist fighters travelling to Syria, Iraq and Mali’.

The US has already imposed sanctions Ansar al-Sharia for its role in the Benghazi consulate attack in 2012 in which four American citizens were killed.

 

EU COURT APPLIES KADI 2 TO SYRIA SANCTIONS – ANNULS INCLUSION OF HAMCHO, KADDOUR AND JABER

195px-european_court_of_justice_insignia-svgThe General Court of the European Union (Seventh Chamber) handed down 3 judgments on 13 November 2014 annulling the inclusion of 3 people on the EU’s sanctions (restrictive measures) relating to Syria: Case T-653/11 Jaber v Council, Case T-654/11 Kaddour v Council and Case T-43/12 Hamcho v Council (the judgments are currently only available in French).

The 3 cases raise similar issues.  The reasons published by the Council for including the 3 applicants were that they were all alleged to be associates of Maher Al Assad.  Mr Kaddour and Mr Hamcho were also said to be businessmen who provide “financial support” to the Syrian regime, “allowing violence against demonstrators”, and Mr Jaber was said to be “directly involved in the violent repression of the Syrian civilian population”. All 3 applicants, first listed in 2011, challenged these allegations as being incorrect and unsupported by evidence.

The General Court applied Article 47 of the EU Charter of Fundamental Rights (the right to a fair trial and effective remedy), as applied by the Court of Justice in Kadi 2 (as it has done in a number of recent Iran judgements, but the position has been more mixed in the Syria case law so far).  In other words, the Court confirmed that where the reasons provided for a person’s listing are challenged, it is for the Council to prove the reasons, with evidence, and not for the listed person to disprove them.  The Council could not do so in these cases – it relied only on press reports which did not substantiate its conclusions, and it had therefore “manifestly erred” in its assessment.

As has become standard practice in sanctions cases in the General Court, the Court did not annul the inclusion of these people straight away, but maintained the measures until the period for the Council appealing (2 months) has expired.  The Court ordered the Council to bear its own costs and pay one third of the costs of each of the applicants, on the basis that they had won their cases but only on one of their grounds for annulment.

The European Court of Justice (the EU appeals court) last Tuesday heard an appeal in Anbouba v Council (see previous blog on General Court judgment here), another Syria sanctions case, which raises the lawfulness of the Council relying on general presumption that successful Syrian businessmen must provide financial support to the Assad regime. Maya Lester is part of that legal team on appeal.