EU Sanctions

EU SANCTIONS

The EU has over forty different sanctions regimes in place. These sanctions (also known as restrictive measures) are imposed in the EU either (1) unilaterally within the framework of the EU’s common foreign and security policy (“CFSP”) to bring about a change in policy or conduct by targeting countries, entities or individuals or (2) to implement UN Security Council Resolutions.

CFSP[1] Key Objectives

• Safeguarding the EU’s values, fundamental interests, and security
• Consolidating and supporting democracy, the rule of law and human rights
• Preserving peace, preventing conflicts and strengthening international security
• Defending the principles of international law

Types of measures

EU sanctions may target governments of non-EU countries, as well as companies, groups, organisations, or individuals through the following measures:

• Arms embargoes
• Restrictions on admission (travel bans)
• Asset freezes
• Other economic measures such as restrictions on imports and exports

Application of sanctions

EU sanctions apply only within the jurisdiction of the EU and the obligations they impose are binding on EU nationals or persons located in the EU or doing business there. Since the end of the Brexit transition period on 31 December 2020, EU sanctions regimes and designations no longer apply in the UK.

Designation process

Proposals for restrictive measures including proposed designations are made by individual Member States or by the EEAS led by the High Representative of the Union for Foreign Affairs and Security Policy. These proposals are then discussed by the relevant working party within the EU Council. Once agreed, they are sent to the EU Council for approval. CFSP decisions such as these must be adopted unanimously.[2]

The EU Council provides in its sanctions guidelines that 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. These criteria are contained in the legislation underpinning the relevant sanctions regime.

The guidelines also state that proposals for listing must be accompanied by accurate, up-to-date and defendable statements of reasons.[3]

Council decisions enter into force upon publication in the Official Journal of the European Union.

It is worth noting that the EU Council is under an obligation to communicate to the person concerned the evidence used against them to justify the restrictive measures imposed on them within a reasonable period after those measures are enacted (see Kadi I at paragraphs 348 and 349).[4]

Administrative challenge to restrictive measures

Although the EU Council is obliged to keep restrictive measures under constant review, it is open to listed individuals and entities to challenge them through an administrative process by petitioning the Council directly to request de-listing.

Listed individuals and entities may submit a request directly to the EU Council (together with supporting documentation) that the decision to list them be reconsidered and restrictive measures against them be lifted. Further details are available on the Council’s website.[5]

A de-listing request will be considered by the competent regional working party on the basis of a preliminary analysis prepared by the EEAS and the Council Legal Service. The request for de-listing and the EU’s response will be discussed within the Foreign Relations Counsellors Working Group (also referred to as “RELEX working party”), which deals specifically with legal, financial and institutional issues of the CFSP. Further details on the procedure for de-listing are set out at paras 18-20 of Annex I of the 2012 Council Guidelines.[6]

Challenging restrictive measures in the EU courts

Both CFSP Council Decisions and Regulations implementing sanctions measures may be challenged before the Court of Justice of the European Union by way of an ‘annulment action’ under Article 263 of the Treaty on the Functioning of the European Union. Importantly, EU sanctions can be challenged even when they are implemented pursuant to an obligation imposed on the EU by UN Security Council resolution (see Kadi I at paragraph 299).

The General Court has jurisdiction to hear and determine at first instance challenges to sanctions measures.[7]  A decision of the General Court may then be appealed to the Court of Justice of the European Union. Annulment actions must be brought before the General Court within two months of the publication of the measure under challenge, its notification, or in the absence of notification, of the day on which it came to the knowledge of the applicant.[8] This two-month period can be extended on account of distance from Luxembourg by a single period of 10 days.[9]

Licencing requirements

As mentioned above, since the end of the Brexit transition period on 31 December 2020 EU sanctions regimes and designations no longer apply in the UK. As a result, no licence is required from HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) for UK persons to accept payment from persons and entities listed by the EU, including to accept payment for legal fees (provided the person in not designated in the UK).  The situation is of course different for EU-persons.

Costs proceedings

Following a challenge of an EU sanctions designation in the EU courts, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party (assuming they have been applied for in the successful party’s pleadings).[10]

Practically, the successful party will need to compile and provide the unsuccessful party with a detailed schedule setting out all costs incurred which are responsive to the Court’s order. Recoverable costs are defined as sums payable to witnesses and experts and expenses necessarily incurred by the parties for the purpose of the proceedings, in particular the travel and subsistence expenses and the remuneration of agents, advisers or lawyers.[11]  This commonly includes (1) solicitors fees; (2) the legal fees of barristers instructed in the matter; and (3) costs incurred by way of other disbursements (for example printing and travel charges).

It should be noted that the levels of costs recovery in the EU courts following sanctions proceedings are relatively low when compared with, for example, recovery in the UK courts.

Damages

Any natural or legal person can bring an action for damages before the EU courts if they have suffered harm due to the actions or omissions of an EU institution. [12] They have five years to bring the action from the moment the damage has materialised.

In accordance with settled case-law, three cumulative conditions need to be satisfied:

• the institution’s conduct must be unlawful and the breach must be sufficiently serious

• actual damage must have been suffered

• there must be a causal link between the conduct complained of and the damage suffered

The EU Courts may grant different types of damages, including material damages, non-material damages such as “moral” damages for harm to reputation, loss of profit and future damages. However, in the context of sanctions cases the EU courts have approached damages claims restrictively, and have generally been reluctant to award damages even where the sanctions have been found to be unlawful.

Contributors:  Charles Enderby Smith (partner),  Guy Martin (Consultant) and Magali Sharma (Solicitor)

The material in this Guide is for general information only and does not constitute legal advice.  The content of this page is accurate as of  January 2023.