Beyond Freezing?

• Date: 11 August 2022
• Year: 2022
• Author: Dr. Dr. h.c. Michael Kilchling
• Pages: 66
• DOI: https://doi.org/10.30709/eucrim-2022-010

I. Introduction

"We will target the assets of Russian oligarchs." With this clear message presented by European Commission President Ursula von der Leyen earlier this year, the plans of the Commission to further tighten the already existing targeted sanctions regime related to Russia's war against Ukraine were publicly communicated. In her statement, she further announced:

"The European Union is looking into ways of using the frozen assets of Russian oligarchs to fund the reconstruction of Ukraine after the war. Our lawyers are working intensively on finding possible ways of using frozen assets of the oligarchs for the rebuilding of Ukraine."¹

The sheer amount of assets, which are already under freeze, provides a considerable incentive for such a policy plan. According to various estimates of May 2022, assets frozen as a result of Western sanctions may total between 300 and 500 billion US dollars;² of these, approximately €200 billion in Belgium alone.³ A possible way forward to realizing such "use" of (private) property is the criminalisation of sanctions evasion in connection to which new grounds for confiscation may be established.⁴

This article is meant to provide a general introduction to the current system of EU sanctions, its origins and current practices as well as to give some guidance through the jungle of relevant EU documents. Given that Germany is one of the first EU Member States which already implemented such additional penal measures, without waiting for EU framework legislation, and based on a portrayal of Germany's actual amendments, the article also discusses potential infringements of fundamental rights arising from such a tightened concept.

II. EU's Targeted Sanctions Regime 1. General Concept

The so-called targeted sanctions⁵ are a genuine instrument of the EU's Common Foreign and Security Policy (CFSP) that can be imposed under Chapter 2 of the Treaty of the European Union (TEU). Art. 29 TEU provides an explicit legal basis for Council decisions imposing such sanctions. The procedure is regulated in Art. 215 of the Treaty on the Functioning of the European Union (TFEU); its second paragraph authorises the Union to impose sanctions against natural or legal persons, groups, and non-state entities.⁶ Their formal name is "restrictive measures".⁷

The first legal document imposing restrictive measures was adopted on 28 October 1996 and concerned the imposition of sanctions on Burma/Myanmar. The measures imposed at that occasion were still rather modest: a visa ban for selected politicians and military officers, and a suspension of high-level bilateral governmental visits.⁸ Since then, the concept developed to become one of the most dynamic and impactful instruments of the EU's foreign policy.⁹ Meanwhile, targeted sanctions are being imposed at many occasions. Over time a change in the use of restrictive measures has been identified, which has shifted from targeting states to targeting individuals and non-state entities.¹⁰ Parallel to the EU's autonomous sanctions, UN-determined sanctions have been adopted and implemented by the European Union as well.¹¹ The related measures are self-executing; transformation into domestic law is not required.

The purpose and scope of targeted sanctions can be diverse, aiming to promote peace and security, to prevent conflicts, to support democracy, and to defend the principles of international law. They can be imposed in a variety of different forms, and selected and combined according to a modular concept.¹² Standard sanctions mainly include economic boycotts, restrictions on services, travel restrictions (including visa or travel bans), flight bans, arms embargoes and embargoes for dual use goods, restrictions on equipment used for internal repression and other specific imports or exports, and most importantly, financial restrictions. In addition, atypical measures customised to specific situations are also possible. For the purpose of this article, the focus is on the financial restrictions.

Distinct from the current public perception, the sanctions regime is not an instrument that would mainly or even exclusively target Russia. As can be seen from the map provided in Figure 1, targeted sanctions are currently in force in relation to a considerable number of states, members of their governments or illegitimate regimes, and individuals or entities supporting those or fighting against those, respectively. Besides Russia, the EU currently targets, inter alia, the following countries: Belarus, Burundi, the Central African Republic, the Democratic Republic of Congo, Iran, Iraq, Lebanon, Myanmar, Nicaragua, Sudan and South Sudan, Syria, Tunisia, Venezuela, Yemen, Zimbabwe, and some more.¹³ North America and Canada, together with Australasia and Japan are the only world regions that are totally devoid of any EU sanctions. Within Europe, the political situation in Bosnia and Hercegovina is considered to be quite unstable; accordingly, the legal basis for a potential imposition of targeted sanctions against those undertaking activities aiming to undermine the sovereignty, territorial integrity, constitutional order and international personality of Bosnia and Herzegovina, or seriously threaten the security situation there, or undermine the Dayton peace agreement, has already been passed on a preparatory status quite some years ago.¹⁴ Although EU policy against Russia has become more and more rigorous, the related sanctions have not reached yet the top position; while 39 restrictive measures have so far been put in place in the context of the Russian aggression against Ukraine, some 52 types are currently effective against North Korea; and some 24 measures have been introduced in relation to the warfare in Syria.¹⁵

Figure 1: Map of Targeted EU Sanctions in Force

Source: EU Sanctions Map (provided online at https://sanctionsmap.eu/#/main)

2. Asset Freezing

With the exception of no more than a handful of cases, asset freeze and other finance-related sanctions commonly apply in all cases. The most prominent example from the past are certainly the financial sanctions imposed in relation to the Taliban.¹⁶ This instrument is one of the most frequently amended legal acts in the area of the targeted sanctions. What had been initiated in the year 2000 as a sanctioning regime against the (first) Taliban regime of Afghanistan¹⁷ was widened in the aftermath of 9/11 into an instrument targeting "certain persons and entities associated with Usama bin Laden, the Al-Qaida network and the Taliban”. Notwithstanding its character as an UN-determined measure,¹⁸ the related Council Regulation 881/2002,¹⁹ together with its currently more than 330 amendments,²⁰ through which the lists²¹ of targeted persons, groups and entities have been updated on a regular basis, developed to become the prototype of what is commonly discussed as "terror lists". This scheme raises a number of concerns related to the limited possibilities for effective judicial supervision.²² Meanwhile the title of the core Regulation (no. 881/2002) was changed again, thus widening the scope to the so-called 'Islamic State'.²³

The key substance of asset freeze is stipulated in Art. 2 of that Regulation which provides:

1. All funds and economic resources belonging to, or owned or held by, a natural or legal person, group or entity designated by the Sanctions Committee and listed in [the annex hereto] shall be frozen;

2. No funds shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in [the annex hereto];

3. No economic resources shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in [the annex hereto], so as to enable that person, group or entity to obtain funds, goods or services.

The same wording can be found in many other legal acts as well. Meanwhile, standard formulations have been developed which are provided in the related guidelines. These include, inter alia, also the following key definitions which are regularly incorporated in the individual legal acts:²⁴

• "Freezing of funds" means preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or other change that would enable the use of the funds, including portfolio management;

• "Funds" means financial assets and benefits of every kind, including but not limited to:

  (a) cash, cheques, claims on money, drafts, money orders and other payment instruments;

  (b) deposits with financial institutions or other entities, balances on accounts, debts and debt obligations;

  (c) publicly- and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts;

  (d) interest, dividends or other income on or value accruing from or generated by assets;

  (e) credit, right of set-off, guarantees, performance bonds or other financial commitments;

  (f) letters of credit, bills of lading, bills of sale;

  (g) documents evidencing an interest in funds or financial resources;

• "Freezing of economic resources" means preventing their use to obtain funds, goods or services in any way, including, but not limited to, by selling, hiring or mortgaging them;

• "Economic resources" means 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.

A further core element of the financial sanctions are the annexes related to the regulations, in which the targeted individuals and entities for which the measures will apply, are listed. Over the years, hundreds of natural and legal persons have been listed and...