Daniel Hudson, Karen Anderson Jeremy Sher and Richard Wright comment on recent developments concerning the EU sanctions regimes applying to Myanmar (Burma), North Korea, Syria and Libya.
European Union (“EU“) foreign ministers have voted to lift the majority of its restrictive measures against Myanmar (Burma). Despite its significant resource wealth and favourable geographical position bordering both India and China, Myanmar remains one of the most under developed countries in Asia. The decision to lift the financial restrictions will provide more certainty for EU corporates and individuals wishing to invest in the country.
In May 2000, the EU adopted a suite of sanctions and restrictive measures against Myanmar (Council Regulation (EC) No 1081/2000). This Regulation provided for a freeze on the assets of certain individuals with political and economic connections to the Burmese military government. These measures were strengthened by subsequent European legislation to provide for prohibitions on the financing of certain Burmese state-owned enterprises (Council Regulation No 1853/2004) and enterprises active in the extractive industries (Council Regulation No 194/2008).
In May 2012, in recognition of the country’s transition from military dictatorship to civilian rule, the EU agreed to suspend its sanctions, save for the arms embargo, for a period of one year (Council Regulation (EC) 409/2012). With the suspension due to lapse on the 30 April 2013 Council ministers voted to lift all restrictive measures, save for the arms embargo (Council Decision 2013/184). We have previously reported on the relaxation of the EU’s sanctions regime with respect to Myanmar.
The EU stated that, it is:
“willing to open a new chapter in its relations with Myanmar/Burma building a lasting partnership and to promote closer engagement with the country as a whole. In response to the changes that have taken place and in the expectation that they will continue, the Council has decided to lift all sanctions with the exception of the embargo on arms which will remain in place”.
The arms embargo, which prohibits the supply of arms and the giving of technical or financial assistance in relation to military activities, is to remain in place until 30 April 2014, at which point it will be renewed or amended as the Council deems appropriate.
These changes are intended to reward the Government of Myanmar and its steps towards a peaceful democratisation process. They will also help to facilitate responsible trade and investment in Myanmar by removing those remaining barriers to trade. In particular, the relaxation of sanctions will enable European resources companies to pursue new opportunities in Myanmar. Notwithstanding the European position, the US maintains its sanctions with respect to Myanmar, although its sanctions are currently suspended.
In contrast to the relaxation of the Myanmar sanctions, the EU has strengthened those sanctions applying to North Korea.
The latest amendments are set out in:
- Council Regulation 296/2013 (26 March 2013), which implements Council Decision 2013/88 (the “2013 Regulation“). This will amend Council Regulation 329/2007 (the “2007 Regulation”);
- Council Decision 2013/183 (22 April 2013), which is yet to be implemented in EU Regulations; and
- Council Regulation 370/2013.
These amendments are due to the “violation and flagrant disregard” of the existing UN Security Council Resolutions. They are a direct response to the escalating tensions in north-east Asia.
There has long been a significant swathe of sanctions applying to North Korea with the aim of restricting North Korea’s nuclear programme. In order to clarify the existing regime, Council Decision 2013/183 repeals the earlier Council Decision 2010/800 and restates many of the restrictive measures which are already in place. These restrictive measures include export and import restrictions on arms and goods which could contribute to North Korea’s nuclear programme, financing and financial assistance, the sale of precious minerals such as gold, the delivery of new currency, a ban on the supply of luxury items, an inspection regime and the freezing of economic resources of Designated Persons. Many of these sanctions are already implemented into EU law.
The 2013 Regulation has the effect of implementing those additional requirements. The 2013 Regulation prohibits the transfer of goods and technology including software, various types of metal alloys including steel; aluminium products for use in North Korea (see Articles 1, 2 and 3 of Council Regulation 296/2013).
There are also further prohibitions which will particularly affect financial institutions. New Article 5a introduces the following changes:
- there is a prohibition on EU credit and financial institutions from:
- opening new representatives offices in North Korea or establishing a new branch or subsidiary in North Korea; and
- establishing a new joint venture with various Designated Persons;
- various Designated Persons are prohibited from opening representative offices or establishing branch offices or subsidiaries within the EU;
- concluding agreements relating to the opening of a representative or branch office for or on behalf of certain Designated Persons;
- granting an authorisation for the taking up and pursuing the business of a credit institution (or any other business requiring prior authorisation), if the representative office, branch or subsidiary was not operational before 19 February 2013, to such Designated Persons; and
- acquiring or extending of a participation in, or acquiring any other ownership interest in, an EU credit or financial institution by such entities.
New Article 9a will prohibit the following arrangements:
- directly or indirectly selling public or public-guaranteed bonds issued after 19 February 2013 to, or purchasing such bonds from:
- North Korea or its Government, and its public bodies, corporations and agencies;
- the Central Bank of North Korea;
- a credit or financial institution domiciled within North Korea, or any credit or financial institution referred to in Article 11a(2) of the 2007 Regulation;
- any person acting on behalf or at the direction of an entity or controlled by a person referred to above;
- providing brokering services with regard to public or public-guaranteed bonds issued after 19 February 2013 to certain Designated Persons; and
- assisting a person, entity or body in order to issue public or public-guaranteed bonds, by providing brokering services, advertising or any other service with regard to such bonds.
The EU also resolved that it will prohibit the transfer, purchase, import or export of gold, precious metals and diamonds to or for the Government of North Korea (see Article 4a of the 2013 Regulation) whether or not those goods originate in North Korea. It has been well established that the North Korean government has been using precious metals and gems as a way of gaining foreign currency. There are reports that Chinese entities purchased North Korea’s reserves of gold earlier this year. Therefore, it appears that the clear intention of the new restrictions on resources transactions is to restrict one of North Korea’s last remaining sources of income. More broadly, the changes described above should hinder the continuation of North Korea’s nuclear and ballistic missiles programmes as well as shutting down North Korea’s already limited access to global markets.
Council Regulation 370/2013 has extended the list of person in respect of whom the North Korean financial sanctions apply (increasing by 3 individuals and 2 entities) from 23 April 2013.
Council Regulation (EU) No 363/2013 has amended Annex II to Regulation (EU) No 36/2012 by removing one person from the list of, and by further updating and amending the entries for, the persons, entities and bodies subject to restrictive measures imposed by that Regulation.
On Monday the Council also announced a decision to permit the easing of certain EU sanctions against Syria, including the oil embargo, so as to help the civilian population and support the opposition in that country. Competent authorities in EU member states are now permitted to authorise three types of transactions:
- imports of oil and petroleum products, including related finance and insurance;
- exports of key equipment and technology for the oil and gas industry to Syria, also including related finance and insurance;
- investments in the Syrian oil industry.
The UK has not as yet confirmed whether it will exercise its discretion to authorise such transactions.
On 23 April 2013, the Council has announced a decision to amend EU sanctions in view of the situation in Libya so as to take account of changes adopted at the UN. It permitted the supply of non-lethal military equipment and technical assistance intended solely for security or disarmament assistance to the Libyan government. It also allowed the supply of small arms, light weapons and related materiel, for the sole use of UN personnel and development workers.
The notice confirms that through Council Implementing Regulation (EU) No 364/2013, Annex III to Council Regulation (EU) No 204/2011 has been amended with effect from 23 April 2013 to remove Al-Barrani Ashkal from the list. HM Treasury has published a Financial Sanctions Notice in respect of this amendment.