FINANCE - EU sanctions

Restrictive measures are a key tool for the EU to safeguard its interests and security. But how do they work and what is the Commission’s role in their implementation?

date: 30/09/2020

Restrictive measures, or 'sanctions', are an essential part of the EU's common foreign and security policy (CFSP). They are designed to bring about a change in policy or activity by governments of non-EU countries, companies, groups or organisations, and individuals. Some sanctions are mandated by the UN Security Council, whereas others are 'EU autonomous'.

Why are sanctions imposed?

Sanctions are one of the means by which the EU promotes the objectives of the common foreign and security policy: peace, democracy and the respect for the rule of law, human rights and international law. EU sanctions are not punitive, but designed to bring about a change in policy or activity by the country, government, entity (for instance corporations or public authorities) or individual concerned. At the same time, they are targeted, and the EU makes every effort to minimise adverse consequences for the local civilian population or for legitimate activities in or with the country concerned.

What type of sanctions?

Sanctions may target governments of non-EU countries, or non-state groups and individuals, such as terrorist organisations and terrorists. All restrictive measures adopted by the EU are fully compliant with obligations under international law. These measures may include:

arms embargoes;
restrictions on admission (travel ban): a sanctioned person cannot enter the EU;
freezing of assets: all the assets in the EU of a sanctioned person/entity are frozen; and no EU citizen/entity can make any funds available to them;
economic sanctions or restrictions concerning specific sectors of economic activity, including import or export bans on certain goods, investment bans, prohibitions on supplying certain services etc.

Focus: Asset freeze in practice

As part of financial restrictions, an asset freeze concerns funds and economic resources owned or controlled by sanctioned individuals or entities. It means that funds – such as cash, cheques, bank deposits, stocks, shares etc. – may not be accessed, moved or sold. All other tangible or intangible assets, including real estate, cannot be sold or rented either.

An asset freeze also includes a ban on providing economic resources to the targeted entities and individuals. This means that EU citizens and companies must not make payments or supply them with goods or other assets. In effect, business transactions with designated companies and individuals cannot legally be carried out unless the legislation allows them.

Most sanctions allow for contracts in force at the time of their imposition to continue, subject to a license by the national competent authorities. Authorities can also permit derogations from the asset freeze under specific exemptions, for instance to cover basic needs (such as foodstuffs, rent, medicines or taxes) or reasonable legal fees.

Frozen assets: Osama Bin Laden

EU sanctions targeting people involved in terrorism ensured that listed individual Osama Bin Laden’s assets were frozen throughout the EU. Importantly, EU sanctions ensured that no one in the EU could provide funds to him. By blocking access to funds, EU sanctions prevented Bin Laden from using these funds to pursue terrorism-related objectives. Even after his death, EU law, following UN mandate, requires all funds of Bin Laden to be checked prior to release.

Who decides to impose sanctions?

The Council of the European Union imposes EU sanctions through a CFSP council decision (adopted unanimously) and decides whether sanctions should be renewed, amended or lifted. EU sanctions are reviewed at regular intervals. While this decision contains all measures imposed, additional legislation may be needed to give full legal effect to the sanctions.

For instance, economic measures, like asset freezes and export bans, fall under the competence of the European Union and therefore require separate legislation in the form of a council regulation, which is directly binding on EU citizens and businesses.

How are the regimes implemented throughout the EU?

The task of implementing and enforcing restrictive measures falls primarily to the Member States. The relevant competent authorities of each Member State must oversee adherence to the regime and carry out assessments as to whether there has been a violation of the measures. The authorities must report to the Commission on compliance, and notify where a breach of the legislation has occurred.

What is the role of the European Commission?

The Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) represents the European Commission in sanctions-related discussions with Member States at the Foreign Relations Counsellors Working Party and prepares proposals for regulations on sanctions for adoption by the Council of the European Union. DG FISMA is also in charge of transposing into EU law sanctions against ISIL and Al-Qaida adopted by the United Nations.

Once sanctions have been adopted, DG FISMA is responsible for monitoring that Member States have implemented the regulations in a proper and timely manner and addressing any questions of interpretation raised by national authorities and private operators. DG FISMA is increasingly supporting Member States in their efforts to implement sanctions, by answering questions of interpretation raised by national competent authorities and economic and humanitarian operators. At the same time, DG FISMA is dedicating increasing efforts to strengthening the application of EU sanctions even further, and to enhancing the resilience of the EU to extra-territorial sanctions adopted by non-EU countries.

Where do EU sanctions apply?

By their very nature, sanctions are designed to have a political effect in non-EU countries. Nevertheless, 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 organisations incorporated under the law of a Member State, whether or not they are in the EU. This also includes branches of EU companies in non-EU countries;
to any business done in whole or in part within the European Union;
on board aircrafts or vessels under the jurisdiction of a Member State.

The EU does not adopt legislation with extra-territorial application in breach of international law. EU candidate countries are invited to align themselves with EU restrictive measures.