The EU has adopted a new Magnitsky-like global human rights sanction regime… a new era for sanctions compliance?

By:

An important Decision establishing a global human rights sanctions regime was adopted by the Council of Ministers on 7 December 2020, providing the European Union with a new sanctions framework that will enable the targeting of individuals, entities and bodies responsible for, involved in or associated with serious human rights violations and abuses worldwide.

Anticipated by the EU Action Plan on Human Rights and Democracy 2020-2024, the new regulation follows a year of preparatory work and represents a significant development in the EU sanctions regime that, to date, had primarily attempted to address human rights violations and abuses through political dialogue or some country-specific sanctions programmes (e.g., Syria, Iran, Belarus). Instead, the new framework allows certain individuals or entities to be designated without targeting and creating geopolitical tensions with an entire country.

Over the past years, various jurisdictions have adopted similar regimes, often referred to as “Magnitsky” sanctions, and imposed travel bans and asset freezes against certain individuals in Russia, Saudi Arabia and Myanmar. The United States first adopted a Magnitsky Act in 2012, while the UK introduced Global Human Rights Sanctions Regulations imposing UK-specific designations on various individuals deemed responsible for human rights violations in July 2020. Earlier this week, Australia also published a report urging the adoption of targeted sanctions to address human rights abuses and corruption.

Who might be affected?

  • Individuals and entities (state and non-state actors) responsible for or involved in serious human rights violations or abuses worldwide, as well as those providing financial, technical material support or are otherwise associated with them;
  • European natural or legal persons, entities or bodies providing, directly or indirectly, funds to the listed persons or carrying out business activities with listed persons.

Which acts are covered?

The accompanying Regulation (EU) 2020/1998 specifies that the new framework applies to:

  • genocide;
  • crimes against humanity;
  • serious human rights violations or abuses, such as torture, inhuman or degrading treatment or punishment, slavery, extrajudicial, summary or arbitrary executions and killings, enforced disappearance of persons, arbitrary arrests or detentions;
  • systematic and serious trafficking in human beings, sexual and gender-based violence, abuse of freedom of peaceful assembly and association, of freedom of opinion and expression, of freedom of religion or belief.

Specific derogations, including for humanitarian purposes, are envisaged through authorisations granted by national competent authorities.

What are the potential sanctions?

A set of targeted restrictive measures are contemplated, such as:

  • freezing of funds and economic resources of listed individuals and entities;
  • travel bans;
  • prohibition for EU entities to make funds and economic resources available to those listed.

Penalties applicable in case of infringements will be established by national legislation in various Member States. It remains to be seen how uniform this will be applied and what effect this could have.

To date, no entities or individuals have been included on the list. Proposals for listing can be put forward by Member States or the EU High Representative Joseph Borrell and then decided by the Council. The existing country-specific sanctions programmes remain in place.

What does this mean for EU companies?

We will need to see how this develops in practice but several observations can already be made.

  • EU operators are required to freeze the assets of the listed individuals and entities and must not make any funds or economic resources available to them.
  • Companies are recommended to conduct a more thorough screening of all counterparties around the world, as the new regime is not limited to any specific country or region.
  • A closer level of co-operation with the United States seems likely. The EU’s regime was far less aligned than before and companies will now globally need to assess their potential exposure much more thoroughly.