EU sanctions: proposal to strengthen enforcement and crack down on violations
The EU has over 40 sets of restrictions in place, but an investigation has concluded there is inconsistent enforcement. Read about the plan to crack down on EU sanction violations in this article.
About the EU’s restrictive measures
Currently, there are more than 40 sets of restrictive measures in place across the EU. These cover both country-specific sanctions and generally-prohibited activities – such as the stockpiling and use of chemical weapons, cyberattacks, human rights violations, and terrorism.
These restrictive measures are legally binding for any EU member state, and also for any entity that is under the jurisdiction of an EU member state. For example, a limited company that is registered in France is bound by these measures even if it is owned by a non-EU operator.
Generally included in all restrictions, regulations, and decisions are clauses on:
Anti-circumnavigation – whereby intentional participation in circumnavigating measures is prohibited.
Obligations to report on activities which are known to be prohibited.
Reports of inconsistency from the EU Commission and the plan to address it
In recent years, the EU has improved adoption of restrictive measures, especially in reaction to violations of international obligations or conflicts – such as the trade restrictions imposed on Iran and the sanctions against Russia following the conflict in Ukraine.
However, the EU Commission has pointed out that inconsistent enforcement of these sanctions throughout different member states has caused their impact to weaken. Therefore, there is an immediate need to identify these weaknesses and strengthen them. Otherwise, recent initiatives such as the EU sanctions on Russian iron and steel will not be as effective as intended.
On the 25th May 2022, the EU Council – following a proposal by the EU Commission – proceeded to identify the violation of European Union restrictive measures as a criminal activity – which requires minimum criteria to be agreed upon as per Article 83(1) of the TFEU (Treaty of the Functioning of the European Union).
This has enabled the EU Commission to enter a proposal for the official definitions of these criminal offences and their penalties, which was submitted in December 2022. Following discussions between the EU Commission, EU Council, and EU Parliament in February and March, the EU Parliament suggested amendments in March 2023.
On 7th July, the Committee for Civil Liberties, Justice and Home Affairs published a report based on these amendments.
The main objectives of the proposal are:
To define the criminal offences applicable for the violation of EU restrictive measures.
To approximate levels of violation, and the appropriate punishment for the same.
Foster cross-border investigation and prosecution.
Improve the operational effectiveness of national enforcement chains and sanctioning.
Why are there inconsistencies across restrictive measure enforcement?
The violation of EU restrictive measures are currently defined as a crime when committed intentionally by a subject (person, business, or another entity such as a trust). However, EU member states have different perspectives of the crime and application of enforcement.
Currently, only one in 12 member states considers violation as a crime and has levels for enforcement within the country. Another member also considers it an administrative offence. However, these definitions and their respective punishments do not align.
For example, some countries consider the administrative offence to be a fine of EUR 1,200 to EUR 10,000. Others have fines of EUR 6,000 to EUR 37 million, and others have a prison term of two to 12 years. The risk for violating parties is largely dependent on their location despite it being an EU-level offence.
The proposal from the EU Commission seeks to unify the definition of the crimes and the additional clauses on circumnavigation and ethics, as well as their respective punishments for violation. This will ensure that enforcement and punishment is equal across the European Union.
What are some of the elements proposed for EU sanction violations?
The proposal by the EU Commission introduces some illustrative penalties for the violation of EU sanctions, such as:
A maximum penalty of five years in prison for direct violation, or one year when the violation includes circumnavigation, for resources of a value between EUR 50,000 and EUR 100,000.
A fine of EUR 10 million when the violation involves values of over EUR 100,000, which can be increased for entities to between 5% and 10% of global turnover for the previous financial year.
Exclusion from public tenders, benefits, or aids.
Disqualification of business activities.
Withdrawal of customs permits and authorisations.
Judicial supervision or winding up.
There are also some mitigating and aggravating factors included in the proposal. These are with regards to humanitarian and military initiatives, to ensure these essential services are not hindered by restrictive measures which are not for this purpose.
What’s next for the crackdown on violation of EU sanctions?
With the three EU institutions (Commission, Council, and Parliament) giving their recommendations, the proposal will now be processed with its first reading, before discussion and amendment if necessary. Once entered into force, you can expect there to be heightened levels of investigation as member states introduce frameworks for international cooperation and enforcement.
Carlotta Bugamelli, an expert in international relations and sanctions at Customs Support, explains, "The harmonisation of EU sanctions enforcement is a critical step towards enhancing their efficiency. By imposing dissuasive punishments and ensuring consistent penalties, the EU sends a clear message to violators that they will be held accountable for their actions. It is essential for the EU to stand united against those attempting to undermine its sanctions."
Customs Support has international experts like Carlotta positioned in EU member states throughout Europe, providing local and EU-level advice to companies just like yours. If you would like help assessing your supply chain for potential violation of EU sanctions, contact us for a customs quick scan today.