1. Sanctions update
The European Union ("EU") has updated various sanctions regimes, including those against Afghanistan, Burundi, the Central African Republic, Côte d'Ivoire, Democratic Republic of Congo, Iran, Iraq, Liberia, Libya, North Korea, Russia, Syria and Yemen, as well as the lists of persons and entities subject to restrictive measures with a view to combating terrorism, the Al-Qaida network and the Taliban.
On 29 September 2016, Regulation 2016/1736 and Decision 2016/1748 amended the entries of the following individuals subject to restrictive measures due to their association with the Taliban: Mohammad Shafiqullah Ahmadi Fatih Khan, Shahabuddin Delawar, Din Mohammad Hanif, Sayyed Mohammed Haqqani, Khairullah Khairkhwah, Jan Mohammad Madani Ikram, Fazl Mohammad Mazloom, Allah Dad Tayeb Wali Muhammad, Nurullah Nuri, Mohammed Omar Ghulam Nabi, Mohammad Hasan Rahmani, Sher Mohammad Abbas Stanekzai Padshah Khan, Abdul-Haq Wassiq, Mohammad Zahid and Rahmatullah Shah Nawaz.
1.3 Central African Republic
On 31 August 2016, Regulation 2016/1442 and Decision 2016/1446 added two individuals to the list of persons and entities subject to restrictive measures in view of the situation in the Central African Republic: Ali Kony and Salim Kony. In addition, the above mentioned Regulation and Decision also added new information concerning the entry of Oumar Younous Abdoulay.
1.4 Côte d'Ivoire
1.5 Democratic Republic of Congo
As a result of these amendments, the competent authorities of the Member States may authorise the provision of technical assistance, financing or financial assistance or brokering services related to non-lethal military equipment intended solely for humanitarian or protective use, where the provision of such assistance or services has been duly notified in advance to the Sanctions Committee.
Moreover, the definitions in points (e) and (g) Article 2a(1) of Regulation 2016/1165 (and Article 3 of Decision 2016/1173) setting out specific acts that undermine the peace, stability or security of the Democratic Republic of Congo have been amended.
Subparagraph (e) has been updated from its previous version: "being involved in planning, directing or participating in the targeting of children or women in situations of armed conflict, including killing and maiming, rape and other sexual violence, abduction, forced displacement and attacks on schools and hospitals" to "planning, directing, or committing acts in the DRC that constitute human rights violations or abuses or violations of international humanitarian law, as applicable, including those acts involving the targeting of civilians, including killing and maiming, rape and other sexual violence, abduction, forced displacement, and attacks on schools and hospitals".
Subparagraph (g) has been updated from its previous version: "supporting individuals or entities, including armed groups, involved in destabilising activities in the DRC through illicit trade of natural resources, including gold or wildlife as well as wildlife products" to "supporting individuals or entities, including armed groups or criminal networks, involved in destabilizing activities in the DRC through the illicit exploitation or trade of natural resources, including gold or wildlife as well as wildlife products".
On 29 July 2016, Regulation 2016/1375 revised the Annexes I, III and VIIB to Regulation 267/2012. As a result of these amendments, the goods and technology listed in Annexes I and III have been supplemented with additional information allowing for a better identification of the items by way of reference to the ECCN included in Annex I to Regulation 428/2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items ("Dual-Use Regulation 428/2009").
In addition, eight entries have been deleted from the list of corrosion-resistant high-grade steel included in Annex VIIB for which a prior export authorisation is required.
In August and September the EU delisted various legal persons from the SDN list of Article 4(1) and Annex III of Regulation 1210/2003:
- Regulation 2016/1398 deleted the entries of Iraqi Oil Tankers Company and State Oil Marketing Organisation.
- Regulation 2016/1453 deleted the entries of Iraqi Airways Company, Directorate-General of Governorate Electricity Distribution, Electronic Industrial Company and Light Industries Company.
- Regulation 2016/1642 deleted the entry of South Refineries Company.
- Regulation 2016/1695 deleted the entries of Al-Hilal Industrial Company, General Establishment for Transport of General Cargo, Industrial Complex—Diala, Industrial Complex Baquba, Iraqi Bicycles & Metal Tubings Company, Iraqi Cement State Enterprise, Modern Paint Industries Company, New Construction Materials Industries Company, Northern Cement Public Enterprise, Ready Made Clothes Co. SA., Southern Cement Enterprise, Specialised Institute for Engineering Industries, State Engineering Company for Industrial Design and Construction, State Enterprise for Asbestos and Plastic, State Enterprise for Bricks Industries, State Enterprise for Concrete Industries, State Enterprise for Gypsum Industries, State Enterprise for Iron and Steel Industries and State Enterprise for Lightweight and Sand Lime Bricks Industries.
On 4 August 2016, Regulation 2016/1334 and Decision 2016/1340 amended the entries of two persons included on the list of natural or legal persons, entities and bodies deemed to be involved in the commission of serious human rights abuses against persons in Libya: Agila Saleh Issa Gwaider and Khalifa Ghwell.
1.10 North Korea
- Prohibition of the import, purchase or transfer of gold, titanium ore, vanadium ore and rare-earth minerals, as listed in Annex Ic, or coal, iron and iron ore, as listed in Annex Id, from North Korea, whether or not originating in North Korea (Article 2(4)(a));
- Prohibition of the import, purchase or transfer from North Korea of petroleum products, as listed in Annex If, whether or not originating in North Korea (Article 2(4)(b));
- Prohibition of the purchase, import or transfer from /export, supply or sale to North Korea, directly or indirectly, of luxury goods, as listed in Annex III, whether or not originating in North Korea (Article 4(1));
- Enhanced inspection of cargo for the purpose of ensuring that it does not contain prohibited items (Article 5);
- Prohibition of the acceptance or approval of investments in any commercial activity in the territory of the Union made by or on behalf of certain Korean persons (or persons controlled by them) (Article 5b(1));
- Prohibition of the (a) establishment of a joint venture with or taking or extension of an ownership interest, including by acquisition in full or the acquisition of shares and other securities of a participatory nature, in certain Korean persons (or persons controlled by them) engaged in North Korea's nuclear-related, ballistic-missile-related or other weapons-of-mass-destruction-related activities or programmes, or in activities in the sectors of mining, refining and chemical industries; (b) grant of financing or financial assistance to or for certain legal Korean person (or persons controlled by them); and (c) provision of investment services directly related to the activities referred to the Korean Government (and its persons, entities and bodies) and the Workers Party of Korea. (Article 5b(2));
- Prohibition of the transfer of funds to and from North Korea, unless they concern a transaction referred to in paragraph 3 (Article 5c(1));
- Prohibition for credit and financial institutions falling within the scope of application of the EU sanctions to enter into, or continue to participate in, any transactions with: credit and financial institutions domiciled in North Korea, their EU and non-EU subsidiaries and branches, as well as credit and financial institutions (wherever located) controlled by a natural or legal person domiciled in North Korea (Article 5c(2), Annex VI);
- Certain transactions can be authorised (Article 5c(3)) but require prior authorisation if the amount involved is equal or above €15,0000 (Article 5(4));
- Prohibition of the provision of financing or financial assistance for trade with North Korea entered into after 29 May 2016, including the granting of export credits, guarantees or insurance to persons or entities involved in such trade, where such financial support could contribute to North Korea's nuclear or ballistic-missile programmes or other activities prohibited by this Regulation; or the circumvention of these prohibitions (Article 9b);
- Prohibition of the provision of access to the Union to any vessel: (a) that is owned, operated or crewed by North Korea; (b) where there are reasonable grounds to believe that it is owned or controlled, directly or indirectly, by a listed person or entity; (c) where there are reasonable grounds to believe that it contains items the supply, sale, transfer or export of which is prohibited by this Regulation; (d) which has refused to be inspected after such an inspection has been authorised by the vessel's flag State or State of registration; or (e) which is without nationality and has refused to be inspected (Article 11a(1)); and
- Prohibition for aircraft operated by North Korean carriers or originating from North Korea to take off from, land in or overfly the territory of the Union.
On 4 August 2016, Regulation 2016/1333 and Decision 2016/1341 amended the list of goods subject to prohibitions on the transfer, procurement and provision of technical assistance by adding weapons-of-mass-destruction-related items, materials, equipment, goods and technology identified and designated as sensitive goods, pursuant to paragraph 25 of UN Security Council Resolution 2270 (2016), as set out in Annex Ig to Regulation 2016/1333.
Article 18(1) of Decision 2016/1341 was updated and now instructs Member States to prohibit entry into their ports of any vessel owned, operated, crewed or flagged by the DPRK.
On 17 June 2016, Decision 2016/982 extended the period of validity of Decision 2014/386 imposing restrictive measures in response to the illegal annexation of Crimea and Sevastopol until the 23 June 2017.
On 1 July 2016, Decision 2016/1071 extended the period of validity of Decision 2014/512 imposing restrictive measures in view of Russia's actions destabilising the situation in Ukraine until 31 January 2017.
On 15 September 2016, Decision 2016/1671 extended the period of validity of Decision 2014/145 until 15 March 2017. In addition, Regulation 2016/1661 and Decision 2016/1671 also renewed the list of sanctioned parties.
On 29 September 2016, Regulation 2016/1735 and Decision 2016/1746 amended the entries of the following individuals: Houmam Jaza'iri, Maher Al-Assad, Atej Najib, Hafiz Makhlouf, Jamil Hassan, Ghassan Ahmed Ghannan, Munir Adanov, Ali Abdullah, Fahd Jasim al-Furayj, Zuhair Hamad, Bushra Al-Assad, Asma Al-Assad, Mohammad Ibrahim, Suleiman Al Abbas, Ismael Ismael, Suhayl Hassan, Bayan Bitar, Brigadier General Ghassan Abbas, Wael Abdulkarim, Ahmad Barqawi, Emad Hamsho and General Muhamad Mahalla.
In addition, Regulation 2016/1735 and Decision 2016/1746 also deleted the entries of three individuals: Hisham Ikhtiyar, Anisa Al-Assad and Major General Fahd Jassem Al Freij.
On 29 September 2016, Regulation 2016/1737 and Decision 2016/1747 amended the entries of Abd Al-Khaliq Al-Houthi and Abdulmalik al-Houthi included in the list of natural persons subject to restrictive measures in view of the situation in Yemen.
(a) Al-Qaida and ISIS
In June, July, August and September, the EU updated the Annex I (SDN list) to Regulation 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaida network and the Taliban several times as follows:
- Regulation 2016/1018 deleted the entry of Farid Aider;
- Regulation 2016/1063 amended the entries of eight natural persons (Lionel Dumont, Emilie Konig, Kevin Guiavarch, Boubaker Ben Habib Ben Al-Hakim, Peter Cherif, Maxime Hauchard, Nasir 'Abd-Al-Karim 'Abdullah Al-Wahishi and Qasim Yahya Mahdi al-Rimi) and one legal person (Al-Qaida in the Arabian Peninsula);
- Regulation 2016/1113 deleted the entry of Daniel Martin Schneider;
- Regulation 2016/1186 deleted the entry of Aschraf Al-Dagma;
- Regulation 2016/1347 deleted the entries of Aslan Avgazarovich Byutukaev and Ayrat Nasimovich Vakhitov;
- Regulation 2016/1430 amended the entry of Dawood Ibrahim Kaskar;
- Regulation 2016/1641 updated the entry of Tarkhan Ismailovich Gaziev;
- Regulation 2016/1683 amended the entries of Ali Ben Taher Ben Faleh Ouni Harzi and Tarak Ben Taher Ben Faleh Ouni Harzi; and
- Regulation 2016/1739 deleted the entries of Muhammad Abdallah Hasan Abu-Al-Khayr and Hassan Muhammad Abu Bakr Qayed.
Furthermore, on 20 September 2016, Regulation 2016/1686 and Decision 2016/1693 imposed additional restrictive measures directed against natural and legal persons related to ISIL ("Da'esh") and Al-Qaeda and listed in the Annexes to the acts.
Article 1 of Decision 2016/1693 imposes an arms embargo and Article 9 of Regulation 2016/1686 prohibits the provision of technical assistance, brokering and financing related to military items and military activities.
Article 2 of Regulation 2016/1686 establishes an asset freeze of listed parties and prohibits the provision of funds and economic resources to these parties.
Article 2 of Decision 2016/1693 imposes a travel ban.
On 12 July 2016, in accordance with Article 2(3), the Commission updated the SDN list under Regulation 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism. The new list is set out in Regulation 2016/1127, and repeals the previous list which was set out in Regulation 2015/2425.
On 27 September 2016, Regulation 2016/1710 suspended the freezing of funds and the prohibition to make funds available and to provide financial services as set out in Article 2 of Regulation 2580/2001 in so far as they concerned the "Fuerzas armadas revolucionarias de Colombia" – "FARC" ("Revolutionary Armed Forces of Colombia") after the FARC and the Columbian government had agreed on a ceasefire and peace accord. Following the Columbian people's "no" vote on the proposed peace accord in the 2 October 2016 referendum, the conflict parties have to return back to the negotiation table to refine the terms of the accord.
2. EU export control updates
2.1 Amendments to the Dual-Use Regulation 428/2009
On 12 September 2016, the Commission published a proposal for a Delegated Act to update Annexes I, IIa to IIg and IV to the Dual-Use Regulation 428/2009.
The delegated act presents a variety of amendments to the Union dual-use control list (Annex I) in the light of changes adopted by the international non-proliferation and export control regimes in 2015. These include amendments to technical definitions and descriptions and the removal or addition of dual-use items.
The amendments to the Union dual-use control list in Annex I also necessitate amendments to Annexes IIa to IIg (setting out the EU general export authorisations – UGEAs) and Annex IV (list of items subject to intra-EU controls).
2.2 Report from the Commission to the European Parliament and the Council on the implementation of the Dual-Use Regulation 428/2009
On 24 August 2016, the Commission published its Annual Report on the Activities, Examinations and Consultations of the Dual-Use Coordination Group ("DUGC") providing a status update of the DUGC's activities and key data on export controls.
- Following the last update of Annex I of the Dual-Use Regulation 428/2009, it contained 1869 listed dual-use items.
- In 2014 license applications reached €59 billion and accordingly controlled dual-use exports represented around 3.4% of total EU exports, authorised dual-use trade represented around €41 billion or 2.4%, and denied exports represented 0.4% of total EU trade. (The difference between all applications and the sum of approvals and denials is due to e.g. pending applications and withdrawn applications).
- The top 10 export destinations for items listed in Annex I are US, China, Switzerland, Russia, UEA, Turkey, South Korea, Norway, Singapore, and Japan.
- Measured by export volume, individual licenses are the most used format (75%), followed by EU and national general licenses (10% + 3%). Non-listed items licenses account for 7%. Measured in export value, global licenses are first (42%), followed by individual licenses (39%) and EU and national general licenses (6%+6%).
2.3 Commission Proposal for a recast of the Dual-Use Regulation 428/2009
On 28 September 2016, the EU Commission published a proposal for an update of the Dual-Use Regulation 428/2009. Considering previous deadlocks of a reform of the EU dual-use controls due to opposition by Member States, the proposal is rather "ambitious". The main substantive changes proposed include:
- the inclusion of technical assistance in the controls;
- the inclusion of certain cyber-surveillance technology in the definition of dual-use items;
- clarifications to the definition of "exporter" including adding the outward processing procedure (Art 259 UCC) to the definition;
- clarifications to the definition of "transit";
- addition of a global authorisation for large projects;
- addition of a Union general transfer authorisation for Annex IV items;
- addition under Article 4 of two new end-use controls: (i) for use by persons complicit in or responsible for directing or committing serious human rights violations; and (ii) for use in the confection of acts of terrorism;
- an obligation to exercise due diligence is added to the "awareness" criterion in Article 4(4) (new Article 4(2));
- clarification that the competent licensing authority is the one of the Member State where the exporter is resident/established or the items are located (if the exporter is established/resident outside the EU);
- clarification that licenses are generally valid for one year and throughout the EU;
- additional national authorisation requirements under Article 4 shall be subject to approval by other Member States: if granted, the controls would apply in all Member States, and if not, the authorisation requirement should be revoked. This provision would not affect the Member States' rights to impose additional controls under Article 8 for reasons of public security and human rights considerations;
- extensions of brokering controls beyond items listed in Annex I, i.e. to non-listed dual-use items;
- enhanced emphasis that the licensing process should be handled electronically; and
- the implementation of an effective internal compliance programme is an explicit condition for the granting of a global license.
Overall, the proposed changes make sense and would indeed facilitate the administration of exports controls. It would therefore be desirable and in the interest of economic operators across the EU if Member States could overcome their previous deadlock and follow the Commission's proposal.
3. Combating customs fraud
Regulation 2015/1525 amending Regulation 515/97on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs and agricultural matters started to apply fully as of 1 September 2016.
Regulation 2015/1525 in particular foresees the use of new electronic tools in order to enhance administrative and criminal procedures, combat fraud, ensure a high level of consumer protection and improve the storage of information and data protection, among other goals.
The new electronic tools will also enable customs authorities to better oversee export control compliance. It is therefore advisable for companies to ensure that internal customs and export control compliance procedures and checks are up-to-date.
4. Judgments of the General Court dealing with the EU Sanctions Regimes against Zimbabwe and Syria
In T-66/14 the General Court dealt with an application for damages by one natural person and three legal entities whose names were included on the sanctions list of the Zimbabwe embargo. The applicants filed an application for annulment with the General Court but were subsequently removed from the sanctions list and the Court ruled that there was no longer a need to adjudicate.
In the present application for damages, the applicants contended that the Zimbabwe embargo Regulations (by which they were listed) (i) lacked proper legal bases; (ii) were vitiated by errors of law and of fact; (iii) were vitiated by breaches of essential procedural requirements; and (iv) constituted breaches of the right to property. The General Court dismissed the pleas in law in their entirety.
In T-790/14, Samir Hassan brought an action for annulment and an action for damages claiming that his inclusion under the denied parties list of the EU Syria embargo was illegal because the Council had (i) committed a manifest error of assessment; (ii) breached his right of property; and (iii) violated the presumption of innocence. The General Court also dismissed the application its entirety.
5. National export control updates
5.1 National dual-use controls
In the Official Journal of 20.8.2016, the EU published the list of additional national controls adopted in the framework of the Dual-Use Regulation 428/2009. That list can be accessed at the following link.
5.2 UK Open Licenses updates
On 17 June 2016, the Open General Trade Control Licence ("OGTCL") (maritime anti-piracy), dealing with export licensing coverage for maritime anti-piracy services that traverse areas at high risk of piracy, entered into force.
The OGTCL permits, subject to the condition set out therein, the supply, deliver or transfer of the items listed in Schedule 1 to the license (mainly UK military items and UK dual-use items including communications and night vision equipment and long range acoustic devices suitable for riot-control purposes) to an overseas territory or between any two overseas territories (or within one overseas territory if that territory is international waters) that is/are not listed in Schedule 2. The countries listed in Schedule 2 are: Armenia, Azerbaijan, Belarus, Burma (Myanmar), China, North Korea, Democratic Republic of the Congo, Eritrea, Iran, Iraq, Côte d'Ivoire, Lebanon, Liberia, Libya, Russia, Somalia, South Sudan, Sudan, Syria, Yemen and Zimbabwe. Further information, as well as the complete text of the licence, can be found at the following link.
On 20 June 2016, the Export Control Organisation ("ECO") amended the Open General Export Licence ("OGEL") for the export of military goods for the production, development or maintenance of Typhoon aircrafts by most importantly adding Kuwait to the list of permitted destinations. Further information can be accessed here.
Lastly, the OGEL for International Non-Proliferation Regime Decontrols has also been amended by removing ECCN 2B006.b.1.c from the list of items authorised for export. ECCN 2B006.b.1.c covers certain kinds of laser-based measuring systems. Further information can be accessed here.
5.3 The UK Export Control Joint Unit has become operative
On 18 July 2016, the new Export Control Joint Unit ("ECJU") started operating. The ECJU has been created as a result of the 2015 Strategic Defense and Security Review. It aims to enhance global security through strategic export controls and to facilitate responsible exports.
While the export licensing process and the online export licensing system will remain unchanged, the decision to grant or refuse an export license in any individual case will be from now on the responsibility of the Secretary of State of the newly formed Department for International Trade. Further information on the work and functioning of the ECJU please can be found here.
6. Announcement – Fieldfisher export control breakfast
We are holding an export control and sanctions breakfast in our London Office on 16 November 2016, from 8.30 to 10.00 am.
In an informal breakfast talk, John Cassels from our London office and Jochen Beck from our Brussels office will provide an update of EU and UK export controls in the light of Brexit and show how to navigate more securely though export controls, and in particular the EU sanctions legislations. In a subsequent Q&A session, participants will have the opportunity to ask questions and discuss compliance challenges.
If you are interested, please register here before 2 November 2016.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.