UE 8 sanction package

On October 6, 2022, the EU announced an eighth package of economic and individual sanctions against Russia.

The content of the package has already been summarized by us in a different article (link).

However, alongside the examination of individual measures, it seems interesting to point out that some of the last Council decisions take on a different and new significance in EU sanctions policy.

In fact in this area and until now the EU had mainly followed a “territorial” policy. This meant that imports or exports were banned and/or certain persons were sanctioned who were blocked goods and prevented from moving to or from or within the EU territory.  So sanctions were limited to the -albeit large- geographical space of the EU.

This is in contrast to the U.S. sanctions policy, which is instead often characterized by extraterritoriality. In fact, measures taken by this nation for both U.S. weapons and dual-use (i.e., with the possibility of also military use) products or components originating there must follow an authorization regime both when the weapons are re-exported and when the individual components are incorporated into products manufactured abroad. If such authorization is not sought and obtained, those who have violated the provision can be prosecuted before the Courts in the US. This is also the case with financial sanctions and the use of dollars that do not follow U.S. financial rules.

So much so that this extraterritoriality was also criticized by the EU and was the subject of a special EU Council Regulation No. 2271/96 , which in Article 4 established a screen from U.S. sanctions. Moreover, this screen never appears to have been used by European companies that have broken U.S. law and suffered proceedings therefor, and that to close the litigation have often reached settlements, of significant economic outlay, with the U.S. administration.

As we said in this 8th EU package there are as many as three measures that create a kind of extraterritoriality even for European sanctions, innovating, the policy hitherto followed and thus giving the feeling of a policy more of “offensive” intervention even outside the European bloc.

Let us look at them carefully.

1) Of particular importance appears to be the extension of import ban  to steel goods – included in Annex XVII – undergoing processing in a third country, but incorporating steel products originating in the Russian Federation listed in the same annex;

2) The Council decided to broaden the criteria on which specific designations (sactions) can be based, in order to target those who facilitate the circumvention of EU sanctions. Thus, a legal possibility was introduced for the EU to designate and sanction entities, including non-Russian entities, that facilitate violations of prohibitions and enable circumvention of the provisions of regulations imposing sanctions against the Russian Federation (including the same Regulation (EU) No. 269/2014 and Regulation (EU) No. 833/2014).

3) In the event that a ship flying the flag of a third country transports  crude oil or Russian petroleum products purchased at a price above the ceiling on prices (price yet to be decided), it will be prohibited to provide technical assistance, brokering services, financing or financial assistance, including the possibility of insurance, related to any future transportation of crude oil or petroleum products by such a ship. 

Thjerefore we might say that EU is expanding its reach extra territorially, following the U.S. example.

The ban on the import of steel products incorporating Russian metal or components assumes nodal importance for products coming from industries located in places such as China and India, which, by their strategic decision, have wanted to exclude  themselves from the sanctions proposed by the U.S.-EU bloc against Russia. It is not really an extraterritorial measure, but it aim to hit entities in countries that are not directly involved in the blocs conflict .

Moreover EU realized that a plethora of entities, including many in Turkey and Serbia, are expanding their operations, importing goods from the EU and exporting them to Russia. The new legal provision at  2) above is giving to EU the possibility to  sanction entities located in non-EU countries, again entities in countries that  that are not directly involved in the blocs conflict .

 Also of interest is the scope of the legislation on maritime transport, which aims to indicate that the EU bloc “having a significant “world position” in the insurance market will prevent the violation of the cap price of oil, either by inhibiting its transportation or by punishing ships carrying such oil impeding insurance of the ship. As a consequence no shipowner shall risk to  transport uninsured cargo due to the infringment of the EU rules. In this case the EU is directly hitting vessels who do not respect the EU oil price cap. This is  an extraterritorial sanction.

On the basis of the above I assume that  the measures under consideration, in addition to indicating a legislative breakthrough, show a heightened awareness of the existence of a UNION OF EUROPE that could hit his “enemies” also outside  its boundaries.

Probably the threat coming from aggressive Russian policy has forged a greater common spirit, as desired by the European founding fathers. (image credits to @Varyvodaart )

Council regulations are available here:

EUR-Lex – 32022R1903 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022R1904 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022R1905 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022R1906 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022D1907 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022D1908 – EN – EUR-Lex (europa.eu)

EUR-Lex – 32022D1909 – EN – EUR-Lex (europa.eu) 

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Published by Carlo Scarpa

lawyer, partner at Tonucci & Partners. Specialized in Commercial Contracts, JV, IP, FIDIC. Conflicts of Law and International Law. Office in Padua - Italy

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