Navigating Sanctions and the Legal Risks of Armed Conflict.

• Author: Beebe, Mark R.

*This article is adapted from a panel presentation presented at the IADC's 2022 International Corporate Counsel College. The authors wish to thank the panelists, Robert Fairless, Silvia Kim, and Tom Spencer, for their contributions to this article.

WHEN direct military confrontation is off the table, countries instead employ economic sanctions as an alternate tactic to dissuade hostility. Economic sanctions are typically targeted against a country's government, businesses, and even citizens. Sanctions include preventing a government from accessing capital and financial markets, prohibiting companies from exporting or importing goods, and imposing travel bans on a country's citizens.

Commentators and the media usually consider sanctions from a political or economic viewpoint. However, sanctions are the product of domestic and international law, and organizations running afoul of sanctions face legal consequences in excess of the economic impact of their imposition. This article provides a framework to evaluate the threats posed to businesses of sanctions regimes. This article also considers the legal implications under domestic and international law implicated by the armed conflicts that often give rise to the imposition of sanctions. For the sake of convenience, we use the sanctions regime initiated against Russia following the 2014 annexation of Crimea and 2022 invasion of Ukraine to provide an example of these implications.

1. Recent Sanctions Against Russia

   1. How Did the European Union and United States' Sanctions Against Russia Start?

      In March 2014, Russia annexed Crimea from Ukraine. Soon thereafter, the European Union and United States issued numerous sanctions against Russian government agencies, businesses, and individuals. (1) These sanctions restricted Russia's access to economic resources, military equipment, and technologies relating to Russia's oil industry. The U.S. further expanded and strengthened its sanctions against Russia between 2016 and 2021. The U.S. sanctioned Russia after the 2016 United States Presidential Election. (2) The U.S. also sanctioned Russian individuals and entities that provided financial and material aid to Syria, Venezuela, and North Korea, as a way to counteract Russia's influence in these countries. (3)

      After Russia recognized the Donetsk People's Republic and Luhansk People's Republic as "breakaway republics" on February 23, 2022, and invaded Ukraine on February 24, 2022, the EU, U.S., United Kingdom, Canada, Japan, South Korea, Taiwan, New Zealand, Australia, and Switzerland subsequently announced a new series of sanctions. (4) These sanctions incorporate, and expand on, sanctions previously imposed on Russia. As more fully explained below, these sanctions target individuals and entities that are connected to Russian leadership and its defense and industrial sectors; they severely limit Russia's access to world-wide financial markets; and they prevent Russia from accessing the necessary equipment and technology to maintain its military and industrial economies.

   2. Who is Being Sanctioned?

      The EU and U.S. levied their sanctions against Russian government agencies, businesses, and individuals. As a result of Belarus' support of Russia's invasion, the EU and U.S. expanded their sanctions to apply to Belarusian entities and individuals. (5) These sanctions specifically target prominent businesspeople, high ranking officials, military personnel, and oligarchs reportedly linked to the Kremlin by implementing travel bans and asset freezes. A complete list of individuals and entities named by the EU can be found in the Council Regulation publications of the EU's official journal. (6) Similarly, the U.S. Office of Foreign Assets Control (OFAC) maintains a searchable database of its most recent Sectoral Sanctions Identifications list on its website. (7)

   3. EU-U.S. Sanctions and International Law

      The Council of the European Union adopts, renews, or lifts EU sanctions. The European Commission, together with the High Representative, subsequently gives effect to these decisions through joint proposals for Council regulations, which the Council also adopts. These sanctions apply to every EU national, wherever he or she may be located, and to every company or entity that is incorporated under the law of any EU Member State, including subsidiaries operating outside of the EU. These sanctions apply to people and entities conducting business in the EU and to anyone aboard aircrafts and vessels that are under any EU Member State's jurisdiction. Although the EU issues sanctions, the Member States are the ones responsible for implementing and enforcing them. (8)

      United States sanctions are typically imposed under the International Emergency Economic Powers Act ("IEEPA"). (9) Under that statute, the President may, among other things, withhold, transfer, or prohibit any property owned by any foreign country or national. To implement these sanctions, the President only needs to declare a "national emergency" based on a threat to the national security, foreign policy, or economy of the United States. United States Presidents have declared two emergencies in this conflict: then-President Barack Obama's 2014 order issued in response to Russia's annexation of Crimea (EO 13660), and President Biden's 2021 order that targets various "harmful foreign activities" of the Russian government (EO 14024). The Office of Foreign Assets Control ("OFAC"), a branch of the U.S. Department of the Treasury, enforces U.S. sanctions.

      The United Nations ("UN")...