The Role of Transnational Private Actors in Ukraine International Flight 752 Crash in Iran Under Economic Sanctions Pressure

The Role of Transnational Private Actors in

Ukraine International Flight 752 Crash in Iran

Under Economic Sanctions Pressure

Mahan Ashouri*

In Remembrance of the Victims of the Ukraine International Airline Flight

PS752

INTRODUCTION—UNDERSTANDING ECONOMIC SANCTIONS REGIMES . . . . . . . . . . 655

I. THE EXPANDED SCOPE OF TRANSNATIONALISM IN RECENT DECADES . . . . 660

II. BEHAVIORAL ANALYSIS OF TNPAS IN FOREIGN MARKETS: RATIONAL

CHOICE AND RISK MITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663

A. Business Risks in Foreign Markets . . . . . . . . . . . . . . . . . . . . 663

1. Country Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664

2. Industry Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666

3. Institutional Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666

4. Legal Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667

B. Business Risks in Foreign Sanctioned Markets . . . . . . . . . . . 669

III. BEHAVIORAL ANALYSIS OF TNPAS IN SANCTIONED MARKETS: THE CASE

OF IRAN NUCLEAR PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670

A. Background of Sanctions Against Iran Nuclear Program. . . . 670

B. Binding Effect of the JCPOA . . . . . . . . . . . . . . . . . . . . . . . . . 673

C. Dispute Resolution Mechanisms of the JCPOA . . . . . . . . . . . 678

D. TNPAs’ Rational Choice and Risk Mitigation in Dealing with

Iran............................................ 680

IV. PART FOUR: UNINTENDED CONSEQUENCES OF TNPAS’ DECISIONS IN

SANCTIONED MARKETS: THE UKRAINE INTERNATIONAL AIRLINES PS 752

CRASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688

INTRODUCTION—UNDERSTANDING ECONOMIC SANCTIONS REGIMES

Economic sanctions have been a favorite instrument of foreign policy

from 432 BC when Athens deployed economic measures against Megara.

1

Over

time, sanctions have evolved from the siege of cities to “secondary smart sanc-

tions,” where sanctioning states punish not only specif‌ic individuals and

* Doctoral Candidate, McGill University Faculty of Law. © 2021, Mahan Ashouri.

1. HOSSEIN ASKARI, ECONOMIC SANCTIONS: EXAMINING THEIR PHILOSOPHY AND EFFICACY 5–6

(2003); GEOFF L. SIMONS, IMPOSING ECONOMIC SANCTIONS: LEGAL REMEDY OR GENOCIDAL TOOL? 13–

14 (London: Pluto Press, 1999).

655

entities within their territory who conduct business, but also other persons who re-

side in foreign countries.

The key players of sanctions regimes are public and private actors, such as

international organizations, trading blocs, non-governmental organizations, inter-

national f‌irms, governments, transnational private actors, domestic f‌irms, entities,

and individuals.

2

The role of these players varies during a sanctions episode. For

example, the principal author of an economic sanction episode is a “sender or

sanctioning” state/party and the recipient of sanctions is a “target or sanctioned”

body.

3

Historically, with the aim of bringing about a change in political behavior or

status quo of a target, individual states began with “unilateral” or one-sided eco-

nomic sanctions and imposed “comprehensive sanctions,” which affected the

entire target state, regardless of specif‌ic sector. Over time, as part of the ongoing

evolution of economic sanctions, sender states realized that imposing sanctions

on specif‌ic individuals and entities that reside in a target state would improve the

outcomes of sanctions yet considerably reduce the negative effects of sanctions

on the blameless civilians of target states. “Smart/targeted sanctions,” thus, were

created.

4

Not surprisingly, sender states also understood that the support of third-party

states through the establishment of a sanctions coalition to impose “multilateral

sanctions” can considerably reinforce their sanctions.

5

Sender states, however,

realized that third-party states might conversely defy the sender’s sanctions if

they play the role of “black knights/sanctions-busters” and offset the loss of sanc-

tions for target states.

6

To reduce third-party states’ sanctions-busting activities,

sender states designed “secondary sanctions” to prohibit individuals and entities

residing in the jurisdiction of foreign countries from dealing with their counter-

parts in a target state.

7

In response, some third-party states adopted retaliatory

measures against the sender’s sanctions by enacting “blocking statutes/orders/

legislation/regulations,” such as EU Blocking Statutes against US sanctions on

2. GARY CLYDE HUFBAUER, JEFFREY SCHOTT & KIMBERLY ANN ELLIOTT, ECONOMIC SANCTIONS

RECONSIDERED 10 (3d ed., 2007).

3. Id. at 47–48.

4. For more information on comprehensive sanctions and smart sanctions see GARY C. HUFBAUER,

JEFFREY J. SCHOTT & KIMBERLY A. ELLIOTT, ECONOMIC SANCTIONS IN SUPPORT OF FOREIGN POLICY

GOALS 3 (Washington, DC: Institute for International Economics, 1983); See also ROBERT EYLER,

ECONOMIC SANCTIONS: INTERNATIONAL POLICY AND POLITICAL ECONOMY AT WORK 4 (New York:

Palgrave Macmillan, 2008).

5. Johan Galtung, On the Effects of International Economic Sanctions: With Examples from the Case

of Rhodesia 19 WORLD POLICY 378, 381 (1967).

6. Li, Yitan, US Economic Sanctions Against China: A Cultural Explanation of Sanction

Effectiveness, 38 Asian Perspective 311, 312 (2014). See e.g., Navin A Bapat & Clifton Morgan,

Multilateral Versus Unilateral Sanctions Reconsidered: A Test Using New Data, 53 INTERNATIONAL

STUDIES QUARTERLY 1075, 1085 (2009); Susan H. Allen, The Determinants of Economic Sanctions

Success and Failure, 31 International Interaction 117, 133 (2005).

7. Baran Han, The Role and Welfare Rationale of Secondary Sanctions: A Theory and a Case Study

of the US Sanctions Targeting Iran, 35 CONFLICT MANAGEMENT AND PEACE SCIENCE 474, 475 (2016).

656 JOURNAL OF NATIONAL SECURITY LAW & POLICY [Vol. 11:655

Iran,

8

and bringing a claim to the World Trade Organizations (WTO), such as

EU’s submission of a request for the establishment of a WTO panel with respect

to US sanctions against Cuba, amongst others.

9

The design of “smart sanctions” and “secondary sanctions” considerably

improved the functionality of economic sanctions against target states. In recent

decades, sender states have moved forward and combined these two types of

sanctions by imposing both secondary and smart sanctions at the same time,

which embraces the issues of extraterritoriality, in addition to violating due pro-

cess standards; the exercise of extraterritorial jurisdiction by sender states in a

sanctions regime and the effect of their national legislation targeting actors who

are abroad violates certain principles of United Nations (UN) Charter, including

but not limited to the equality of states, national sovereignty, and nonintervention,

when it extends the reach of the sanctions beyond its borders without proper con-

nection with the target of sanctions.

10

The violation of due process standards can

arise through a sender state’s denial of blacklisted persons’ rights, for example, to

property through asset freezes, to the freedom of movement through travel bans,

to a fair hearing through lack of rule and procedure of law, to an effective judicial

review through lack of appellate body, and to an immediate and effective remedy,

i.e., delisting from sanctions lists.

11

One of the remarkable examples of a “sec-

ondary smart sanctions” episode is the Paris-headquartered French Bank BNP

Paribas’s guilty plea and agreement to pay $8.9 billion f‌ine to the United States

for the violation of U.S. sanctions against Cuba, Sudan, and Iran.

12

Besides states that can initiate a sanctions episode, trading blocs (e.g., the

European Union) as well as the UN, may also decide to design and deploy eco-

nomic sanctions. The decision of trading blocs to impose sanctions is only bind-

ing over their member states, while the decision of the UN Security Council to

impose sanctions is binding over all member states of the UN and constitutes

“universal sanctions.”

13

After reaching the desired outcomes, trading blocs, as

well as the UN Security Council, may decide to lift the sanctions, a decision

which correspondingly has binding effects over their member states.

8. Commission Delegated Regulation 2018/1100, Amending the Annex to Council Regulation (EC)

No 2271/96 Protecting against the Effects of Extraterritorial Application of Legislation Adopted by a

Third Country, and Actions Based Thereon or Resulting Therefrom, 2018 O.J. (L 199I/1), https://perma.

cc/B2NN-BFUJ.

9. Kinka Gerke, The Transatlantic Rift Over Cuba. the Damage Is Done, 32 THE INTERNATIONAL

SPECTATOR 27, 40 (1997).

10. Rahmat Mohamad, Unilateral Sanctions in International Law: A Quest for Legality, in

ECONOMIC SANCTIONS UNDER INTERNATIONAL LAW: UNILATERALISM, MULTILATERALISM, LEGITIMACY,

AND CONSEQUENCES 71, 71–73, 79-80 (Ali Z. Marossi & Marisa R. Bassett, eds., 2015).

11. Thomas J. Biersteker, Targeted sanctions and individual human rights, 65 INT’L. L. 99, 104

(2009); Monika Heupel, UN Sanctions Policy and the Protection of Due Process Rights: Making Use of

Global Legal Pluralism, in PROTECTING THE INDIVIDUAL FROM INTERNATIONAL AUTHORITY: HUMAN

RIGHTS IN INTERNATIONAL ORGANIZATIONS 95 (Monika Heupel & Michael Zu¨rn eds., 2017).

12. Capital Punishment, THE ECONOMIST (July 5, 2014), https://perma.cc/BJP2-59MB.

13. Galtung, supra note 5.

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