Who do I call for an EU sanctions exemption? Why the EU economic sanctions regime should centralize licensing.

Author:Golumbic, Court E.
 
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  1. INTRODUCTION II. EUROPEAN INTEGRATION AND THE RISE OF EU SANCTIONS A. The Treaty of Rome and Early Efforts at Consolidating Foreign Policy B. Movement Toward Autonomous EU Sanctioning Authority C. The Maastricht Treaty Lays the Groundwork for Modern EU Sanctions D. International Colloquy Influences EU Sanctions Regime III. THE EMERGENCE OF THE EUROPEAN UNION AS A RELEVANT SANCTIONING BODY A. Sanctions Guidelines Established B. New Administrative Infrastructure C. Latest Sanctions Are Autonomous and Holistic 1. Going Beyond the U.N. Security Council in Libya and Syria 2. Holistic Sanctions Against Iran D. Separation of EU Sanctions Imposition and Implementation. 1. EU Sanctions Legislation 2. Delegation of Licensing and Other Functions IV. THE EUROPEAN UNION SHOULD CENTRALIZE LICENSING RESPONSIBILITIES A. Member State Implementation and Enforcement Is Suboptimal B. Centralized EU Licensing Would Foster Core Competencies 1. Flexibility 2. Ability to Mitigate Collateral Damage 3. Adaptability V. CONCLUSION I. INTRODUCTION

    The ongoing revolutionary wave termed the "Arab Spring" by the media (1) has brought millions together in a grassroots effort to bring about democratic reforms, the recognition of human rights, and, in some cases, the overthrow of longstanding oppressive regimes. (2) The movement has led to the overthrow of governments in Tunisia, (3) Egypt, (4) Yemen, (5) and Libya. (6) It has also triggered other conflicts that remain ongoing, most notably President Bashar al-Assad's violent crackdown against opposition groups in Syria. (7)

    Violent government responses to the Arab Spring demonstrations have elicited a range of responses from the Western world, from diplomatic missions (8) to direct military intervention. (9) A central element of the West's response, however, has been the use of economic sanctions. (10) Economic sanctions involve the deliberate withdrawal of normal economic relations between a sanctioning governmental body and a target country, government, entity, or individual in order to coerce the target to modify its behavior in a manner consistent with the sanctioning body's foreign policy objectives. (11) The United States, historically the predominant force on the international sanctions scene, (12) has issued a number of sanctions in response to government crackdowns against Arab Spring protestors, most notably in Libya and Syria. (13) These restrictive measures have reinforced the United States' preference for "holistic" sanctions--broad-based, categorical restrictions on doing business in targeted countries. (14)

    More noteworthy, however, has been the emergence of another governmental body seeking to impose its political will through economic sanctions--the European Union. (15) Although official EU sanctions policy endorses targeted or "smart" sanctions, (16) the European Union has become increasingly aggressive in its response to the crises in the Middle East. EU sanctions imposed in the wake of the Arab Spring in Libya and Syria were autonomous (17) and holistic. (18) EU sanctions aimed at halting Iran's nuclear program were even more severe, imposing significant trade and financial restrictions that nearly matched measures imposed by the United States. (19)

    The emergence of the European Union as a prominent sanctioning body may have persons subject to EU sanctions asking a familiar question: "Who do I call if I want to speak to Europe?" This inquiry, long attributed to Henry Kissinger and adopted as a call to action by European integrationists, (20) is again relevant as multinational businesses struggle to discern their obligations under the evolving EU sanctions regime. (21) To the extent the European Union continues to act more aggressively, imposing broader-based, holistic sanctions, the potential for excess will be increasingly present.

    In a previous article, the authors demonstrated, by reference to historical examples and recent lessons emerging from the Arab Spring and other Middle East conflicts, the challenges attendant to a holistic sanctions program. (22) Comprehensive trade restrictions can create conflict of law scenarios for businesses operating within the sanctioned country as well as preclude activities that are deemed benign and not inconsistent with U.S. foreign policy. (23) They can also impose an excessive hardship on innocent citizens and businesses in the targeted countries whose interests the United States is trying to protect by imposing sanctions in the first place. (24) The United States manages these challenges with the prolific licensing practices of its central sanctions agency, the Office of Foreign Assets Control (OFAC), a component of the Department of the Treasury. (25) Through its licensing practices, OFAC is able to maintain the three core competencies of a broad-based sanctions regime: flexibility, the ability to mitigate collateral damage, and adaptability.

    Though the promulgation of EU sanctions is centralized within the Council of the European Union, the responsibility for implementation and enforcement--including licensing--rests with the relevant regulatory agencies or competent authorities of the EU Member States. With twenty-seven Member States, each bearing its own foreign policy agenda and a variable degree of administrative infrastructure and resources, this decentralized licensing will produce uncertainty at best, and at worst, conflicting licensing policies that undermine the objectives of the sanctions themselves. (26)

    This Article explores the potential impact of the European Union's decentralized approach to licensing. The Article proceeds in three parts. Section II provides an historical overview of the EU sanctions regime, tracing the development of EU sanctions through the various European integration treaties of the past fifty years.

    Section III observes the European Union's emergence as a significant sanctioning force, discussing modern EU sanctions policy, recent administrative reforms, and the latest EU sanctions in response to the events of the Arab Spring and the Iranian nuclear crisis. This Section also reviews the process by which sanctions targets are designated and the delegation of implementation authority to each of the twenty-seven Member States. (27)

    Section IV addresses the substantial challenges posed by the European Union's decentralized approach to sanctions implementation and enforcement. (28) This Section demonstrates that with respect to licensing in particular, delegating discretion to the competent authorities of the twenty-seven Member States frustrates the ability to achieve and sustain the three core competencies necessary to the effective operation of both an increasingly aggressive and holistic sanctions regime like that of the European Union. (29)

    The Article concludes by arguing that to ensure its relevance as a sanctioning body in the future, the European Union should establish a centralized licensing agency with the resources and administrative capacity to implement a singular, cohesive licensing practice applying with equal force to all Member States.

  2. EUROPEAN INTEGRATION AND THE RISE OF EU SANCTIONS

    The European Union's emergence as a sanctioning body has tracked the overall development of the supranational entity over the last half-century. The concept of an integrated Europe began with a desire to establish a post-World War II system that would avoid the region's post-World War I failings. (30) Early attempts at integration thus focused mainly on establishing an economic system that would foster peace and prosperity. (31) More recent integration efforts have emphasized establishing a unified European foreign policy and streamlining EU decision-making. (32)

    1. The Treaty of Rome and Early Efforts at Consolidating Foreign Policy

      The origins of the European Union can be traced to the 1957 Treaty of Rome, formally the Treaty Establishing the European Economic Community (33) and renamed the Treaty on the Functioning of the European Union in 2009 (the TFEU). (34) The Treaty of Rome was designed to foster an open economic market among Member States, and it largely removed the Member States' ability to regulate independently their international trade, prohibiting them from adopting trade-related legislation that conflicted with that of the European Union. (35) Notably, however, Article 57 of the Treaty of Rome (TFEU Art. (36) restricted the European Union's ability to impose economic sanctions by carving out from the scope of the European Union's authority issues related to Member State security and arms production. (36) Specifically, Article 57 provided that "any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material." (37) Despite this provision and the fact that economic sanctions would violate the European Union's open market regulations, the Treaty of Rome included an exception that allowed Member States to fulfill their "obligations ... accepted for the purpose of maintaining peace and international security." (38)

      The decade following the establishment of the European Union saw enhanced foreign policy coordination among Member States. In 1970, the Member States created the European Political Cooperation (EPC) in an effort to formalize their joint foreign policy efforts. (39) Despite promoting coordinated foreign policy actions by Member States, however, the EPC emphasized national sovereignty with respect to state security. (40) For example, the 1973 Copenhagen Declaration was one of the European Union's first attempts at establishing a unified foreign policy under the EPC. (41) Its approach focused on concerns such as human rights, leaving issues of security off the table. (42)

      The avoidance of security matters was also evident in the EPC's failure to streamline decision-making processes with respect to sanctions...

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