In the Netherlands, the Dutch Parliament debated about the situation in Ukraine and whether or not to supply military items to strengthen Ukraine’s defensive capabilities. In the European Union, the European Commission published the long-awaited European Chips Act package. Moreover, the EU has launched dispute settlement proceedings at the World Trade Organization (“WTO”) against China over its alleged discriminatory trade practices against Lithuania. In the United States, certain sanctions waivers were reinstated that allow third parties to participate in Iran´s civilian nuclear facilities. This, and more, in our newsletter.
1. The Netherlands
- The Netherlands (Dutch government decides to supply military items to Ukraine and debate about sanctions on Russia) – On 18 February 2022, the Dutch government has decided to supply military items to Ukraine to strengthen its defensive capabilities in light of the rising tensions with Russia. The decision follows after several Members of Parliament called on the government to consider supplying military goods during a debate held on 3 February 2022. By authorising military exports, the government at the same time rejects strong opposition voiced by other Members of Parliament. Member of Parliament Van Dijk (SP), for example, argued that the supply of military items to Ukraine would constitute a violation of the export control criteria set out in the EU Common Military Position 2008/944/CFSP (“Common Military Position”). Minister Hoekstra replied that the government thoroughly assesses all potential exports of military items against the criteria set out in the Common Military Position, but he refuted the notion that it would ex ante be prohibited to supply weapons to conflict areas under the Common Military Position. While Criterion 3 of the Common Military Position requires Member States to deny export licenses for military items which would provoke or prolong armed conflicts, the government has decided to allow the export of military items on the ground that the military items will be used for defensive purposes, as written in a letter to parliament.
In addition to arms trade, the debate on 3 February 2022 focused on the imposition of sanctions vis-à-vis Russia in case of further aggression. Member of Parliament Sjoerdsma (D66) stated that the price for Russian aggression must be made as high as possible by designing “tough” sanctions. He furthermore urged the government to trace and target the financial assets that “[Russian president] Putin and his oligarch clique have acquired through corruption”. Member of Parliament Omtzigt (independent) likewise stressed that the EU must prepare credible sanctions that would affect the Russian elite. The obstruction of the opening of the Nord Stream 2 gas pipeline and the disconnection of Russia from the SWIFT payment system are important options for potential sanctions, Member of Parliament Piri (PvdA) stressed. Minister Hoekstra replied that all options currently remain on the table in the discussions in Brussels. On 16 February 2022, the Conference of Presidents of the European Parliament also published a statement calling for the exclusion from SWIFT and the termination of the Nord Stream 2 project in case of a Russian attack against Ukraine.
- The Netherlands (The Dutch Financial Markets Authority’s 2022 Agenda) -On 13 January 2022, the Autoriteit Financiële Markten (“AFM”; in English: Financial Markets Authority) published the AFM Agenda 2022. In this supervisory agenda, the AFM provides insight into recurring themes that cause risks in the financial sector (e.g., accelerated digitalisation and internationalisation), as well as its supervisory and internal priorities for this year. Some of the priorities of the AFM for 2022 are as follows:
- Increased international cooperation in the fight against money laundering and terrorist financing through active participation in international cooperation frameworks (e.g. the Standing Committee on anti-money laundering and countering terrorist financing, and involvement in the development of new EU legislation (e.g., amendments to the existing AML Directive and the proposed establishment of an EU anti-money laundering authority).
- Intensifying the cooperation with national organisations such as the Dutch Central Bank, the Dutch Public Prosecution Service and the Fiscal Intelligence and Investigation Service. This will be achieved by conducting joint investigations, exchanging insights and making more use of the Financial Expertise Centre, a partnership between authorities with a supervisory, control, prosecution or investigation role in the financial sector.
- Lastly, broadening the supervision of the accountancy sector. From the beginning of 2022, the AFM will perform the supervision of non-public-interest organisation audit firms entirely on its own and the supervision of public-interest organisation audit firms will be intensified as well.
2. The European Union
- EU/China (EU WTO case against China over Lithuania trade restrictions) – On 27 January 2022, after attempts to resolve the issue bilaterally, the EU announced that it has launched dispute settlement proceedings at the WTO against China over its discriminatory trade practices against Lithuania, which are alleged to be contrary to WTO law. From December 2021, China started to heavily restrict or de facto block imports from and exports to Lithuania or linked to Lithuania in reaction to Lithuania’s decision to allow Taiwan – which is not recognized by China as a sovereign county – to open a Representative Office in its capital under its own name. The trade restrictions imposed by China are harming exporters both in Lithuania and elsewhere in the EU, as they also target products with Lithuanian content exported from other EU countries, the European Commission stated.
The first stage under WTO dispute settlement proceedings is the ‘request for consultations’ with a view to reaching a solution. If these consultations will not lead to a positive outcome within sixty days, the EU may request the establishment of a panel to rule on the matter. In addition to launching a case at the WTO, the EU Commission is currently strengthening its toolbox of autonomous measures to deal with similar situations in the future. As part of this initiative the EU Commission has recently adopted a proposal for an Anti-Coercion Instrument, which could give the EU more possibilities to react in case of economic coercion.
- EU (European Chips Act package proposed) – On 8 February 2021, the European Commission presented the ‘EU Chips Act Package´ that includes a communication, two proposals for a regulation and a recommendation. The reasoning behind the EU Chips Act package is that semiconductor chips are the essential building blocks of digital and digitised products, and that Europe must reinforce its capabilities in semiconductors to ensure future competitiveness and to maintain its technological leadership and security of supply. The package comprises:
- The Chips for Europe Initiative, that will make €11 billion available to strengthen existing research, development and innovation;
- A new framework to ensure security of supply by attracting investments and enhanced production capacities;
- A coordination mechanism between the Member States and the Commission for monitoring the supply of semiconductors, estimating demand and anticipating the shortages, and
- A tool with immediate effect to enable the coordination mechanism between the Member States and the Commission to commence.
The objectives are to upscale capacity, relax state aid rules, finance research and establish international partnerships. The European Parliament and the Member States will now discuss the Commission’s proposal for a regulation on a European Chips Act in the ordinary legislative procedure. Once adopted, the Regulation will be directly applicable across the EU.
3. The United Kingdom
- UK (Guidance on monetary penalties for breaches of financial sanctions updated) – On 28 January 2022, the Office of Financial Sanctions Implementation (“OFSI”) published an update to their guidance on monetary penalties for breaches of financial sanctions. The guidance provides a summary of OFSI’s compliance and enforcement approach. It furthermore sets out how OFSI will decide when to use its civil enforcement powers to impose monetary penalties for breaches of financial sanctions and how such penalties will be calculated.
According to the guidance, OFSI can take the following steps in response to a potential breach of financial sanctions: i) issue a warning (when the individual is unresponsive to a previous warning, this will be considered as an aggravating factor); ii) refer regulated professionals or bodies to their relevant professional body or regulator to improve their compliance with financial sanctions; iii) impose an administrative monetary penalty; and/or iv) refer the case to law enforcement agencies for criminal investigation and potential prosecution. OFSI may undertake several of these actions in any case. When imposing a monetary penalty, OFSI can reduce the final penalty amount by up to 50% in case the (legal) person provided a prompt and complete voluntary disclosure of a breach of financial sanctions.
In the recent update, changes were, amongst others, made to the role of the public interest in the assessment of a case. Assessing the public interest encompasses such issues as the prudent use of public resources and fairness and consistency in applying the law. In some instances, it may not be in the public interest to take enforcement action even where this appears to be warranted, and in other instances it may be in the public interest to take more serious action than the facts of the breach appear to warrant.
4. The United States
- US/Iran (US charges unlawful exporting of technology to Central Bank of Iran) – On 14 January 2022, a dual US-Iran citizen was arrested in the US on criminal charges relating to his alleged conspiracy to illegally export US goods, technology and services to the Central Bank of Iran, in violation of the International Emergency Economic Powers Act. According to the US government, the Central Bank of Iran “has materially assisted, sponsored and provided financial, material or technological support, goods or services to Lebanese Hizballah, a terrorist organization, and to the Qods Force of Iran’s Islamic Revolutionary Guards Corps”. The Central Bank of Iran is recognized by the US government as an agency of the government of Iran and has been designated by OFAC as a Specially Designated National, signifying that the Central Bank of Iran is acting on behalf of a terrorist organization.
On 18 January 2022, the individual in question made his initial court appearance in the Northern District of Illinois. If convicted, he faces a maximum penalty of 20 years’ imprisonment and a 1 million US Dollar fine.
- US/Russia (Deal on Russia sanctions) – On 30 January 2022, Senators Bob Menendez, the Democratic chairman of the Senate Foreign Relations Committee, and James Risch, its top Republican, stated on CNN’s ”State of the Union” that they are on the one-yard line to reach an agreement. US senators thus appear to be remarkably close to reaching a deal on legislation to sanction Russia over its actions on Ukraine, including some measures that may take effect before any invasion. Russia has been building up its forces on Ukraine’s borders for months and has demanded the North Atlantic Treaty Organization to withdraw troops and weapons from eastern Europe and bar the former Soviet state from ever joining the U.S.-led military alliance. The Senate bill would target the most significant Russian banks (among which Raiffeisen Bank and the Austrian bank) and Russian sovereign debt. The Senate bill will also provide more U.S. military assistance to Ukraine, Secretary of State Antony Blinken spoke of $200 million in military aid to Ukraine. Senator Menendez said that some of the sanctions in the bill could take effect before any invasion because of what Russia has already done, including cyber-attacks on Ukraine, false flag operations and efforts to undermine the Ukrainian government internally. However, there are still some areas of disagreement between senators from the two parties, especially on whether to impose sanctions on the Nord Stream 2 natural gas pipeline. Europe (especially Germany) on the one hand needs Russian gas as a bridging technology, because of its decision to phase out coal and nuclear power and besides that, rising energy prices are already a heavy burden on consumers. On the other side, the Nord stream 2 pipeline would be a great leverage in case Russia violates Ukrainian territorial integrity. It remains to be seen whether the deal will ultimately take effect, depending on the further development of the situation in Ukraine.
- US/China (US calls for comments on Xinjiang forced labour import ban) – On 25 January 2022, the US Department of Homeland Security has indicated that they are seeking guidance on how they can ensure that goods, wares, articles and merchandise mined, produced or manufactured wholly or in part with forced labour in China, and particularly in Xinjiang Uyghur Autonomous Region, are not imported to the US. The request is made on behalf of the Forced Labour Enforcement Task Force (FLETF). In December 2021, the US has already banned imports from China’s Xinjiang region, because of the alleged abuse of religious and ethnic minorities. The deadline for comments is 10 March 2022.
- US/Iran (Restored Iran nuclear waivers) – On 4 January 2022, the US government has reinstated a number of sanctions waivers that allow third parties to participate in Iran´s civilian nuclear facilities. According to a spokesman of the ministry, Mr. Price, these waivers allow foreign companies, e.g. European, Chinese and Russian, to carry out some non-proliferation nuclear work in Iran. These waivers could affect projects such as the redesign of the Arak nuclear reactor to a much less proliferation-sensitive design based on a design approved by the Joint Comprehensive Plan of Action (“JCPOA”). Mr. Price further explained that these waivers will still allow the US administration to comply with the JCPOA, if the US returns to the JCPOA, while taking steps to make Iran’s nuclear program less dangerous. After withdrawal from the JCPOA in 2015, on 8 February 2022, the eight round of indirect discussions resumed between negotiators from Iran and the US on the prospect of a possible return of the US to the nuclear agreement. To conclude, even if these talks do not culminate in a mutual return to compliance with the JCPOA, these reinstated waivers will still, according to the US department, contribute to its non-proliferation objectives.
5. Around the Globe
- Switzerland/Russia (Six people & three entities added to Switzerland’s Russia sanctions list) – On 17 January 2022, Switzerland has followed the EU in designating six persons and three entities linked to the Wagner Group. The Wagner group is a Russian private military organisation, that was recently also subject to EU sanctions. According to the European Council, the Wagner Group has recruited, trained and sent private military personnel to conflict zones around the world to foment violence, loot natural resources and intimidate civilians, in violation of international and human rights law. The sanctioned individuals are accordingly involved in serious human rights violations, including torture and extrajudicial, summary or arbitrary executions and murders. Amongst others, Switzerland has added Dimitriy Valerievich Utkin (Wagner Group founder), Denis Yurievich Kharitonov, and Sergey Vladimirovich Shcherbakov (both mercenaries) to its Russia sanctions regime (in German: Verordnung über Massnahmen zur Vermeidung der Umgehung internationaler Sanktionen im Zusammenhang mit der Situation in der Ukraine). Like the Wagner Group, these individuals were designated by the European Council already in December 2021.
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