In May 2021, the District Court of North-Holland rendered a preliminary judgment concerning a denied export licence application. Also in the Netherlands, the Dutch General Intelligence and Security Service and the Dutch Military Intelligence and Security Service published their 2020 annual reports of the year.
On a European level, the European Parliament and the Council approved the upgrade of its legislation on the export controls applicable to dual-use goods and an Opinion of the Advocate General of the Court of Justice of the EU was published in Case C-124/20 Bank Melli Iran. Meanwhile, in the US, OFAC fined a company because it failed to screen the beneficiaries of the transactions against the SDN List and negotiations to achieve a potential new US-Iran agreement are well underway, albeit challenging. This, and more, in our newsletter.
1. The Netherlands
- Netherlands – On 3 May 2021, the District Court of North-Holland rendered a preliminary judgment concerning a denied export licence application. In July 2020, the applicant – a Dutch private limited company (“BV”) – had entered into an agreement with a French company to install two ammunition elevators in two vessels. The French company was to deliver these vessels to the navy of the United Arab Emirates (“UAE”), for which the French authorities had issued an export licence. In September 2020, the applicant submitted in turn an application in the Netherlands for an export licence in relation to the supply of the two ammunition elevators on the military vessels, specifying that the end-user was the UAE. In February 2021, the Dutch Minister of Foreign Trade and Development Cooperation rejected the licence, on account of UAE involvement in the Yemen conflict. The BV argued that because the French authorities had issued an export licence, the Dutch authorities must do the same. However, the District Court of North-Holland explains that the Dutch arms export policy is a full national matter. The BV asked the District Court of North-Holland for a preliminary judgment and asked the court to establish that the Minister had on incorrect grounds decided that the export licence should not be granted and allow the two ammunition elevators to be delivered and installed pending the objection and appeal procedure. According to the BV, the urgent interest in this case lies in the major financial interest it has that the contractual obligations are complied with and that the BV may be faced with claims for damages and reputational damage as a result of not being able to deliver the ammunition elevators. The District Court of North-Holland denied this request, holding that it had not been established that the BV had an urgent interest in a preliminary judgment being granted and that it had not been established that the Minister’s decision to refuse the licence was unlawful beforehand.
- Netherlands – In April 2021, the Dutch General Intelligence and Security Service (”AIVD”) ( Report) and the Dutch Military Intelligence and Security Service (”MIVD”) (Report) published their respective annual reports for the year 2020. According to the reports, the AIVD and MIVD have over the past year investigated and prevented international networks from obtaining knowledge and goods to develop weapons of mass destruction. These networks are very active and use various intermediaries and transporters in European countries, such as the Netherlands. These reports expressly list the countries which tried to acquire such goods and technology in 2020, i.e. Iran, North Korea, Syria, and Pakistan.
2. European Union
- EU – On 10 May 2021, the EU announced it had upgraded its legislation on the export controls applicable to sensitive dual-use goods and technologies, following a decade of discussions on the subject. In September 2016 already, the European Commission (“EC”) had published its proposal to replace Council Regulation (EC) No 428/2009 (“Dual-Use Regulation”), and in November 2020, the European Parliament and the Council had come to a provisional agreement on its modernized text. On 25 March 2021 and 10 May 2021, the new version of the Dual-Use Regulation was respectively adopted by the two EU institutions. The updated Dual-Use Regulation heightens controls on emerging technologies and empowers the private sector in addressing risks to global security and human rights by obliging exporters using global export authorisations to implement Internal Compliance Programmes, including due diligence obligations, by incorporating a new definition and stricter controls for cyber-surveillance items, namely when these endanger human rights and international humanitarian law, and by adding the prevention of terrorism as a ground for catch-all provisions. It also improves transparency and coordination among Member States, between the latter and the Commission, and between the EU and third countries to enhance effective enforcement of controls, by increasing the Commission’s publications on controls and licence authorisations, by allowing Member States to introduce export controls based on another Member State’s legislation and by providing for the set-up of an EU Enforcement Coordination Mechanism.
- EU – In an opinion dated 12 May 2021, in Case C-124/20 Bank Melli Iran, Aktiengesellschaft nach iranischem Recht v Telekom Deutschland GmbH, the Advocate General of the Court of Justice of the EU considered that a decision by an EU undertaking to terminate a contractual relationship with an Iranian undertaking subject to US primary sanctions should be regarded as invalid if it could not be justified on any ground other than by the intention to comply with US legislation on secondary sanctions. This opinion reaffirms the intention of the EU Blocking Statute to prohibit to comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from the US secondary sanctions against Iran. Indeed, it provides (i) that the general prohibition contained in the EU Blocking Statute for EU entities and directed against compliance with third country legislation providing for secondary sanctions applies even when such entities comply with that legislation without having been compelled to do so by a foreign administrative or judicial agency, (ii) that the EU entity seeking to terminate a contract with an Iranian entity subject to the US sanctions must demonstrate to the satisfaction of the national court that it did not do so only to comply with third country secondary sanctions and (iii) that should the EU entity violate the prohibition to comply with US secondary sanction legislation, the national court seized by its contracting party subject to US primary sanctions is required to order the EU undertaking to maintain their contractual relationship.
3. United States of America
- US – On 26 April 2021, US Secretary of the Treasury – Janet Yellen – stated that the US welcomes the new Global Anti-Corruption Sanctions Regime of the United Kingdom (see BenninkAmar Newsletter d.d. 7 May 2021). According to the statement, the new UK sanctions regime “gives the UK an authority similar to the United States’ Global Magnitsky program and Canada’s Justice for Victims of Corrupt Foreign Officials Act, which target both human rights abusers and corrupt actors’’. Yellen also stated that this new regime gave opportunities to the UK, but also to the US to take complementary sanctions actions where appropriate. According to Yellen, the use of sanctions can further incentivize businesses to adopt a more proactive corporate risk and due diligence approach, which takes into account both corruption and human right issues.
- US – On 29 April 2021, the US Department of the Treasury published a press release with regard to an OFAC-settlement with company MoneyGram Payment Systems, Inc. (“MoneyGram”) for 359 apparent violations of multiple sanctions programs. MoneyGram provided money transfer services to the US Department of Justice’s Federal Bureau of Prisons, (“BOP”) allowing inmates to send and receive funds out of and into their personal commissary accounts. According to the OFAC, MoneyGram did not screen the inmates against the US Department of the Treasury’s Office of Foreign Assets Control’s (“OFAC”) List of Specially Designated Nationals and Blocked Persons (“SDN List”), despite knowing, that some of the inmates for whom it was processing transactions could be on the SDN List, “erroneously believing that such screening of inmates in federal prison was not expected under the BOP program”. OFAC determined that MoneyGram had provided services to blocked individuals incarcerated in US federal prisons without a licence, processed transactions on behalf of an additional blocked person, and processed transactions for individuals who initiated commercial transactions involving Syria. Among the aggravating retained, was MoneyGram’s erroneous misunderstanding of its obligations, but also the fact that it was a large and commercially sophisticated international financial institution.
- US – In May 2021, a settlement agreement was published by the US Bureau of Industry and Security (“BIS”). The settlement was made with Dutch company Kleiss & Co B.V. (“Kleiss”) – a pipeline manufacturer and distributor – for illegally shipping “extruded butyl sealants” from the US to Iran. According to the settlement, Kleiss shall have to pay a civil penalty of $ 60,000 and is temporarily denied export privileges: “For a period of two years, Kleiss, and when acting for or on its behalf, its successors, assigns, directors, officers, representatives, agents, or employees […] may not, directly or indirectly, participate in any way in any transaction involving any commodity, software or technology […] exported or to be exported from the US that is subject to [..] [Section 766.18(a) of the Export Administration Regulations]“.
- US – On 5 May 2021, the US BIS published a Notice in the Federal Register, the Daily Journal of the US Government. This Notice contained an order denying export privileges for Hakan Atilla, a Deputy General Manager at the Turkish Halkbank. The US imposed a 10-year trading ban on Atilla on the grounds that he was convicted of circumventing the sanctions on Iran by failing to apply for a licence.
- US/Iran – In 2018, then US President Trump withdrew from the Joint Comprehensive Plan of Action, also known as the “Iran nuclear deal” / “Iran deal”, and restored all sanctions against Iran. According to a 18 May 2021 news article of the New York Times, the effectiveness of US sanctions is being called into question “as Iran and its oil buyers test whether penalties are worth the risk amid diplomatic negotiations”. The article flags that the potential over-use of sanctions by the US government resulted in a loss of cooperation and push-back from other countries, hinging their bets on not getting caught violating US sanctions or helping Iran work around them. According to a 17 May 2021 news article of news agency Reuters, the Biden administration has concluded it is in the national security interest of the US to return to the Iran deal. The US faces an important challenge in light of Iran’s reluctance to negotiate with the US following the sanctions the Trump administration imposed on several hundreds of entities and persons after the withdrawal of the Iran deal. Reuters says that European diplomats are shuttling between the US and Iranian delegation, because Iran rejects direct talks with the US whereas officials are trying to strike a deal by 21 May 2021, namely before a monitoring agreement between Iran and the U.N. International Atomic Energy Agency expires and ahead of the Iranian elections mid-June. Crucial issues that will still need to be worked out are which sanctions imposed by the US would need to be removed and what steps Iran would have to take to avoid further breaches by not curbing its uranium enrichment capacity.
- US – On 19 May 2021, a press release of US Secretary Antony Blinken was published with regard to Nord Stream 2 and European Energy Security. According to the statement, “it is in the national interest of the US to waive the application of sanctions on Nord Stream 2 AG, its CEO Matthias Warnig, and Nord Stream 2 AG’s corporate officers”. Blinken stated that these actions demonstrate the commitment of the Biden Administration to energy security in Europe and is in line with President Biden’s pledge to rebuild relationships with allies and partners in Europe.
4. Around the Globe
- Russia / EU – On 30 April 2021, the Russian authorities banned eight EU-nationals from entering the territory of the Russian Federation – i.e. the President of the European Parliament, David Sassoli, Vice President of the European Commission, Věra Jourová, and six EU Member States’ officials from Estonia, France, Germany, Latvia and Sweden. This ban was in response to the EU Council’s 2 March 2021 and 22 March 2021 restrictions on Russian citizens (travel ban / asset freeze). The EU sanctioned these Russian citizens because they are involved in “serious human rights violations in Russia, including arbitrary arrests and detentions, as well as widespread and systematic repression of freedom of peaceful assembly and of association, and of freedom of opinion and expression”. These persons include Alexander Petrovich Kalashnikov (Director of the Russian Federal Penitentiary Service), Alexander Ivanovich Bastrykin (Chairman of the Investigative Committee of the Russian Federation), Igor Viktorovich Krasnov (Prosecutor General of the Russian Federation) and Viktor Vasilievich Zolotov (Director of the Federal Service of National Guard Troops of the Russian Federation). On 1 May 2021, the EU published a declaration as a response to the Russian 30 April 2021-ban. The Russian decision to ban eight EU nationals is considered as targeting the EU and its Member States directly, and “unacceptable” by the High Representative, who stated that the ban shows that Russia “has so far chosen the path of confrontation instead of seeking to reverse the negative trajectory of EU-Russia relations’’.
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