20 Restrictions on economic and financial
relations with Iraq
| (a)
(25019)
—
—
(b)
(24952)
13468/03
COM(03) 584
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Council Regulation and Common Position concerning certain specific restrictions on arms sales and economic and financial relations with Iraq.
Draft Council Regulation amending Regulation and Common Position concerning certain specific restrictions on economic and financial relations with Iraq.
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| Legal base | (Council Regulation and draft amending Regulation) Articles 60 and 301 EC; QMV
(Common Position) Article 15 EU; unanimity
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| Documents originated | (b) 8 October 2003
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| Deposited in Parliament | (b) 15 October 2003
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| Department | Foreign and Commonwealth Office
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| Basis of consideration | EM of 27 October 2003 and Minister's letter and EM of 13 November 2003
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| Previous Committee Report | None
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| Discussed in Council | (a) Adopted on 7 July 2003
(b) Adopted on 13 October 2003
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background and scrutiny
20.1 Council Regulation 1210/2003[55]
and Common Position 2003\495\CFSP[56]
implemented United Nations Security Council Resolution (UNSCR)
1483(2003) of 22 May 2003. They address the lifting of sanctions
against Iraq. In his letter to us, the Minister for Europe (Mr
Denis MacShane) regrets that, due to a misunderstanding as to
which documents were subject to scrutiny, the Common Position
was not deposited. The Council Regulation should also have been
deposited. Both should have been scrutinised before adoption
at the 7 July 2003 General Affairs and External Relations Council
(GAERC). In the same letter, the Minister also regrets that,
due to the same misunderstanding, the draft amending Regulation
and Common Position, both of which were deposited, did not clear
scrutiny before being adopted at the 13 October 2003 GAERC.
Document (a)
20.2 The Regulation and Common Position adopted on 7 July left
certain measures in place but introduced others. The arms embargo
remains, with a specific exemption for arms and related materiel
required by the occupying powers to serve the purposes of the
UNSCR 1483 and related Resolutions.
20.3 Measures introduced include:
- a new prohibition on trade
in or transfer of Iraqi cultural property or other important items
suspected of having been illegally removed from Iraq. The Regulation
obliges all States to facilitate the safe return to Iraqi institutions
of all such property and items removed from Iraq since 6 August
1990.
- funds, financial assets or economic resources
belonging to the previous Government of Iraq, its state bodies,
corporations and agencies, or belonging to Saddam Hussein or other
senior officials of the former regime or their families are frozen
and transferred to the Development Fund for Iraq (DFI), provided
they are not already subject to prior liens or judgements. Government
funds were already frozen under previous Resolutions, but most
countries had not frozen assets belonging to individuals. The
UN Sanctions Committee has listed the 55 "playing cards individuals".
No list of State entities has yet been issued.
- oil and natural gas exports and other trade can
resume. Revenues from the former as of 22 May 2003 will be deposited
in the DFI until an internationally recognised, representative
government of Iraq is properly constituted.
Document (b)
20.4 The Regulation and Common Position adopted on
13 October relate to the interpretation of the Resolution and
address two technical problems with implementation. The Commission
explains that Member States considered the Regulation to be more
restrictive on one point than the Resolution required and that
another was not logical. The amendments proposed with be retrospective
and will apply from the date on which Regulation 1210/2003 entered
into force.
20.5 The Minister provides a fuller explanation than
that offered by the Commission, as follows:
"UNSCR 1483 states that the freezing and
transfer of assets of entities of the former Government of Iraq
to the Development Fund for Iraq (DFI), applies to all assets
held overseas 'as of' 22 May. Other language versions of the
UNSCR made clear that this was intended to mean assets held overseas
on the date of 22 May, but the initial EU legislation referred
to 'on or after 22 May'. It later became clear that this
interpretation would mean that any Iraqi entity listed at the
UN would be unable to hold or use any assets overseas for as long
as they remained listed, ie they could not trade. The resulting
prohibition on the entities future international presence and
trade would stop the international actions of these entities.
It would also have had consequences on their ability to continue
operating at all and, particularly with banks, this might have
had unwelcome repercussions within Iraq. The amendments therefore
[make] clear that the assets to be frozen [are] those held overseas
on the date of 22 May [but not after that date].
"UNSCR 1483 allows funds that are subject
to prior claims to be exempt from transfer to the Development
Fund for Iraq. But it does not explicitly provide for their subsequent
return to their appropriate beneficiaries, and so no such provision
was included in the initial Council Regulation. The impact of
this was to require banks to hold indefinitely assets that have
already been judicially determined to belong to others —
the assets could neither go to the DFI nor back to those to whom
they rightfully belong. It was not the intention of the UN Security
Council to prevent the release of such funds, and so the amending
Regulation allows States to take action compatible with their
UN commitments."
The Government's view
20.6 The Minister comments:
"The UK was the Member State which first
identified the two problems outlined above and worked hard to
ensure that they were corrected as quickly as possible. The new
EU legislation will help facilitate the reconstruction of Iraq.
It will ensure that EU Member States can fulfil their international
obligations by transferring money to the DFI, without crippling
the international offices of Iraqi entities that are vital to
the reconstruction effort."
Conclusion
20.7 We thank the Minister for explaining to
us how these documents escaped scrutiny and for having given his
officials instructions which should ensure that a similar misunderstanding
does not occur again.
20.8 We have no issues to raise on the proposals
and now clear the documents.
55 OJ L 169, 8.7.2003, p.6. Not deposited. Back
56
OJ L 169, 8.7.2003, p.72. Not deposited. Back
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