13 Restrictive measures against Iran
| (31905)
13082/10
COM(10) 459
| Draft Council Regulation on restrictive measures against Iran and repealing Council Regulation (EC) No. 423/2007
|
| Legal base | Article 215 TFEU; QMV
|
| Department | Foreign and Commonwealth Office
|
| Basis of consideration | Minister's letter of 22 October 2010
|
| Previous Committee Report | HC 428-ii (2010-11), chapter 24 (15 September 2010) and (31779) —: HC428-i (2010-11), chapter 61 (8 September 2010); and (31937) —: HC 428-iii (2010-11), chapter 15 (13 October 2010); also see (29812) — and (29813) —: HC 16-xxvii (2007-08), chapters 16 and 17 (16 July 2008); and (29912) 12463/08: HC16-xxx (2007-08) chapter 16 (8 October 2008)
|
| To be discussed in Council | 25 October 2010 Foreign Affairs Council
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared (decision reported on 15 September 2010)
|
Background
13.1 On 23 December 2006, the UN Security Council adopted Resolution
1737, which imposed a number of sanctions on Iran. In broad terms
UNSCR 1737:
- prohibited the sale/transfer to Iran — and also the
export by Iran or export from Iran — of certain goods and
technologies that could contribute to sensitive activities (enrichment
related, reprocessing and heavy water activities and the development
of nuclear weapons delivery systems);
- prohibited technical or financial assistance related to these
activities;
- froze the assets of named individuals and entities involved
in, associated with or providing support to Iran's sensitive nuclear
and missile programmes;
- called on signatory States to "exercise vigilance"
about the travel to or through their territories of individuals
involved in, associated with or providing support to Iran's sensitive
nuclear and missile programmes and required them to inform the
Security Council when named individuals do so; and
- called on States to prevent Iranian nationals from studying
sensitive subjects.
13.2 On 7 February 2007 the then Committee cleared Common Position
2007/140/CFSP, which enabled EU Member States to fulfil their
obligation to implement these restrictions. It was subsequently
adopted by the Council on 27 February 2007.
13.3 Consideration by the previous Committee of subsequent changes
is set out in those Reports referred to in the headnote above.
13.4 Most recently, on 9 June 2010, the UN Security Council adopted
Resolution 1929 on Iran's nuclear programme and its failure to
comply with its international obligations, which imposes a number
of further restrictive measures against Iran. In broad terms it:
— reaffirms
that Iran shall cooperate fully with the International Atomic
Energy Agency;
— stops
new Iranian nuclear facilities and bans Iranian nuclear investment
in third countries;
— imposes
total bans on exports of several major categories of arms, and
further restrictions on Iran's ballistic missile programme;
— freezes
the assets of 40 entities, including one bank subsidiary, several
Islamic Revolutionary Guard Corps companies, and three Islamic
Republic of Iran Shipping Lines subsidiaries, which have been
involved in multiple sanctions violations cases;
— freezes
the assets of and bans travel on one senior nuclear scientist;
— implements
a regime for inspecting suspected illicit cargoes and authorising
their seizure and disposal;
— places
restrictions on financial services, including insurance and reinsurance,
where there is suspicion of a proliferation link;
— bans
existing and new correspondent banking relationships where there
are proliferation concerns;
— establishes
a Panel of Experts to advise and assist on sanctions implementation;
and
— reaffirms
the dual track strategy (of pressure and diplomacy).
13.5 EU Heads of Government welcomed the UN resolution
in a Council Declaration on 17 June 2010, which invited the EU
Foreign Affairs Council to adopt a Council Decision at its next
session, on 26 July, to implement the measures contained in UNSCR
1929, as well as additional EU sanctions in the following areas:
— the
energy sector, including the prohibition of investment,
technical assistance and transfers of technologies, equipment
and service;
— the
financial sector, including additional asset freezes against
banks and restrictions on banking and insurance;
— trade,
including a broad ranging ban on dual use goods and trade insurance;
— the
Iranian transport sector in particular the Islamic Republic
of Iran Shipping Line (IRISL) and its subsidiaries and air cargo;
— new
visa bans and asset freezes, especially on the Islamic
Revolutionary Guard Corps (IRGC).
13.6 The Committee was not formed at the time the
Council Decision was adopted, and was not able to consider it
until its first meeting on 8 September 2010.
13.7 In an Explanatory Memorandum of 9 July 2010,
the Minister for Europe (David Lidington) said that the Government
was "committed to tough additional EU sanctions against Iran,
aimed at halting its proliferation sensitive activity and making
it comply with its international obligations", and explained
the Government's position in detail.[70]
In an accompanying letter of 9 July 2010, the Minister said that
he had submitted the Decision, despite it being still a working
document, so that the Committee had time to scrutinise the proposal,
and undertook to submit the final Decision for scrutiny as soon
as it had been agreed by officials and, in advance of the adoption,
outline the main differences from the draft text — which,
he said, he expected to be of detail rather than substance.
13.8 The Minister also explained in his Explanatory
Memorandum that, once the Decision was adopted, the EU would negotiate
an implementing Council Regulation, which would make these measures
binding upon Member States; he expected this to be adopted in
October 2010, and undertook to submit it for scrutiny when a draft
was received.
13.9 The European Council adopted Council Decision
2010/413/CFSP at the 26 July Foreign Affairs Council, together
with a Regulation extending the list of entities and individuals
subject to an assets freeze.[71]
The Minister's letter of 29 July 2010
13.10 The Minister for Europe then wrote to the Committee
on 29 July 2010 with regard to this updating of the existing Council
Regulation. It was, he said, imperative that the Regulation update
was agreed along with the Council Decision to prevent asset flight,
of which there would have been a real threat if action had been
delayed until adoption of a new Regulation in the autumn, which
would have weakened the impact of the new measures. He expressed
regret that the Committee was not able to scrutinise the update
to the Regulation before it was adopted; the final list of agreed
names was only agreed and circulated on 23 July, with the result
that he had had to agree to the adoption of the Regulation amendment
at the Foreign Affairs Council, before the Committee had cleared
it from scrutiny. He expected the translation of the measures
in the Council Decision into a Council Regulation to be completed
by the end of September, and undertook to submit the draft Regulation
to be scrutinised by the Committee in due course.
Our assessment
13.11 We found it disappointing that, despite his
protestations regarding his commitment to rigorous scrutiny, the
Minister had now agreed to override scrutiny of the amendment
to the implementing Council Regulation without giving the Committee
any prior warning. At paragraph 4 of his Explanatory Memorandum
the Minister said that "once the Decision is adopted, the
EU will negotiate a Regulation. This will make these measures
binding on upon Member States. On current timing, we expect the
Regulation to be adopted in October 2010." And at paragraph
27 he said again "Once the Decision is adopted EU member
states will begin negotiation of the Council Regulation".
His letter of 9 July similarly made no mention of an amendment
to the implementing Regulation being adopted at the same time
as the Decision. So it was only in his letter of 29 July, after
the meeting of the Council, that we were told that in fact an
amended Regulation was adopted at the same time as the Decision.
13.12 We accordingly asked the Minister to explain
when the Commission forwarded the proposed amendment to the Regulation
to the Council, and why the Government did not deposit it with
an Explanatory Memorandum, as is the procedure for EU documents
under our Standing Order.
13.13 We also asked the Minister to deposit the amended
Regulation with an Explanatory Memorandum. Given that the Regulation
was directly effective, we asked that the Explanatory Memorandum
should cover the fundamental rights implications of the travel
restrictions and asset freezes in the Regulation, in particular
in the light of the ECJ's decision in Yusuf and Kadi.[72]
13.14 Given our understanding that a second implementing
Regulation was to be adopted, we also looked forward to its early
deposit with an accompanying Explanatory Memorandum.
13.15 In the meantime, we cleared the Council Decision.[73]
The Council Regulation
13.16 In his Explanatory Memorandum of 9 September
2010, the Minister for Europe said that the Iran Regulation would
make the measures agreed in the Council Decision that fell under
EU competence legally binding upon Member States.
13.17 With regard to the fundamental rights aspects
of the proposed Council Regulation, the Minister said that the
procedures for designating individuals as subject to asset freezes
are compliant with fundamental rights, explaining that:
— provision
is made for competent authorities of Member States to authorise
the release of frozen funds where necessary in certain circumstances,
for example, to satisfy the basic needs of listed persons or their
dependents and where necessary for extraordinary expenses. Decisions
by competent authorities of Member States in this regard would
be subject to challenge in Member State's courts. Prohibitions
on transfer of funds and financial services are exempted where
necessary for humanitarian purposes, or where necessary for supply
of foodstuffs, medical equipment or provision of health care.
In addition, these prohibitions do not apply to transfers having
a value below €40,000 and the Member State's competent authority
has been notified (unless to a designated person or entity where
separate licensing arrangements will apply). Provision of bunkering
services to Iranian ships and engineering and maintenance services
to Iranian cargo aircraft are prohibited where there are reasonable
grounds to believe that the vessel is carrying goods covered by
the EU Common Military List or goods prohibited under the Regulation.
These prohibitions are subject to services necessary for humanitarian
purposes;
— the
Regulation says that the Council shall provide designated persons
and entities an opportunity to present observations on the reasons
for their listing. Where observations are submitted, the Council
will review its decision in the light of those observations and
inform the person or entity concerned accordingly. In addition,
the asset freezing measures will be reviewed at regular intervals
and at least every 12 months;
— challenges
to a listing can be brought before the General Court;
— challenges
to the application of an asset freeze may be brought in the courts
of the Member State concerned.
The Minister's letter of 9 September 2010
13.18 In his accompanying letter of 9 September 2010,
the Minister:
— reiterated
the Government's commitment to ensuring that the Committee has
an opportunity to express its views on texts, so that it can hold
the Government to account on EU decision making;
— said
that he was sending the Regulation in its current form, along
with an unnumbered EM, so that the Committee had time to scrutinise
the proposals;
— went
on to say that he would submit the final Regulation as soon as
it had been agreed at official level and write in advance of the
adoption, outlining the main differences from the draft text;
— said
that he expected any differences to be on the detail of the text
rather than the substance of the policy covered by the draft Regulations.
Our further assessment
13.19 We had no wish to seek to hold up this process,
and accordingly cleared the draft Council Regulation.
13.20 In so doing, we reminded the Minister that
we still awaited his response to the matters outstanding from
our earlier Report (c.f. paragraphs 13.12-13.14 above), as well
as the further information that he had undertaken to provide with
regard to this Council Regulation.[74]
Council Implementing Regulation (EU) No. 668/2010
of 26 July 2010
13.21 This is the Council Regulation adopted by the
Foreign Affairs Council on 26 July ahead of the timetable envisaged
by the Minister and prior to parliamentary scrutiny.
13.22 In his Explanatory Memorandum of 15 September
2010, the Minister for Europe reiterated his explanation that
its adoption in concurrence with the Council Decision was important
to mitigate the risk of asset flight.
13.23 With regard to the Fundamental Rights
aspect of the Regulation, in response to our earlier request the
Minister said:
"Community acts must respect fundamental rights
in accordance with the principles outlined in the European Court
of Justice in Kadi and Al Barakaat v Council of the EU and Commission.
If the Regulation breached fundamental rights this would be reviewable
by the European Court of Justice. Provision is made for competent
authorities of Member States to authorise the release of frozen
funds where necessary in certain circumstances, for example, to
satisfy the basic needs of listed persons or their dependents
and where necessary for extraordinary expenses. Decisions by competent
authorities of Member States are subject to challenge in Member
State's courts."
13.24 The Minister went on to note that the Regulation
says that the Council shall provide designated persons and entities
an opportunity to present observations on the reasons for their
listing and to say that, where observations are submitted, the
Council will review its decision in the light of those observations
and inform the person or entity concerned accordingly; and
that, in addition, the asset freezing measures will be reviewed
at regular intervals and at least every 12 months.
13.25 He also noted that challenges to a listing
can be brought before the General Court, while challenges to the
application of an asset freeze may be brought in the courts of
the Member State concerned.
13.26 A separate letter of 15 September 2010 dealt
with the timing issues. There, the Minister explained that:
— the
first draft was circulated to Member States on 9 July but only
finalised on 23 July, before its adoption on 26 July;
— the
draft should have been submitted to the Committee with an Explanatory
Memorandum, but this was overlooked;
— he
had taken steps to prevent this from happening again by instructing
officials to submit draft Regulations to the Committee, along
with an Explanatory Memorandum, as soon as they have been received.
13.27 The Minister concluded his letter with the
hope that his Explanatory Memorandum answered the Committee's
concerns on the fundamental rights aspects of the Regulation.
Our further assessment
13.28 We confirmed that it did, and thanked the Minister
for his clarification.
13.29 We also noted that, on the scrutiny aspect,
it was now up to the Minister and his officials to live up to
the standard that he had laid down.
13.30 In the meantime, we cleared the document.[75]
The Minister's letter of 22 October 2010
13.31 The Minister writes to update the Committee
on progress with the EU Iran Regulation, as promised in his letter
of 9 September, as follows:
"The Regulation was finalised at official level
today and is due to be adopted at the Foreign Affairs Council
on 25 October. This delay from the informal deadline of the end
of September was due to complex negotiations on unprecedented
EU measures. I have attached the text that will be discussed by
Foreign Ministers. I would be grateful if you could treat it in
confidence until its adoption. I do not anticipate any further
changes to be made at the Foreign Affairs Council, although this
remains a possibility.
"We believe that the Regulation represents a
significant achievement that will help ratchet up the pressure
on Iran to return to dialogue with the E3+3 and comply with its
international obligations. The measures that the Regulation imposes
are the most stringent and broad ranging that the EU has adopted
to date. The sanctions are the first to target the energy sector,
which UN Security Council resolution 1929 noted was a key source
of finance for Iran's proliferation-sensitive activity. The Regulation
also extends the financial sanctions into new areas and, inter
alia, requires the EU to monitor and authorise payments being
made to Iran over a threshold of forty thousand Euros; places
prohibitions on the opening of new Iranian banks in the EU; and
restricts the provision of insurance and reinsurance to Iran.
The transport sector has also been targeted through additional
asset freezes of IRISL, the Iranian state shipping line, and its
subsidiaries and additional inspections of Iranian cargo entering
the EU.
"The finalised Regulation does not deviate from
the substance of the measures agreed in the Council Decision. However, the
text that has been agreed at official level has inevitably
changed during the course of negotiations from the first
draft which I deposited with your Committee. The nature of
these changes is largely technical or legal in nature and will enable
Member States to implement measures more easily and effectively.
One example is the decision to move to a purely list based prohibition
for goods for use in Iran's energy sector.
"Other changes have been made to ensure
that business within the EU were not unfairly disadvantaged
or unintentionally caught by sanctions.
"As such, clarifications have been
made on existing contracts and joint ventures with Iranian
companies to ensure that EU businesses would not be liable
for legal action or faced with unintentional environmental consequences."
13.32 The Minister concludes his letter by saying
that the UK has been at the forefront of upholding the case for
the most stringent possible sanctions that are clearly and consistently
implementable by EU Member States, and that he believes that the
Regulation has met the Government's objectives.
Conclusion
13.33 We thank the Minister for this further information,
which we are reporting to the House.
13.34 We now regard the scrutiny of the Council
Decision and Council Regulation to be complete.
70 See (31779) -: HC 428-i (2010-11), chapter 61 (8
September 2010). Back
71
The Iran conclusions are at pages 10 and 11 of the Conclusions
of the 26 July 2010 Foreign Affairs Council, available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/115976.pdf. Back
72
Joined cases C-402/05 and C-415/05. Back
73
See (31779) -: HC428-i (2010-11), chapter 61 (8 September 2010). Back
74
See headnote: HC 428-ii (2010-11), chapter 24 (15 September 2010). Back
75
See (31937) -: HC 428-iii (2010-11), chapter 15 (13 October 2010). Back
| 
