The legality of EU sanctions Contents

Chapter 4: Our analysis

The purpose of EU sanctions

92.Sanctions are an important tool of foreign policy, which seek to influence through indirect means the behaviour of an offending State or organisation by impacting on their economy. They are also applied to individuals and companies in the belief that the punitive effects will encourage them to make or press for policy changes in their own State. The EU-Iran sanctions are an example of sanctions that changed State behaviour. EU counter-terrorism sanctions are an example of well-evidenced sanctions which limit the scope of activity of terrorist organisations.

The evidence-gathering process

93.Balancing the foreign policy objective of sanctions against the rights of sanctioned individuals and companies is inherently difficult. We note that this is often the crux of the debate within the Council. The large number of listings that have been annulled by the General Court attests to this difficulty.

94.All witnesses agreed that the quality of sanctions listings has improved, with reasons for listings being better defined and substantiated. It is clear that the UK has played a leading role in the Council in implementing these improvements. The number of cases being lost by the Council has reduced dramatically in the last year, although one of the reasons for this may be the greater use of more general, and more status-based, criteria for listing which are harder legally to challenge.

95.The renewed focus on when to lift sanctions, and on the annual reviews of sanctions regimes, are further improvements in the sanctions-listing process.

Reasons for sanctions listings being annulled

96.The most common reason for sanctions listings being annulled over the past few years has been insufficient evidence from the Council to substantiate the reason for listing an individual or company.

Are the reasons for annulment justified?

97.While we agree that sanctions serve foreign policy objectives and should not be subject to the same procedural safeguards as criminal proceedings, the consequences of a listing are nonetheless very serious. Funds and other financial assets are frozen and normal economic life is suspended. In such circumstances, it is reasonable to insist that sanctions listings should be based on evidence that can be reviewed by a court, and should respect the rights to due process and to an effective judicial remedy of targeted individuals and companies, as guaranteed by the EU Charter of Fundamental Rights.

98.Where the Council has been unable to adduce evidence supporting the statement of reasons for a listing, we conclude that the EU courts have been right to annul the listing.

Standard of proof

99.The Court of Justice of the EU’s landmark decision in the case of Kadi II in 2013 set out the broad test for the standard of proof for sanctions listings: “There has to be a sufficiently solid factual basis to substantiate the reasons for listing.” There is no agreed, publicly stated formula, however, as to what a “sufficiently solid factual basis” means. We were told that each Member State applies its own standard in the vote in the Council on adopting a listing. The consequence is that there is no assurance that a similar standard of proof is applied across all EU sanctions regimes.

100.We share Maya Lester QC’s concern that there is a risk that status-based sanctions may rely on presumption at the expense of evidence. The case of Yuri Chyzh,105 whose listings were annulled by the General Court, and on which we corresponded in detail with the Government, is an example of this.

101.We agree with the evidence we received that sanctions for misappropriation of State funds in Egypt, Tunisia and Ukraine appear to rely on the existence of criminal proceedings rather than any assessment by the Council of the validity of those proceedings.

102.We recommend that the Council codify the standard of proof it applies to sanctions listings as soon as possible. This would provide transparency to the listing process as well as public assurance that the same standard of proof is applied by all Member States in the Council. The Council may wish to consider applying the test, which the UK applies in adopting sanctions listings, of reasonable grounds for suspicion.

Listing and re-listing

103.We recognise that the General Court has upheld the practice of re-listing individuals or companies on amended statements of reasons after the annulment of the original listing, but conclude that this practice gives rise to a perception of significant injustice, namely that there is no effective judicial remedy against sanctions listings. Put in non-legal language, the judgment of the General Court is of no consequence because further sanctions are imposed before it comes into effect. The Council should bear this in mind when considering whether to re-list a targeted individual or company after the original listing has been annulled.

104.Were listings to be better substantiated in the first place, there would be less need for re-listing. A codified standard of proof would help to ensure that listings are better substantiated in the future.

Reliance on open-source information

105.While intelligence information may be relevant to clandestine activities, such as involvement in terrorism or nuclear proliferation, Mr Bishop told us that evidence supporting many other sanctions listings can be obtained through open-source information, for example internet searches and press articles.

106.We welcome the greater reliance on open-source information that can be disclosed to listed individuals and companies because it makes the listing process fairer and more transparent. There are, however, limitations to its use, and we note the comment of Advocate General Sharpston in the Tamil Tigers case,106 cited by Ms Lester, that the Council cannot list an individual or company simply on the basis of a press report stating “he did it” or “he said he did it”.

The closed material procedure

107.Although it is too early to tell the extent to which Member States will be willing to use the closed-material procedure to share confidential evidence with the General Court, the indications are that some may not. The UK, for example, abstained in the vote on the adoption of the new rules, concerned that they contained insufficient safeguards to protect confidentiality. The closed-material procedure, even if there were sufficient trust in it, is unlikely to provide satisfaction to sanctioned individuals and companies, as they will not have sight of the evidence provided on which judgements are made.

108.It would be concerning if the closed-material procedure were not to be used, given the number of listings that have been annulled by the General Court because the Council has been unable to adduce confidential evidence in support of them. It is incumbent on the EU to ensure that it has sufficiently robust procedures to allow the EU courts to assess confidential evidence underpinning sanctions listings. Should the current closed material procedure not be adequate to achieve this, the EU should consider an alternative approach.

Application of the Council’s rules on confidentiality to open-source information

109.Both Mr Bishop and Maya Lester QC agreed that Article 6(1) of the Council’s Rules of Procedure could not be interpreted as requiring open-source information to be kept confidential.

110.Open-source material can be made available to Parliament. We call on the Government to revise its interpretation of Article 6(1) of the Council’s Rules of Procedure, and in future to disclose the open-source information substantiating new sanctions listings and re-listings to the scrutiny committees.

The value of parliamentary scrutiny

111.We were told by Maya Lester QC that, from the perspective of people and companies targeted by EU sanctions, parliamentary committees may be the only bodies that raise concerns over listing and re-listing decisions with the relevant authorities. We think the value of such parliamentary scrutiny will be increased if the Government provides the open-source information justifying sanctions listings to committees in future.

The Council’s administrative processes

112.Although the Council responds to correspondence from listed individuals, companies, and their legal representatives, the evidence suggests that its responses are both slow and often do not engage with the substance of the concern being raised. The procedure by which a letter from the Council is agreed requires consideration in three separate committees—the working group responsible for the sanctions regime, the Foreign Relations Working Group, and the Committee of Permanent Representatives (COREPER)—and slows the process down considerably.

113.We call on the Council urgently to reduce the time taken to respond to correspondence from targeted individuals and companies.

114.We recommend that the Council examines as a matter of urgency whether an expedited procedure could be put in place for responding to correspondence concerning mistaken identities.

Making the process fairer

115.We call on both the Government and the Council to consider the appointment of a sanctions ombudsman, analogous to the UN Ombudsperson for the Al Qaida Sanctions Committee, or if such consideration has previously been given to provide the arguments for and against it.

The impact of the UK’s withdrawal from the EU

116.The UK has contributed greatly to the substance and quality of improvements in the sanctions process over the last few years. It is, therefore, particularly important that the UK should remain able to align itself with EU sanctions post-Brexit. National legislation to achieve this must be put in place.

105 Yuri Chyzh and others v the Council of the European Union, 6 October 2015, T-276/12

106 Council of the European Union v Liberation Tigers of Tamil Eelam (LTTE) , Opinion of Advocate General Sharpston (22 September 2016), C-599/14

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