Chapter 3: Current situation: policy design
How an EU sanctions regime is established
46.The formal EU structures relating to sanctions are shown in Box 2.
Box 2: EU bodies and groups relating to sanctions
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Foreign Affairs Council (FAC) The Foreign Affairs Council is responsible for the EU’s external action, which includes foreign policy, defence and security, trade, development co-operation and humanitarian aid. The Foreign Affairs Council is composed of the foreign ministers from all EU Member States. Depending on the topics to be discussed, the Council also brings together defence ministers, development ministers, and trade ministers. Meetings of the Foreign Affairs Council are chaired by the High Representative of the Union for Foreign Affairs and Security Policy. The High Representative is assisted by the European External Action Service (EEAS). However, when the FAC discusses Common Commercial Policy issues, it is presided over by the representative of the EU Member State holding the six-monthly rotating presidency of the Council of the EU. The Foreign Affairs Council meets once a month.65 The Political and Security Committee (PSC) The Political and Security Committee meets at ambassadorial level as a preparatory body for the Council of the EU. Its main functions are keeping track of the international situation, and helping to define policies within the CFSP including the Common Security and Defence Policy. It prepares a coherent EU response to a crisis and exercises its political control and strategic direction. It meets twice a week, and more often if necessary.66 Council preparatory bodies/working groups There are currently 33 working groups (also called working parties) preparing the work of the Foreign Affairs Council, which include geographical working groups (such as Eastern Europe and Central Asia, or Asia-Oceania) and parties with a thematic focus (such as sanctions, terrorism, or non-proliferation).67 They comprise representatives below ambassadorial level of the Member States, the EEAS and the Commission, and are reinforced by experts from Member States as needed. Through these groups, attendees exchange views, ensure consultation between Member States, the EEAS and the Commission, and identify options for consideration and decision at a higher level. Some are chaired by EEAS representatives, whereas others are chaired by representatives of the six-monthly rotating presidency. Most working groups report to the Committee of Permanent Representatives to the EU (COREPER).68
Working Party of Foreign Relations Counsellors (RELEX) The RELEX working party deals with legal, financial and institutional issues of the CFSP. Its priorities include: sanctions; EU crisis management operations; EU special representatives; financing of external activities; non-proliferation; and other crosscutting issues. In 2004, a new formation called ‘Sanctions’ was created within the working party. Its main task is to share best practice, and to revise and implement common guidelines to ensure effective and uniform implementation of EU sanctions regimes.69 European Commission Service for Foreign Policy Instruments (FPI) The FPI is a service of the European Commission which works alongside the EEAS.70 It represents the European Commission in sanctions related discussions with Member States at the RELEX working party and prepares proposals for Regulations on sanctions for adoption by the Council of the European Union. Once sanctions are adopted, the FPI works to facilitate their implementation in the EU and addresses questions of interpretation raised by economic operators. 71 |
47.Mr Findlay outlined the process through which a new sanctions regime is developed by the EU. A “crisis erupts in the world and there is political impetus for the EU to take action”. After this, “the first stage is often a political discussion; for example, in the Foreign Affairs Council”—a grouping of the foreign ministers of all EU Member States, chaired by the High Representative of the Union for Foreign Affairs and Security Policy, currently Ms Federica Mogherini. He continued: “Quite often, a head of steam will build up for sanctions to be explored as a possible part of the EU’s foreign policy response”.72
48.After this, there “tends to be a discussion in one of the geographical expert working groups within the EU”—chaired by the EEAS, with representatives from all Member States—”or within the Political and Security Committee.73 Dr Portela pointed to the importance of the “common analysis” framed in the geographical working groups in the design of a sanctions regime.74 Mr Roger Matthews, Senior Director, Dechert LLP, said that the relevant geographical working group “is where the political decision would be taken that there should be sanctions”.75
49.Mr Findlay said that technical experts were then usually given a mandate to work up options for a sanctions regime. The EEAS had responsibility for “drafting the legal Acts that would give effect to the Council Decision, which is the political commitment to apply sanctions”.76 Mr Matthews explained that a draft Council Decision sets out “all the individual sanctions measures” to be adopted “in relation to a particular country or a particular situation”.77 A draft of this text “is then negotiated by the EU Member States and often amended before it is finalised”.78
50.Mr Findlay explained that, as a parallel process, “the European Commission produces a Regulation, which covers those parts of the sanctions for which the EU has competence, such as the trade restrictions and financial restrictions”.79 This process is led by the Service for Foreign Policy Instruments (FPI) in the Commission, which “holds the pen and leads the co-ordination and control for the Commission at the working level for the preparation of sanctions measures”. This involves liaising both formally and informally with other Directorates-General and the legal service, in a process called “inter-service consultation”.80 Mr Matthews explained that Member States could “at any point in the discussions” raise with the Commission any elements of a regime that they anticipate “need to be there or that might be problematic, either for them politically or for businesses in their area”. The Member State and the Commission will “work through … how the element might be accommodated”.81
51.Mr Matthews explained that wider discussions on draft Regulations took place in RELEX—the Working Party of Foreign Relations Counsellors.82 RELEX “deals with legal, financial and institutional issues of the Common Foreign and Security Policy”,83 and meets in a ‘sanctions formation’—as RELEX/Sanctions—”to carry out the monitoring and evaluation of EU restrictive measures (sanctions)”.84 His experience had been that while there was “no rigid timetable”, “political urgency” usually dictated a turnaround of the Regulation in less than two weeks. RELEX “met twice a week”, but would meet more frequently if needed. When agreement was reached in the RELEX working group, “it could obviously go up through the chain of committees to the Council very quickly”—if not, “there might be a further round of significant discussion at the next level up”, which was the Committee of Permanent Representatives to the EU.85
52.Producing the Regulation “in tandem” with the Council Decision helped to avoid asset flight and confusion for businesses, Mr Matthews explained.86 Particularly for more complex Regulations, such as the restrictive measures on Russia, “there has been an increasing awareness of the value of having the Commission involved earlier”. As arms embargoes and travel bans were Member State—rather than EU—competences, these would not be part of the Regulation: it was “for Member States individually to see that those measures have been agreed by the Council in the CFSP Decision, and to give effect to them nationally”.87
53.Mr Findlay reiterated that while the EEAS and the Commission “hold the pen on the legal Acts”—the Council Decision and Regulation—these are “subject to negotiation” with the Member States.88 After discussion within the groups outlined above, the Council Decision and Regulation are finally adopted by the Council.89
54.Throughout this process of designing and maintaining restrictive measures, the Member States and EU institutions work together closely. Mr Matthews explained that “representatives of all the permanent representations … are in Brussels routinely having informal engagements throughout the process and … overtly represent their Member State’s interests”. A number of seconded national experts from the Member States also worked in the Commission, where “formally they are to operate as Commission officials”, while usually maintaining close relationships with their home governments.90
55.Mr Matthews told us that discussions on sanctions regimes were held between the EU institutions and Member States on an ongoing basis. This meant that “the individuals—the Member State representatives, the Commission and the External Action Service people who work on sanctions—meet quite often at a personal level.” Such regular “informal discussions … at working level” were “very important because that is the way the EU identifies whether problems can be solved or whether there are things that need to be escalated to a higher—more senior—level”. He added that there were also “bilateral opportunities” for discussions, “along the side between individual Member States, the External Action Service and the Commission”.91
56.Liaison with the US in the sanctions development process—which was raised by a number of our witnesses—is considered in Chapter 4.
Co-ordination between the Member States and EU institutions on listings
57.Mr Findlay explained that once a sanctions regime had been drawn up, “you then have an opportunity to propose that certain individuals be designated under that regime”.92 Sir John Sawers told us that following discussion in EU capitals, lists would then be “discussed and winnowed down or constructed in Brussels within an EU framework, which then becomes the EU sanctions list”. He noted that these discussions also engaged the US93—discussed further in Chapter 4.
58.Mr Findlay said that “quite often”, proposals for listings came from the Member States, and that the UK had “been one of the most active in doing so”.94 Before the meeting of the FAC, the geographical working groups reviewed the proposed listings, and were responsible for approving “whether there are sufficient grounds for each of those targets”.95 The final list was then agreed by the Council “by unanimity”.96
59.Mr Findlay drew our attention to some restrictions on the information that the Member States were able to share with the EU to underpin listings. As we discussed in our report, The legality of EU sanctions, listings are often subject to legal challenge.97 Mr Findlay said that “the [EU] courts have developed a test where, for any sanctions designation, they need to be able to substantiate it—at least to have some information that makes a causal link to the reasons for the designation”.98 While the General Court’s Rules of Procedure99 were amended “in 2015 to enable the Council to share information with the EU courts”, the UK was “not satisfied with the safeguards in that mechanism and in practice it has not been used”. Mr Findlay said that the result was that “in the EU context we are not really able to share intelligence with the courts if we need to substantiate the reason for a designation”, and so EU listings were based on open-source information rather than secret intelligence.100
60.Dr Giumelli said that the UK “was and is very active” in sharing information, but there was also “a lot of intelligence in other Member States, depending on the regions in which you want to intervene”. He noted, however, that intelligence-sharing, even between Member States, had its limitations: “Being a member of the same institutional architecture or not does not always determine whether you talk to each other”.101
Implementation and enforcement
61.Mr Matthews told us that while the implementation of EU sanctions was largely a matter for Member States, the Commission retained “a bit of a pan-European role”, deriving from its role “as a guardian of the Treaties”, with “an interest in ensuring consistent interpretation and application of EU law throughout the EU”. For example, it can issue guidance to support the consistent application of a regime, as mentioned in Chapter 2.102
62.Enforcement is entirely a matter for Member States. Each has a responsible ‘competent authority’ for sanctions, which in the UK is the Office for Financial Sanctions Implementation (OFSI). Mr Matthews said that each Regulation specified that Member States have “to have effective, proportionate and dissuasive penalties, but that is as far as the EU goes”.103
The UK’s role and influence
63.Our witnesses told us that the UK currently had considerable influence in the process we have described. Mr Keatinge described the UK as “the lead in the pencil … of the EU’s sanctions policy”.104 According to Mr Denton: “The UK forms a major part of the backbone of the European Union’s sanctions policy through the FCO and the expertise that we have in the UK. We are front and centre in the development of measures that can be used to form sanctions regimes”.105
64.Mr Mortlock and Mr Nephew agreed: “The United Kingdom was (and, for the time being, is) a major contributor of information and capability to the EU sanctions machine.” They continued: “There is no mistaking the amount of time, effort, and energy that the UK applied in the sanctions field for the EU. In the design of sanctions, their defense, and their implementation, the UK brought knowledge and ideas that helped to create the system as it stands”.106
65.Mr Denton said that the UK also provided “a significant part of the political will in respect of many regimes.” He noted, as an example, that Member States had “lots of different views … on the Russian regime … but the UK is clearly pushing to make sure that not only are the sanctions developed in a way that is appropriate but that they are renewed to keep the pressure on Russia”.107 Mr Keatinge agreed that the UK had been “a robust advocate for the use of sanctions within the EU … a strong and positive influence on the EU to use the bloc … to help compel behavioural change”.108
66.Sir John Sawers, on the other hand, told us that the imposition of EU sanctions on Russia was “essentially determined by Germany and France as a consequence of the difficulties that the negotiating process and the failure to implement successive Minsk agreements on Ukraine”. He was “not sure I entirely agree that we had the greatest influence in the European Union on sanctions on Russia, because we were outside the basic process that was formulating policy towards Ukraine, which was the reason for applying the sanctions”.109
Conclusions and recommendations
67.The UK is widely recognised as playing a leading role in developing the EU’s sanctions policy, and the listings for these regimes. In cases such as Russia and Iran, both UK foreign policy priorities, the collective imposition of restrictive measures by 28 Member States has magnified their economic impact and projected a strong message to the targeted entities.
68.The UK is embedded within a formal structure for co-operation on sanctions with the 27 other Member States. This is further strengthened by informal opportunities to engage actively, in the margins of formal EU meetings and wider foreign policy discussions.
65 Council of the European Union, ‘Foreign Affairs Council configuration (FAC)’: http://www2.consilium.europa.eu/en/council-eu/configurations/fac/ [accessed 12 December 2017]
66 EEAS, ‘CSDP structure, instrument, and agencies’: https://eeas.europa.eu/headquarters/headquarters-homepage/5392/csdp-structure-instruments-and-agencies_en [accessed 12 December 2017] and Council of the European Union, ‘Political and Security Committee (PSC)’: http://www.consilium.europa.eu/en/council-eu/preparatory-bodies/political-security-committee/ [accessed 12 December 2017]
67 Council of the European Union, List of Council preparatory bodies (19 June 2017): http://data.consilium.europa.eu/doc/document/ST-10075–2017-INIT/en/pdf [accessed 12 December 2017]
68 Some of the working parties report directly to the Council. Alan Hardacre, How the EU Institutions Work and… How to work with the EU Institutions, 1st edition (London: John Harper Publishing, 2011)
69 Council of the European Union, ‘Working Party of Foreign Relations Counsellors (RELEX)’: http://www2.consilium.europa.eu/en/council-eu/preparatory-bodies/working-party-foreign-relations-counsellors/ [accessed 12 December 2017]
70 European Commission, ‘Service for Foreign Policy Instruments (FPI)—What we do’: http://ec.europa.eu/dgs/fpi/what-we-do/index_en.htm [accessed 12 December 2017]
71 European Commission, ‘Service for Foreign Policy Instruments (FPI)—Sanctions’: http://ec.europa.eu/dgs/fpi/what-we-do/sanctions_en.htm [accessed 12 December 2017]
82 Q 41. He explained that agreement at RELEX “was simply the first stage”, before that agreement “could … go up through the chain of committees to the Council”. Aspects not agreed at this level might require “a further round of significant discussion at the next level up”.
83 Council of the European Union, ‘Working Party of Foreign Relations Counsellors (RELEX)’: http://www.consilium.europa.eu/en/council-eu/preparatory-bodies/working-party-foreign-relations-counsellors/ [accessed 12 December 2017]
84 Council of the European Union, Monitoring and evaluation of restrictive measures (sanctions) in the framework of CFSP—Establishment of a ‘Sanctions’ formation of the Foreign Relations Counsellors Working party (RELEX/Sanctions) (22 January 2004), p 2: http://data.consilium.europa.eu/doc/document/ST-5603–2004-INIT/en/pdf [accessed 12 December 2017]
86 Q 39. He explained that Council Decisions on restrictive measures “contain more and more detail”. “Very commonly, the asset freeze measure in the Decision and the asset freeze measure in the Regulation are very close to identical.”
91 Ibid.
97 European Union Committee, The legality of EU sanctions (11th Report, Session 2016–17, HL Paper 102)
99 In 2015, the new ‘closed-material procedure’ was introduced into the General Court’s Rules of Procedure (Article 105). The Member States can use this procedure when they intend to rely on sensitive material to impose sanctions on an individual and can apply to the Court for the information to be treated as confidential and not be shared with the individual concerned.