Sanctions Law

315 Pages·2019·2.927 MB·English

by  Richard Gordon Qc, Michael Smyth, Tom Cornell

FOREWORD
As Ombudsperson for the Security Council Al-Qaida Sanctions Committee, I oft en
remarked that I worked in a vortex where politics intersected with law, with less than
desirable results. One of the core problems in dealing with this challenging role was the
complete lack of understanding, in many quarters, of how important the law had become to
sanctions practice. Th is book brings much welcome focus to that reality – law can no longer
be ignored in the sanctions world.
Th e past 20 years has brought essentially a revolution in the fi eld of sanctions. In the
1990s there was a sudden resurrection of a dormant power of the Security Council under
Article 41 of the UN Charter, not utilised since the measures aimed at the apartheid
regimes in South Africa and Rhodesia in the 1960s and 1970s. Since the initial compre-
hensive regime imposed on Iraq in August 1990, there has been a proliferation of Security
Council sanctions on a global scale and the creation of elaborate structures – including
panels of experts and monitoring teams – to support them. In addition, there have been
many innovations in Security Council practice, including the use of sophisticated sanctions
measures and the migration from comprehensive to targeted schemes. Within that migra-
tion there has also been an expansion of targets from state sectors to state offi cials and to
non-state actors.
In parallel to these developments at the UN level, sanctions have become a popular tool
of other multilateral institutions – most notably the European Union – and we have seen
innovative use of unilateral sanctions by states in a broad range of circumstances.
It was inevitable that this increased activity in the use of measures which aff ect econo-
mies, industry, fi nancial services and individual rights would generate complex legal issues
and challenges. Much has been written about the use of sanctions in terms of policy objec-
tives and eff ectiveness. Th ere has also been scholarly examination of the substance of legal
challenges, particularly in the context of targeted sanctions. But this book makes a unique
contribution with its focus on the ‘ how ’ of sanctions in legal practice – how the sanc-
tions themselves are implemented, how the types of laws are used, how the sanctions can
be challenged in various fora and practical issues for the private sector. Th is book will be
helpful to lead practitioners and academics alike through the ever-expanding quagmire of
sanctions law.
Classically, sanctions aim to prevent, deter and stigmatise. To be eff ective in achieving
these goals, sanctions have to be implemented or they will remain purely political state-
ments. In most instances, modern sanctions involve fi nancial, trade or travel restrictions,
and require the adoption or amendment of laws for implementation. Th is is an especially
complex process when the sanctions are decided upon and imposed by a multilateral
institution at the international level, but where the laws themselves which give them eff ect
have to be adopted at the individual state level. Perhaps the most complex in that regard
is the implementation of EU sanctions, which can take place through laws adopted by the
vi Foreword
EU or individual states or sometimes both. One of the important contributions of this
text is that it provides a comprehensive overview of the kinds of legal measures used to
implement UN and EU sanctions, and gives examples of state implementation in the UK
and US. To the extent that part of the legal challenge is the lack of clarity surrounding the
adoption of sanctions, it is helpful as well that there is a description of the process by which
sanctions are originally adopted in international fora.
While the implementation of sanctions is an important part of sanctions law, unques-
tionably the area of law which has seen the largest explosion of activity over the past 10 years
is sanctions-related litigation. In relation to United Nations sanctions, the starting point was
the adoption of resolution 1267 in 1999, which created a targeted sanction regime aimed
initially at the Taliban and, a year later, incorporating Osama bin Laden and Al-Qaida. Th e
goal of the sanctions measures was to compel the Taliban to turn over bin Laden, who had
been identifi ed as the suspected organiser of the 1998 bombings of the American embas-
sies in Kenya and Tanzania. At the time of the adoption of the resolution, he was being
sheltered within Afghanistan by the Taliban. Whilst the list of targeted individuals was
initially quite limited, aft er the tragic events of 11 September 2001 in the United States
hundreds of i ndividuals and entities – said to be associated to Al-Qaida – were added to the
list. Th e further complication, not seen before with other lists, was the geographic scope of
resolution 1267, which triggered the inclusion of individuals and entities from across the
globe.
Th e result was greatly increased anxiety about due process surrounding Security
Council sanctions. Without notice, reasons or recourse hundreds of individuals had their
assets frozen and were prohibited from travel on a worldwide basis. Left simmering for
many years with only modest improvements by the Security Council, the situation gener-
ated litigation in national courts and most signifi cantly before the European Union ’ s own
Court – the ECJ. Ultimately, the landmark decision in Yassin Abdullah Kadi and Al Barakaat
International Foundation v Council of the European Union and Commission of the European
Communities triggered the creation of another forum for challenging sanctions – this one at
the UN level – an Ombudsperson for the 1267 regime.
In parallel to these developments, the increased use of sanctions by the European Union
for broader policy reasons triggered a wave of litigation against sanctions imposed under
the EU ’ s autonomous regimes. In addition, there continued to be litigation on a national
level in relation to both internationally and nationally generated sanctions.
All of this together created what is perhaps best described as a chaotic web of litiga-
tion options in the fi eld of sanctions law. Th e benefi t of the approach in this text is that the
focus is not merely on the substantive case law but also on the practice of litigating sanc-
tions in these diff erent fora. As such, it provides a useful guide for practitioners considering
litigation options and more broadly an overview which will be helpful in many other
contexts.
Lastly, the book provides much-needed consideration of sanctions from the perspective
of business – the legal implications for commercial law and the array of legal challenges in
the context of compliance. Th ese are important topics, particularly as reliance is increas-
ingly placed on the private sector to implement economic sanctions which are becoming
ever more intricate and complex in design and function.
Foreword vii
As the use of sanctions shows no signs of abating – to the contrary in fact – the number
of interested practitioners will continue to expand. A practical guide of this nature – with
manageable content and length – will be a valuable asset. And more generally the book will
make an important contribution in focusing attention on this growing area of national and
international law. As such it will help advance the important concept that sanctions policy
and practice must be properly managed in accordance with the rule of law.
Kimberly Prost
Judge of the International Criminal Court and
former Ombudsperson for the
UN Security Council Al-Qaida Sanctions Committee
Th e Hague
July 2018

PREFACE
When we fi rst had the idea for this book we were struck by the absence of any p ractitioners’
texts dealing with sanctions law in its own right. Th ere were good reasons for that. Sanctions
law is highly technical, involving questions not only of international law, but also of regional
and domestic law, depending on where the sanctions are drawn up, implemented and
enforced. It is also multi-polar and fast-moving, sanctions having become an increasingly
popular tool of foreign policy for states and international organisations such as the UN and
the EU. To this extent, sanctions law changes from week to week in line with governmental
imperatives. Given this, we decided to focus on the broad framework of sanctions law at
the UN, EU, UK and US levels; in other words, on the ‘h ow ? ’ of sanctions law, as opposed
to the ‘w hy ? ’ .
Not that the ‘w hy? ’ is unimportant. Sanctions have much more salience than hitherto
because of the need to restrict the kind of capital fl ows that are facilitated by globalisation
and digital technology. Enforcement of sanctions was once a matter solely for naval offi cers
and customs offi cials; now it requires to be a priority item for anyone engaged in inter-
national trade and those advising such traders, to say nothing of high-end London estate
agents and private jet operators. Th is book is for them too and not just the lawyers.
Th e framework of sanctions law has been updated and amended on multiple occasions
since we started writing, not least as a result of Brexit. A new UK fi nancial sanctions regu-
lator – the Offi ce of Financial Sanctions Implementation (OFSI) – was set up in June 2016
and then followed by the creation of new enforcement powers under the Policing and
Crime Act 2017. More recently, the UK ’ s sanctions framework has been overhauled by
the Sanctions and Money-Laundering Act 2018, which received royal assent on 23 May
2018 but which will not come into force until the Brexit process is complete. Th e book
refl ects the situation as fully as possible as at 1 June 2018, but there will inevitably be
further developments in these turbulent times. Indeed, the next few years will be busy for
sanctions law practitioners. Our hope is that this book can serve as a useful starting point
for understanding where the law has got to and where it might go from here.
Th e aim of the book is to serve as a practical guide to sanctions law as it operates both
internationally and at the EU, UK and US levels. It is not, for the reasons discussed above,
anything like a comprehensive compendium of the law that exists in this area. Th e book
sets out fi rst to explain how sanctions law works at various levels, and then to grapple with
some of the main ways in which it engages individual rights and business interests. Part 1
aims to provide an overview of how sanctions policy becomes law in various jurisdictions,
including how sanctions policy decided at the international level is implemented domesti-
cally. Part 2 deals with challenges to sanctions designations in the courts and the expanding
body of case law in this area. Finally, Part 3 looks at sanctions law from a business perspec-
tive, focussing on the impact of sanctions on commercial contracts and the compliance
requirements for businesses operating in the UK.
x Preface
Due to the breadth of the area covered, we have needed, at various stages in the
draft ing process, help from a long list of people. We owe a special debt of gratitude to
Adam M. Smith, partner in the Washington D.C. offi ce of Gibson, Dunn & Crutcher,
who helped us at short notice to navigate the murky waters of US sanctions law. Closer to
home, thanks are due in particular to Nicky Smith, Head of the International Institutions
and Security Policy Team in the Legal Directorate of the UK Foreign and Commonwealth
Offi ce, as well as Crown Advocate Kate Rabey from the Law Offi cers ’ chambers in Guernsey,
and Luigi Lonardo, research student at King ’ s College London, for their help with the EU
aspects of the book. Gavin Irwin, barrister at 2 Hare Court, provided much-needed feed-
back in relation to the implementation and enforcement of sanctions law in the UK. In
terms of litigation, Richard Blakeley of Brick Court Chambers alerted us to a number of
important developments in the EU courts. Similarly, Richard Eschwege, also of Brick Court
Chambers, helped clarify some of the recent case law involving sanctions in the courts of
England and Wales. Nick Petrie, research student at Cambridge University, deserves thanks
for commenting on the international law points raised in the book. Finally, we must mention
Maziar Jamnejad, Global Head of Legal Innovation at Freshfi elds Bruckhaus Deringer LLP,
who has on numerous occasions been willing to assist us in our battle to understand the
private sector implications of sanctions law.
N eedless to say, any errors in law or exposition are entirely our own. We have endeav-
oured to state the law as at 1 June 2018.
Richard Gordon QC
Michael Smyth CBE QC (Hon.)
Tom Cornell
London
June 2018
TABLE OF CASES
United Kingdom (England & Wales, Scotland)
A v Secretary of State for the Home Department [2004] EWCA Civ 1123,
[2005] 1 WLR 414 ................................................................................................................. 190
A v Secretary of State for the Home Department [2004] UKHL 56, [2005] 2 AC 68 ........ 188
Agrokor AG v Tradigrain SA [2000] 1 Lloyd ’ s Rep 497 ......................................................... 254
Ahmed v HM Treasury [2010] UKSC 2, [2010] 2 AC 534,
[2010] 2 WLR 378 .................................................................................. 58 , 132 – 33 , 141, 174 ,
189 , 191 , 193 – 95 , 202
Al Rawi v Security Service [2012] 1 AC 531 ............................................................................ 182
Al-Kishtaini v Shanshal [2001] EWCA Civ 264, [2001] 2 All ER (Comm) 601 ................. 251
American Cyanamid Co v Ethicon Ltd (No 1) [1975] AC 396, [1975] 2 WLR 316 .... 184 – 85
Amin v Brown [2005] EWHC 1670 (Ch), [2006] IL Pr 5 ...................................................... 100
Anufrijeva v Southwark London Borough Council [2003] EWCA Civ 1406 ..................... 200
Arash Shipping Enterprises Co Ltd v Groupama Transport
[2011] EWCA Civ 620 ................................................................................................... 255 – 56
Arnold v Britton [2015] AC 1619 .............................................................................................. 253
Bank Mellat v HM Treasury [2012] QB 91 .............................................................................. 184
Bank Mellat v HM Treasury (No 1) [2013] UKSC 38, [2014] AC 700 ................ 175 , 182 , 187
Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700,
[2013] 3 WLR 179 .....................................................................69, 175 , 177 – 78 , 187 – 8 9 , 199
Bank Mellat v HM Treasury [2015] EWHC 1258 (Comm),
[2016] 1 All ER (Comm) 766 ............................................................................ 177 – 78 , 200 – 1
Bank Mellat v HM Treasury [2016] EWCA Civ 452, [2017] QB 67 ...................... 177 – 78 , 201
B ank Mellat v HM Treasury [2017] EWHC 2409 (Comm). .........................................1 79, 1 99
Bank Voor Handel en Scheepvaart NV v Administrator of Hungarian
Property [1954] AC 584 ....................................................................................................... 101
Begg v HM Treasury [2016] EWCA Civ 568 ............................................................................. 67
C v HM Treasury [2016] EWHC 2039 (Admin) ...................................................... 67, 1 79, 1 90
Calvin ’ s Case (1608) Co Rep 1a ................................................................................................. 100
David Taylor & Son v Barnett Trading Co [1953] 1 WLR 562, [1953] 1 All ER 843 ......... 248
Davis Contractors Ltd v Fareham UDC [1956] AC 696 ........................................................2 49
DVB Banks SE v Shere Shipping Co Ltd [2013] EWHC 2321 (Comm) .............................. 250
Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd
[2007] 2 Lloyd ’ s Rep 517 ....................................................................................................... 249
Elaine Hmicho v Barclays Bank Plc [2015] EWHC 1757 (QB). ............................... 6 4 , 71 , 263
HMA v Weir Group PLC (Sentencing Statements) ................................................................ 268
xxii Table of Cases
Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting
Association (Bermuda) Ltd [2010] EWHC 2661 (Comm),
[2011] 2 All ER (Comm) 609 ................................................................................ 245 , 248 – 49
Johnson v Gore Wood [2002] 2 AC 1 .......................................................................................2 00
Krell v Henry [1903] 2 KB 740 .................................................................................................. 249
Lauritzen AS v Wijsmuller BV [1990] 1 Lloyd ’ s Rep 1 ........................................................... 249
Libyan Arab Foreign Bank v Bankers Trust [1989] QC 728 .................................................. 252
Mamidoil Jetoil Greek Petroleum v Okta Crude Oil Refi nery (No 2)
[2003] EWCA Civ 1031, [2003] 2 Lloyd ’ s Rep 635 ........................................................... 254
Matsoukis v Priestman & Co [1915] 1 KB 681 ........................................................................ 253
Maud v LIA [2016] EWCA Civ 788 ................................................................................. 245 , 248
Millar & Co Ltd v Taylor & Co Ltd [1916] 1 KB 402 .............................................................. 250
National Carriers Limited v Panalpina (Northern) Limited [1981] AC 675 ....................... 249
Pioneer Shipping Ltd v BTP Tioxide Ltd (Th e Nema) [1982] AC 724 ................................. 249
R (Actis SA) v Secretary of State for Communities and Local Government
[2007] EWHC 344 (Admin) ................................................................................................ 183
R (Al-Jedda) v Secretary of State for Defence [2007] UKHL 58 ........................................... 168
R (Al-Jedda) v Secretary of State for Defence [2007] UKHL 58, [2008] 1 AC 332 ............ 202
R (Campaign Against Arms Trade) v Secretary of State for International
Trade [2017] EWHC 1726 (QB) .................................................................................... 93 , 270
R (Ezz) v HM Treasury [2016] EWHC 1470 (Admin) ......................................................7 7– 7 8
R (Faulkner) v Secretary of State for Justice [2013] UKSC 23 ............................................... 200
R (Greenfi eld) v Secretary of State for the Home Department [2005] UKHL 14 ............... 199
R (John Arnold Bredenkamp) v Secretary of State for Foreign
and Commonwealth Aff airs [2012] EWHC 3297 (Admin),
[2013] 2 CMLR 10 ........................................................................................................ 174 , 197
R (John Arnold Bredenkamp) v Secretary of State for Foreign
and Commonwealth Aff airs [2013] EWHC 2480 (Admin),
[2013] Lloyd ’ s Rep FC 690 .......................................................................................... 175 , 183
R (Kaplan) v Enemy Property Claims Appeal Adjudicator
[2004] EWHC 485 (Admin) ................................................................................................ 101
R (Melli Bank plc) v HM Treasury and Others [2008] EWHC 1661
(Admin) ......................................................................................................... 173 , 196 , 244 , 250
R (OJSC Rosneft Oil Company) v HM Treasury and Others
[2015] EWHC 248 (Admin) ..................................................................... 52 , 70 , 176 , 1 95 – 96
R (Quark Fishing Ltd) v Foreign Secretary [2005] UKHL 57 ............................................... 199
R (Sarkandi and Others) v Secretary of State for Foreign and Commonwealth
Aff airs [2015] EWCA Civ 687, [2016] 3 All ER 837 ................................................ 178, 183
R v Faulkner [2011] EWCA Crim 962, [2011] 2 Cr App R (S) 117 ........................................ 94
R v Gul [2013] UKSC 64 .............................................................................................................. 67
R v IRC, Ex parte National Federation of Self-Employed and Small
Businesses Ltd [1982] AC 617 ............................................................................................. 192
R v Knight [2008] EWCA Crim 478, [2008] 2 Cr App R (S) 76 .............................................. 95
R v Pouladian-Kari [2013] EWCA Crim 158, [2013] Crim LR 510 ....................................... 94
R v R [2015] EWCA Civ 796, [2016] 2 WLR 127 ................................................. 51 , 54 , 72 , 245
Table of Cases xxiii
R v Secretary of State for Foreign and Commonwealth Aff airs, Ex parte World
Development Movement Ltd [1995] 1 WLR 386 .............................................................. 192
R v Secretary of State for Transport Ex parte Factortame Ltd (No 2) [1991] 1 AC 603,
[1990] 3 WLR 818 ................................................................................................................. 184
Rainy Sky v Kookmin [2011] 1 WLR 2900 .............................................................................. 253
Regazzoni v KC Sethia [1958] AC 301 .....................................................................................2 52
Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269 .............. 176 , 184
Secretary of State for the Home Department v CC and CF
[2012] EWHC 2837 (Admin), [2013] 1 WLR 2171 .......................................................... 190
Secretary of State for the Home Department v MB [2006] EWCA Civ 1140,
[2007] QB 415 ........................................................................................................................ 190
Soeximex SAS v Agrocorp International PTE Ltd [2011] EWHC 2743 (Comm),
[2012] 1 Lloyd ’ s Rep 52 ......................................................................................................... 247
Sovracht (V/O) v Van Udens Scheepvaart en Agentuur Maatshappij
[1943] AC 203 ........................................................................................................................ 100
Springwell Navigation Corporation v JP Morgan Chase Bank and others
[2010] EWCA Civ 1221 ........................................................................................................ 2 54
Tariq v Home Offi ce [2012] 1 AC 452 ...................................................................................... 184
Tweed v Parades Commission [2006] UKHL 53 .................................................................... 183
Wood v Capita Insurance Services [2017] AC 1173 ...............................................................2 53
Youssef v Secretary of State for Foreign and Commonwealth Aff airs
[2016] UKSC 3, [2016] AC 1457, [2016] 2 WLR 509 ................. 59 , 179 , 191 , 194 – 95 , 198
Yrazu v Astral Shipping Co (1904) 20 TLR 153 ...................................................................... 254
European Union
A bdulrahim v Council and Commission (Case C-239/12 P). ......................................1 47, 1 55
Afrasiabi (Case C-72/11) [2011] ECR I-14285 ....................................................... 47 , 5 1, 5 4, 7 2
Al-Ghabra v Commission (Case T-248/13) ............................................................................. 160
Anbouba v Council (C-630/13 P) [2015] All ER (D) 178 ...................................................... 149
Bank Mellat v Council (Case C-176/13P) [2016] 4 WLR 84 ....................................... 149 , 156 ,
158 – 60 , 175 , 184 , 189
Bank Mellat v Council (Case T-160/13) ................................................................... 150 – 52 , 154 ,
161 – 62 , 176 , 183 – 84
Bank Mellat v Council (Case T-496/10) ................................................................................... 175
Bank Melli Iran v Council of the European Union (Case T-390/08 R) ................................ 173
Bank Tejarat v Council (Case T-176/12) [2015] All ER (D) 175. ................................. 148 , 160
Bredenkamp and Others v Commission (Case T-145/09) ..................................................... 174
Bredenkamp and Others v Council and Commission (Case T-66/14) ................................ 174
Chyzh (Case T-267/12) ............................................................................................................... 160
CIG (Case C-241/99) [2001] ECR I-5139 ..................................................................................7 7
Costa v ENEL (Case 6/64) [1964] ECR 585 ............................................................................... 39
Council v Bamba (Case C-417/11 P) [2013] CMLR 1434 .................................... 147, 1 57, 1 59
Council v Bank Saderat (Case C-200/13) [2016] All ER (D) 176 .................................. 149 – 50