The difference between the US and EU sanctions policy and the updated EU Blocking Regulation
One of the main characteristics of EU sanctions is that the goals of the sanctions and the steps the receiving country must take with which the EU sanctions are going to be lifted are clearly stated in the specific measures. Besides, the “Basic Principles” (2004) oblige the EU institutions and Member States to regularly review the sanction measures and lift them as soon as progress is recognisable. In contrast, the US sanctions are open-ended and stay in force until a decision is taken to lift them.
This has a considerable impact on the flexibility of the sanction regimes, as the example of Myanmar/Burma clearly shows. Here, the ease of some US sanctions took four years longer than the EU’s removal of all its sanctions. Unlike the EU which prefers targeted sanctions to limit the effects on the immediate producers of the wrong behaviour, the US sanctions are generally broader in scope. Thus, US sanctions tend to be more comprehensive than the EU ones, for instance, while the EU targets 38 organisations related to the East Ukraine conflict the US`s sanctions list encompasses 428. Finally, EU sanctions and regulations are only binding to EU related entities and persons, whereas US secondary sanctions have extraterritorial effects. As a result, the US is also expecting non-US citizens and companies to comply with them and threatens them with punishments range from massive penalties to prohibition of access to US markets.
This final aspect is worth a detailed examination because the EU created a regulatory measure named “Blocking Regulation” (Council Regulation (EC) No 2271/96) to offset these extraterritorial effects of US sanctions on EU entities.
The Blocking Regulation was initially adopted in 1996 to provide protection against and counteracts the effects of the extra-territorial application of the laws specified in the Annex of this Regulation. So, this EU regulation was designed as a countermeasure to the US measures targeting Iran, Libya and Cuba, which were harming EU interests. Recently, after the unilateral withdrawal of the US from the Joint Comprehensive Plan of Action (JCPOA) with Iran and the re-imposition of previously suspended sanctions, the European Commission amended the annex of the Blocking Regulation. On August 7th 2018, this updated regulation becomes effective. As stated in Article 5 of the Regulation, no EU entity “shall comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from the laws specified in the Annex or from actions based thereon or resulting therefrom”. It applies to EU nationals, EU residents and companies incorporated in one of the EU Member States.
Article 4 proclaims that any foreign court judgment covered by the regulation is not enforceable before the courts of the EU and Article 6 allows companies to “recover any damages” arising from US sanctions. Non-compliance with the EU Blocking Regulation will result in penalties. Against this backdrop, EU companies are facing the chose to either get a punishment in the US for non-compliance with US sanctions or violating the Blocking Regulation and risk a fine in the EU.
In brief, the EU Blocking Regulation is an attempt to position the EU as an independent actor on the realm of sanction policy and its adoption sends a political message to the US government. But at the same time, it displays the limitations of the EU’s scope of action vis-à-vis the US.
This article was published in February’s (2019) issue of the Diplomatic Magazine.
Yunus Emre Ok is currently pursuing a Master`s degree in Political Science and International Relations at the Free University of Berlin and King`s College London. He has completed an internship at the Institute for Peace Research and Security Policy at the University of Hamburg as well as at the Center for Strategic Research of the Turkish Ministry of Foreign Affairs. At IFAIR, the author assists in the organisation`s think tank activities for the regional area “Eastern Europe and Eurasia”.