Archive for the ‘EU’ Category



When a Firing Squad Gives You Lemons, You Can’t Make Lemonade

Posted by Clif Burns at 7:11 pm on April 7, 2014
Category: EU

Vietnam Firing Squad via Amnesty International [By Permission]The recent decision by Vietnam to execute corrupt bankers has garnered world-wide attention. Rather surprisingly, however, the case has an interesting intersection with export law issues.

As has been reported, the bankers will be subject to rather gruesome execution by firing squad.

Vietnam’s traditional means of execution involves binding perpetrators to a wooden post, stuffing their mouths with lemons and calling in a firing squad.

Death Penalty Worldwide adds another gory detail to death by firing squad in Vietnam: “As the prisoner is dying, an officer fires a pistol shot through the condemned’s ear.”

Apparently even Vietnam is somewhat troubled by all this and wants to transition from this barbaric procedure to lethal injection. But it can’t. According to Patrick Winn on the website Global Post, Vietnam is unable to obtain sodium thiopentol used in executions because the European Union refuses to export the chemical to countries that practice capital punishment.

That of course might make the E.U. feel better about itself, but it won’t stop Vietnam from executing anyone and only assures that prisoners in Vietnam will meet their bloody end with a lemon stuffed in their mouth, multiple bullet wounds, and a final coup de grâce of a bullet in the ear. I’m sure that each person executed in Vietnam will appreciate the European Union’s solicitude for their well-being.

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Wide World of (North Korean) Sports: Piste Off Edition

Posted by George Murphy at 7:23 pm on January 21, 2014
Category: ChinaEconomic SanctionsEUForeign Export ControlsNorth Korea Sanctions

By Mark Scott Johnson from Sydney, Australia (IMG_7688) [CC-BY-2.0] (], via Wikimedia Commons Rodman and his coterie of NBA All-Stars recently returned to the United States from North Korea after Rodman’s birthday basketball bash for his “friend for life” Kim Jong Un.  While Rodman’s zealous zaniness has grabbed global media headlines, another sports-related development in North Korea, is more significant to sanctions and export control issues: the grand opening this month of the Masik Pass luxury ski and hotel resort.

Pictures taken of the resort show the 120-room hotel, indoor swimming pool and 11 ski runs.  Other pictures also show, however, Italian snow plows, Canadian snowmobiles and Swedish snow cannons.  Recent news reports began to shed light on the obvious sanctions issue: how did North Korea build a ski resort without someone violating sanctions.  U.N. Security Council Resolution 2094 and others prohibit members from selling “luxury goods” to North Korea and even though “luxury goods” are not defined and are not limited to the specific luxury items delineated in Annex IV of Resolution 2094, it seems hard to deny that snowmobiles, snow cannons and the other accoutrements of a “luxury” resort are not “luxury goods.”

According to SkyNews, the Italian snow plow manufacturer has predictably said, “Snow groomers are sold directly to ski resorts and distributors and it is possible that a used snow groomer is than sold to another final user by ski resorts or distributors themselves. On this kind of business we as a producer do not have any influence, no company can avoid that this happens.”

Western goods flowing into North Korea is not new.  In fact, we reported last year on the curious infiltration of an Apple iMac on Kim Jong Un’s desk and suggested it, like many Western goods in North Korea, came from China.  Plausible deniability about to whom a manufacturer’s customers sell its products becomes, of course, more attenuated when your business is selling “state-of-the-art snow cannons” that retail for 14,000 Euros each.

U.N., U.S., E.U. and Canadian sanctions policies fail if a repressive regime like North Korea’s so-called supreme leadership continues to violate human rights but opens a ski resort to sustain its control.  Like sanctions against Iran, Cuba and other countries, a principal goal is to curtail infrastructure projects that support the sanctioned governments.  While a ski resort is not the largest national infrastructure project, sanctions were designed to prohibit it being built and supported by Western goods and technology.

Even if the sales of the items found at Masik Pass were beyond detection of reasonable know-your-customer requirements, Italian, Canadian and Swedish enforcement authorities would at least have grounds to inquire further, especially company records and communications involving sales to Chinese resellers that may have been possible routes to North Korea.  While any manufacturer or retailer can’t know everything about its customers, knowing more gives a company greater support to conclude that its business does not involve impermissible activities or give law enforcement a reason to examine its business further.

Clif adds: Blame me, not George, for the terrible pun in the post title.

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E.U. Court Overturns Sanctions on Iranian Bank

Posted by Clif Burns at 5:09 pm on March 1, 2013
Category: EUIran Sanctions

Bank Saderat by Aghajanpour (CC BY-SA 3.0)The General Court of the European Court of Justice on February 5 set aside the sanctions that the European Union had imposed on Bank Saderat of Iran. (Bank Saderat was blocked in the United States by the Office of Foreign Assets Control in 2008 under the provisions of Executive Order 13382, meaning that U.S. persons are forbidden to engage in any transactions with the bank and that any of the bank’s assets that come into the possession or control of a U.S. person must be blocked.)

The E.U. Court relied on a number of largely procedural arguments to overturn the E.U. sanctions on Bank Saderat, but two substantive arguments were also relied on by the court, both of which were dubious at best. First, the Court argued that Bank Saderat was no longer owned by the Iranian government and that the 94% share held by the government at the time of the E.U. sanctions had been reduced to a minority position. In fact, according to publicly available documents, the Iranian government is still the largest single shareholder of the bank.  Moreover, the Iranian government’s prior holdings were  spun off to other Iranian government entities.  As a result,   some have forcefully alleged that this was a “fake privatization” and a “scam” designed to escape international sanctions on the bank.

The second substantive ground cited by the E.U. Court was even more preposterous. At issue is whether the bank provided banking services to Iranian entities involved in Iran’s nuclear program. In this regard, Bank Saderat admitted that it processed letters of credit for two companies engaged in nuclear proliferation but argued that these were “ordinary banking services … and that those services did not relate to transactions linked to nuclear proliferation.” It’s hard to understand how this “ordinary banking service” argument would not provide a “get out of jail free” card to any Iranian bank providing services to nuclear proliferators. All banking services can likely be characterized as “ordinary” in some sense, and it is doubtful that any bank is engaged in extraordinary services directly related to proliferation. What would such services be? Does the bank have provide advice on the construction of enrichment centrifuges before it can be sanctioned? And how do you determine what transactions are or are not related to the proliferation activity?

The Court did, however, reject Bank Saderat’s argument, premised on diplomatic cables published by Wikileaks, that the sanctions were the result of undue pressure exerted on European governments by the United States Government. The court noted:

[A]s regards the diplomatic cables, the fact that some Member States were subject to diplomatic pressure, even if proved, does not imply, by itself, that such pressure affected the contested measures which were adopted by the Council or the assessment carried out by the Council when they were adopted.

The E.U. Court’s action here followed closely on earlier action in the last week of January by the Court striking down the E.U. sanctions on Iran’s Bank Mellat

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U.K. Banks Backpedal On Domestic Enforcement of U.S. Cuba Sanctions

Posted by Clif Burns at 7:05 pm on November 9, 2010
Category: Cuba SanctionsEUForeign Countermeasures

Cuban Postage StampThis blog reported several weeks ago on a complaint brought by a small British company against Lloyds for refusing to cash a check in pounds sterling that the company had received from a Cuban customer. Lloyds had previously agreed to pay $217 million to the U.S. Office of Foreign Assets Control (“OFAC”) in connection with fraudulent activities by the bank in order to process payments from sanctioned countries, including Cuba, through U.S. correspondent banks. However, the check that was declined by Lloyds was not denominated in U.S. dollars, did not involve a U.S. customer, and was being cashed outside the United States, meaning that neither the Lloyd’s settlement agreement with OFAC nor OFAC’s own regulations would prohibit the U.K. bank from processing the payment. More significantly, its refusal to cash the check could be seen as a violation of E.U. Council Regulation No. 2271/96 , which forbids companies in the E.U. from complying with the U.S. sanctions on Cuba.

According to an article on the website of London broadsheet The Daily Telegraph, some U.K. banks may be walking back, at least slightly, from a hard and fast policy of not processing Cuban payments for fear of OFAC reprisal. Interestingly, the article notes that part of the banks’ hesitance arises from “US attempts to extradite British executives it claims have breached sanctions” and “the failure of the British Government to provide protection against extradition.” This is presumably a reference to the pending extradition request against Christopher Tappin for his involvement in an attempted export of batteries from the United States to Iran.

The Telegraph article suggests that British authorities have been in contact with Lloyds and other banks after receiving a number of complaints from customers that could not clear Cuba checks. One case involved a customer whose account was closed by Bank of Scotland when the customer would not provide assurances that it would not receive Cuban payments in its account.

Now, presumably as a result of these official contacts, even Lloyds may be softening its hard line on Cuba transactions. The Telegraph reporter Roland Gribben signals this change in the following fractured sentence that suggests he may not have a very clear grasp of export law himself.

If the Cuban bank does not infringe OFAC regulations or has dealings with Specially Designated Individuals who can be either individuals, entities or banks, then Lloyds may be willing to process a payment from Cuba provided it was in sterling.

Probably what Lloyds was saying before Mr. Gribben garbled their statement was that Lloyds would process checks in pounds provided that parties on OFAC’s List of Specially Designated Nationals and Blocked Persons were not involved in the transaction.

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Small British Company Takes On Lloyds for Not Cashing Cuban Check

Posted by Clif Burns at 8:26 pm on October 25, 2010
Category: Cuba SanctionsEUForeign Countermeasures

Cuban Postage StampIt started simply enough. A small, U.K.-based agricultural consultant, Fertecon, took a check for £7,156 to its banker, Lloyds, and asked them to cash it. Lloyds refused. The reason? The check came from Cuba.

Once bitten, twice shy, it would seem. Last year, Lloyds agreed to pay $217 million in penalties and to adopt certain compliance procedures arising from allegations by the U.S. Treasury Department’s allegations that Lloyd deleted information about Libya, Sudan and Iran in wire transfer instructions in order to clear dollar transactions through its correspondent banks in the U.S. Specifically, Lloyds agreed to third party audits “to determine whether any payments subject to OFAC regulations were processed through, or on behalf of, any U.S. individual or entity.”

Twice shy here means that Lloyds is backing away from transactions that it would appear aren’t even subject to OFAC’s regulatory jurisdiction and which don’t involve transactions to be processed through a U.S. bank or on behalf of any U.S. entity. It was a check payable to a U.K. company in pounds sterling. So maybe its thrice shy or twenty times shy.

The problem here, of course, is E.U. Council Regulation No. 2271/96 which makes it illegal for Lloyds to cooperate with the U.S. sanctions on Cuba. This point was not lost on Fertecon, or its lawyers, who have traipsed off to U.K. and E.U. authorities to complain. Lloyds case with the E.U. is not terribly enhanced by the fact that U.S. law wouldn’t appear to prohibit Lloyds from negotiating a Cuban check in pounds sterling for a U.K. customer. Lloyds must have made a careful calculation, given the lack of any significant enforcement of Regulation 2271/96, that it would be happy to be bitten by a toothless, mangy dog in its own backyard if it would curry favor with a neighbor’s angry pit bull that thinks it owns the entire neighborhood.

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