21 Jan GCIII Commentary: Prisoners of War Remittances–Financial Challenges of Sanctions and Conversion Rates
[Chanel Chauvet earned her Master of Laws in International Humanitarian Law and Human Rights from the Geneva Academy of International Humanitarian Law and Human Rights. She also holds a Juris Doctor degree from the University of Georgia School of Law. This is a post in our joint blog symposium with ICRC’s Humanitarian Law & Policy Blog exploring the new ICRC Commentary on the Third Geneva Convention (GCIII Commentary).]
This post will explore the challenges of armed conflict that extend beyond the battlefield and into detention camps for many prisoners of war due to sanctions levied by international institutions and independent states against another state. In addition to enduring the hardships in camp associated with survival, including but not limited to ill-treatment, prisoners of war (POWs) also face an overlooked but practical concern of an impaired ability to send and receive remittances, which affects their overall wellbeing.
In practice, remittance transfers typically occur at an international level between family members of a POW who is held abroad in captivity by a party to a conflict. These relatives, who are based in the POW’s country of origin, send funds in an effort to contribute to the POW’s financial welfare. The procedure for outgoing remittances involves a POW transfer of funds from the Detaining Power to a Protecting Power, or the International Committee of the Red Cross (ICRC) if it agrees to carry out this role, which then forwards to the Power on which a POW depends a notification detailing the amount of a payment and the contact information of the payee. This is the case unless the parties maintain direct relations. In such a transaction, the authorities of the Detaining Power are required to abide by the model regulations concerning payment detailed here.
In addition, I address the legal landscape governing POW remittances along with the obstacles that interfere with the financial health of POWs. Those obstacles include the banking framework that governs international money transfers and conversions, which directly relates to collective financial sanctions levied via the UN Security Council to unilateral sanctions imposed by individual states, both of which can affect the conversion rates of POW remittances. This form of economic warfare is intended to compel an adversarial state to concede to the will of the imposing party, and it is analyzed in a case study between the United States of America and the Islamic Republic of Iran. The barriers imposed as a result of economic sanctions in turn affect the purchasing power of POWs in detention and their levels of morale. This can become an arduous process that can span many years given the fact that POWs can be detained until the cessation of active hostilities or until they have been directly repatriated if they have become seriously wounded or sick while detained, according to international humanitarian law. Following this overview, I discuss the importance of addressing this novel issue and offer recommendations, specifically about measures that should be implemented to improve the financial and overall health of POWs while detained.
Law Applicable to POW Remittances
The Geneva Conventions of 12 August 1949 comprise four treaties that institute a universal set of standards for humanitarian treatment during a conflict. Of the four, the third, the Geneva Convention Relative to the Treatment of Prisoners of War, is the primary source of law governing POWs. GC III, as it is known, defines POWs to include combatants who are hors de combat because they have fallen into the custody of an enemy state, called the Detaining Power. Also labeled POWs are certain categories of noncombatants: members of militias or volunteer corps that form part of a state’s armed forces, either by professing allegiance or by meeting a distinct set of criteria; civilians authorized to accompany an armed force; and participants of a levée en masse, that is, national conscription.
Specific provisions concerning remittances may be found in Articles 63-66, themselves located in Section IV, “Financial Resources of Prisoners of War.” The section pertains directly to the conversion rate difficulties common to POW remittances because they address the scenarios in which conversion issues arise, including: first, transfer of funds and prisoners’ accounts; second, management of prisoners’ accounts; and third, winding up of accounts.
Of particular relevance is Article 63 of the Third Geneva Convention (GC III), which states that a Detaining Power is obliged to accept remittances without distinction from organizations within the prisoners’ home countries, from neutral countries, or from within the territory of the Detaining Power. With that established, it is important to note that transfers between enemy countries are often obstructed because financial sanctions are frequently employed as a measure of economic warfare. For example, after the invasion of Kuwait by Saddam Hussein, President George H.W. Bush admitted that U.S. sanctions against Iraq were a “precursor to military action.” (Gary Clyde Hufbauer, Jeffrey J. Schott & Kimberly Ann Elliott, Economic Sanctions Reconsidered, 9-11 (Peterson Institute Press: All Books, Vol. 3 1985). Financial sanctions are particularly important in this discussion because they pose challenges to ensuring the financial welfare of POWs, mainly by aggravating the conversion rate difficulties that plague POW remittance transfers.
As a general matter, GC III declares that POWs shall be humanely treated. Thus, the means to accrue money while detained, either through earned wages, advances of the regular pay by a POW’s armed forces, and for the purposes of this analysis, through remittances from family members, friends, or organizations outside of camp, allows the POW the possibility of affording basic necessities such as soap, food stuffs, shaving supplies and discretionary goods beyond the camp-provided water, food and clothing. The ability to send and receive remittances also provides intangible benefits in helping POWs maintain a certain level of morale in an environment that is typically dispiriting. Howard S. Levie, Prisoners of War in International Armed Conflicts in International Law Studies 143 (U.S. Naval War College, Vol. 59 1978). Furthermore, POWs in collaboration with camp management work to recirculate profits from the camp canteen to enrich the camp environment for the POW’s benefit. Additionally, upon closure of a POW camp, any remaining funds from a camp canteen is redistributed to the POWs who initially contributed through their purchases. As a result, the money that POWs earn in detention may actually permit them to return to their countries of origin in a better financial condition than when they left for an armed conflict, and on occasion, in a better condition than their fellow countrymen, making for a more prosperous beginning.
In spite of the provisions of GC III that guarantee humane treatment of POWs, problems inherent to international remittance transfers and conversions occur between enemy countries during an armed conflict. Due to the restrictive measures of sanctions within the scheme of economic warfare, enemy countries are generally prohibited from sending and receiving direct transfers, creating the need for an intermediary bank established in a neutral country for processing these transactions. Problems also tend to arise when that neutral bank is affected by sanctions from another state, which has a chilling effect even when transfers between two countries are not prohibited. Problems like these in turn affect the financial health of POWs. For example:
Sanctions: States involved in transfers, including the Detaining Power, may be obliged to comply with sanction regimes issued by states or by the Security Council acting pursuant to Chapter VII of the UN Charter. These sanctions typically consist of asset freezes against entities, mainly against banks.
Conversion rates: The second issue relates to the transfer of remittances, namely, the amount of money that a POW receives in the currency of a Detaining Power, based on the outcome of the conversion rate applied. As demonstrated in the hypothetical case studies detailed in the paper (and below) within the context of a would-be armed conflict between the U.S. and Iran, this situation often leads to distressing outcomes.
Although firsthand accounts are scarce in this area of academic scholarship, this scenario would be seemingly prevalent in the event of an IAC because economic sanctions are often one of the first measures that a state levies against an enemy state as a tool for coercion (Gary Clyde Hufbauer, Jeffrey J. Schott & Kimberly Ann Elliott, Economic Sanctions Reconsidered, 5 (Peterson Institute Press: All Books, Vol. 3 1985). For the purposes of this analysis, it is only necessary to explore the likely scenarios in which conversion-rate issues would arise, which I demonstrate in a would-be armed conflict between the United States and Iran.
In hypothetical case 1, an Iranian POW in a US detention camp is sent Iranian rials or tomans from a payor in Iran per the Article 63 Transfer of Funds provision of GC III. The Iranian currency can be converted into US dollars for use within the camp. The international transaction will most likely take place through an intermediary institution, such as a neutral bank in a third-party state, unless the US and Iran explicitly agree to permit these direct transfers. Depending on the conversion rate applied, the Iranian POW will receive much less than the value of US dollars to spend in the detention camp canteen to exchange for various goods. This is the case because the Iranian rial has depreciated in value by 70 percent due to unilateral sanctions from the US causing exchange rates to drop to a low of 215,000 rials to the US dollar. As a result, the purchasing power of Iranian POWs within the camp is severely hampered by the poor exchange rate, and their ability to purchase necessities and discretionary goods within the camp is impeded.
Hypothetical case 2 focuses on the winding up or closure of POW accounts upon termination of captivity by the Detaining Power. Upon release or repatriation, a POW is entitled to a statement listing the credit balance of the POW’s account. Upon the POW’s release or death, the Detaining Power must pay the amount that it owes the POW, particularly earned wages, to either the former POW or to the POW’s heirs if the POW died in captivity. If, for example, an Iranian POW has money left at the end of internment in a US camp, then the conversion rate is applied to the credits listed in the statement from the Detaining Power, and the money is converted into the currency of the Power on which the POW depended, here Iran. In this case, the amount received would be significantly more because the currency of the Detaining Power in this instance, the US dollar is notably worth more than the Iranian rial and toman.
In hypothetical case 3, which could apply to both hypotheticals one and two, the Iranian POW can choose to keep the money that he received via a remittance transfer from a payor located in the territory of the Power on which he depended in its original currency, or the POW can choose to save the money: thus, there is no conversion issue. However, without converting the money, the POW will not be able to use this currency in the Detaining Power’s camp. A POW may choose to keep remittances in its original currency to avoid the risk of losing money when converting the sum upon initial receipt in the Detaining Power’s currency, and again into the original currency upon release and repatriation. It essentially serves as a reserve of money until the POW returns to power on which he depended where the POW can begin anew.
To conclude the discussion of conversion rate difficulties related to remittances, there are a plethora of obstacles that can potentially harm the financial welfare of POWs in detention camps. These hindrances primarily stem from the imposition of UNSC and unilateral sanctions, along with political pressure against third states, which may lead to additional fees incurred in the remittance transfer process. As detailed in the paper, the payors often deal with severe inflation of their currency and basic necessities, making it difficult to send remittances to POWs under that circumstance.
Recommendations for Filling Gaps in Compliance and Enforcement
A number of recommendations and recourses are available to assist in efforts to address the insufficient legal landscape governing the protection of POW remittances from the effects of sanctions. The recommendations, discussed from a compliance and enforcement angle, that I offer act to mitigate the effects of conversion rate difficulties applied to POW remittances. Generally speaking and in the interest of ensuring that POWs are humanely treated, the international community must ensure via international policies and domestic legislation and pronouncements that sanctions do not interfere, directly or indirectly with the transfer of remittances to and from POWs.
Discussed within the context of an armed conflict between the U.S. and Iran, unilateral state sanctions can indirectly affect third-party states because of political pressure exerted from the issuing country. This, in turn, may adversely affect the economy of the country in which the sanctions are imposed because financial partners in other countries are no longer willing to conduct business and trade. To combat the political pressure and preserve the economy of the sanctioned state, other states can enact “Blocking Statutes.” Blocking Statutes effectively nullifies the chilling effect of another state’s sanctions within the territory of a third-state because it forbids businesses within its territory from complying with the unilateral sanctions, unless explicitly authorized to do so in the event that non-compliance would severely hinder a business’s operations. Such statutes would permit third-states to continue doing business with the sanctioned state, effectively helping the sanctioned state’s economy, which would also preserve the purchasing power of the sanctioned state’s currency, thus mitigating the effect of poor conversion-rate exchanges its POWs. The Blocking Statute essentially circumvents another state’s-imposed sanction regime upon a country.
Additionally, it is important that individual states adhere to their IHL obligations, even when they establish a sanction regime against another state. Notably, Sanctions established by the UNSC are presumed to comply with IHL-related obligations, unless there is an explicit carve-out for the same. Unilateral sanctions issued by individual states, however, do not require this same legal presumption for their sanctions to comply with IHL. Accordingly, states should agree to an international policy that provides for a legal exclusion concerning the process of POWs’ remittance transfers from the effects of banking sanctions that are in place in their Power of Origin. This international policy should then be incorporated into the domestic legislation of all states to ensure POW protection in the event of an IAC.
State practice is scant concerning legal exclusions for POW payments and remittances from the effects of banking sanctions. With that said, the International Criminal Tribunal for the former Yugoslavia found in the Kupreskic case stated that where state practice is scarce “principles of international humanitarian law may emerge through a customary process under the pressure of the demands of humanity or the dictates of public conscience.” Therefore to solve this issue, states can form a relevant practice and express opinio juris through the issuance of legislative and administrative acts endorsing such an exclusion. This international policy should also be addressed in official state pronouncements and implemented in state military manuals in order to demonstrate that a substantial number of states support this legal obligation as a general state practice. This initiative would also serve to demonstrate that there exists an opinio juris, or a general state practice that creates a legal norm and obligation on part of states as customary international humanitarian law. These measures are especially crucial because ascertaining state practice is almost impossible, so reliance must be placed on such official state documents which should be taken into account in IHL formation. Additionally, resolutions of various international organizations, such as the United Nations, along with regional organizations can also make written commitments to carve out exceptions in sanctions regimes to create legal norms and prevent adverse effects on the POW remittance transfer process. The incorporation of such protections of the POW remittance process at an international, regional, and domestic level would be of substantial utility for the facilitation of POW payments and remittances, despite any international sanctions in effect, thereby improving the financial conditions of POWs.
The legal landscape governing POW remittances is insufficient, and as such, states should collectively address the obstacles that damage the financial health of POWs by incorporating specific protections for POWs (e.g., a legal exclusion for POW payments and remittances) from the effects of the banking sanctions that are in place in their Power of Origin. Failing to implement such a framework further contributes to the deterioration of a sanctioned state’s economy because third states are likely to be politically pressured into severing business ties with the sanctioned state. As a result of such actions, a state’s currency typically inflates, and the prices for goods soars at the cost of the average citizen. This further contributes to the stark contrasts in the conversion rates between a sanctioned state’s currency and that of a different country, thus undermining the impact of an Article 63-66 transfer of funds to-and-from a POW located in a sanctioned state.
Asanga Tilakaratne, Peter Harvey, Sunil Kariyakarawana and Andrew Bartles-Smith, GCIII Commentary: A Buddhist Perspective on the Treatment of Prisoners of War
Lawrence Hill-Cawthorne, Common Article 1 and State Responsibility