Unilateral and Extraterritorial Sanctions Symposium: A Rejoinder – Part II

[Charlotte Beaucillon is a professor of European and public international law at Université de Lille.]

Impact on Economic Operators: Promising Paths from Macro-economy to Human Rights Diligence

Part III of the Research Handbook on Unilateral and Extraterritorial Sanctions is devoted to the impact of unilateral and extraterritorial sanctions on economic operators: they are the main addressees of the legal injunctions contained in unilateral and extraterritorial sanctions, which now generally take the form of economic sanctions – whether sectoral or individual (on this distinction, see the Research Handbook Introduction, pp. 1 and 4-5). A topical example within the new unilateral sanctions against Russia rests in the disconnexion of the Russian Banks from the SWIFT  global financial messaging system. Part III thus shows how economic operators implement risk mitigation strategies to compensate for their uncertainty on the law that actually binds them: they are caught between a multiplicity of national, foreign and international unilateral normative injunctions, which are then linked back to their own business priorities. This “overcompliance”, as we have termed it in the Research Handbook, reinforces the factual impact of unilateral and extraterritorial sanctions, without correlation to their binding or lawful character. Two other chapters show how unilateral and extraterritorial sanctions specifically affect the financial sector: one is based on a sociological analysis of global banking surveillance of digital money flows (chapter 16, in open access) , the other presents the topical case of the very rapid disappearance, in 15 days, of a European bank (ABLV in Latvia), against the backdrop of the violation of US unilateral sanctions. A similar phenomenon has also been reported as a result of the unilateral sanctions imposed on Russia after the invasion of Ukraine this year, with the 100% Russian-controlled Sberbank Europe AG and subsidiaries declared failing or likely to fail by the European Central Bank.  Three other chapters explore in turn the litigation remedies that are or could be open to private operators: in France and the United Kingdom, in China (chapter 19 in open access), and through international arbitration.

The discussion offered by Marco Fasciglione and Tristan Kohl on Part III exploring the impact of unilateral and extraterritorial sanctions on economic operators is very welcome as it proposes new analytical tools and opens up innovative perspectives. It thus responds to and supports the question underlying the third part of the Research Handbook: is it possible to identify, beyond the intergovernmental and public international law issues (examined in Part II), avenues open to economic operators (and their States) that would make it possible to limit their instrumentalisation as vectors of unilateral economic sanctions policies?

The discussion proposed by Tristan Kohl is, quite frankly, undreamt of. Let me now briefly explain this stance. One of the research questions underlying the 2018 COMPLY project was to question the cost of overcompliance with unilateral and extraterritorial sanctions, with the aim of showing that it is important to better understand the effects of such instruments, beyond the already crucial question of their compatibility with respect to international law. The hypothesis is that in a globalized and liberalized world, if compliance with the law is not enough in and of itself to weigh in the diplomatic balance, the (dizzying?) cost of the unilateral and extraterritorial sanctions under consideration would perhaps weigh in the equation. Yet, as Tristan Kohl notes, although there are many studies on the economic impact of sanctions, there is no systematic study to model the economic impact of extraterritorial sanctions. Not being an economist, I had to resign myself to postpone this interdisciplinary aspect of the COMPLY project to a later phase. It seems that this chapter can now be initiated, which is very promising. My intuition was that the economic cost (the realized risk) accruing to all – mainly large-scale and internationally exposed – economic operators as a result of their exposure to unilateral and extraterritorial sanctions should be quantifiable in terms of the impact of these measures, not only from a micro perspective on the company or group itself, but also from a macro perspective on the economic wealth of the targeted states or group of states. In his section “Overcompliance and its effects on welfare”, Tristan Kohl opens up new perspectives for interdisciplinary research that are of the utmost interest. Similarly, his discussion confirms various research hypotheses, both on the structuring of the most internationally exposed firms, and on the cost of the legal uncertainty in which these actors operate. His contribution indeed “create(d) links between unilateral and extraterritorial sanctions, the notion of overcompliance and available theories in international economics”, which hopefully will mark the beginning of a new interdisciplinary dialogue.

Marco Fasciglione‘s suggestion to include the business and human rights framework in our toolbox is also very compelling. He shares the starting premise of the Research Handbook – although he bases his analysis only on US unilateral sanctions, which are considered the most aggressive, due to their extensive and controversial extraterritoriality – that the burden of economic sanctions falls on operators who assume the risk and economic cost, which they try to temper with various strategies and private normative instruments such as good practices and compliance programs. The business and human rights framework seems to contribute to answering a twofold question that runs through Part III of the Research Handbook: what can states do and what can operators do? As for the first part of the question, the recourse to the first pillar of the United Nations Guiding Principles on Business and Human Rights, which requires states to protect human rights against corporate violations, illustrates the links between Part III, Part II and Part IV of the Research Handbook. Indeed, Marco Fasciglione argues that: “given the disastrous impacts of sanctions and ineffectiveness of exemptions provided under the sanctions regime for necessities such as food, medicine and medical technology, categorizing the sanctioned country among the conflict-affected and high-risk areas (…) makes sense”. This position clearly shows the importance of state responses in securing the contours of their sovereignty and not suffering the effects of contested measures (Part II), and that innovative tools are available, including in the context of the conduct of business relations, to achieve the common goal of preserving human rights (Part IV). As to whether economic operators can also play their part in this protection, the tools offered by the second pillar of the United Nations Guiding Principles on Business and Human Rights seem promising. Corporate due diligence is indeed a contemporary tool, which has been used particularly prominently in the field of climate change  (see for example the Milieudefensie v. Shell case, District Court of the Hague, May 2021). As Marco Fasciglione notes, France adopted a specific law in 2017, and so did Germany in 2021, which could trigger reflection on the appropriateness of a European approach in this area. Moreover, the proposal to use due diligence to order companies that wish, often because of overcompliance, to withdraw from a market they consider too risky, to carry out a ‘responsible market exit’ by taking care to identify, mitigate and remedy the effects of their withdrawal on human rights, is a valuable avenue, if we refer again to the objective underlying Part IV of the Research Handbook.

Respect for Human Rights: From Due Process to Humanitarian Emergency

Respect for human rights is the focus of the last part of the Research Handbook on Unilateral and Extraterritorial Sanctions, which explores the different relationships between unilateral and extraterritorial sanctions and human rights. The first chapter outlines the evolution of the concept of unilateral coercive measures, which has gradually come under scrutiny within the United Nations for their negative impact on human rights. The next chapter addresses the issue from the now classic perspective of due process in the context of the implementation of unilateral and extraterritorial sanctions, and offers a rare comparative analysis between the US, the EU and the UK systems. Two other specific issues then appear. The first, mentioned by almost all contributors to this Symposium, concerns the humanitarian impact of unilateral and extraterritorial sanctions on the population of targeted states, and is of the utmost urgency. The second, less well known, relates to the criminal prosecution of violations of unilateral and extraterritorial sanctions. Primarily affecting top corporate executives (as in the so-called Huawei case), these prosecutions help explain the cautious attitude of economic operators who prefer overcompliance to criminal risk (Part III). Paradoxically, the last chapter of the Research Handbook shows that massive human rights violations have recently become a reason for the imposition of new unilateral and sometimes extraterritorial sanctions, sometimes known as ‘Magnitsky’ sanctions. These are adopted in particular by the United States and the European Union alongside other so-called horizontal/thematic sanctions regimes. They raise recurring questions about their legality under human rights standards and their articulation with the criminal prosecutions that would normally deal with such serious violations of the law.

Elvira Dominguez Redondo and Eirik Bjorge offer a polymorphous and useful discussion of the issues addressed by Part IV. Some of these elements are exclusive to unilateral and extraterritorial sanctions; others concern all sanctions, whether unilateral or collective. We will consider these in turn.

On the one hand, it is clear from these two discussion papers that there is a need to further examine the link between the impact of unilateral and extraterritorial sanctions and the notion of coercion in international law, as well as its corollary concepts, such as the principles of non-interference and non-intervention, or the notion of the reserved domain of the State (Elvira Dominguez Redondo; Eirik Bjorge). The stakes of this debate are significant, insofar as one may wonder about the degree of severity that unilateral and extraterritorial sanctions should have in order to fall within the strict conditions of coercion in international law, as defined by the International Court of Justice in 1986 in the case of Military and Paramilitary Activities in and against Nicaragua  (Nicaragua v. United States). In this respect, the Alleged Violations of the 1955 Treaty of Amity, Economic Relations, and Consular Rights case (Iran v. United States), currently pending before the same court and relating to the re-establishment of unilateral and extraterritorial US sanctions following the US withdrawal from the JCPOA, will perhaps allow the Court to provide some (useful and long-awaited) clarification.

Also related to the notion of coercion is the notion of criminal prosecution for the violation of unilateral and extraterritorial sanctions. It brings to light another aspect of the “normative ambiguity” (Elvira Dominguez Redondo) that marks the situation of those prosecuted, as in the so-called Huawei case, which helps to illustrate the very strong interactions between the issues dealt with in Parts II, III and IV of the book.

On the other hand, some of the issues dealt with in the Research Handbook were implicitly considered as cross-cutting by more contributors to the Symposium. This implicit assimilation of the different types of sanctions – unilateral or collective – is however clear from the discussion papers, when they address both UN and unilateral sanctions (Elvira Dominguez Redondo; Eirik Bjorge; Larissa Van den Herik). More specifically, I am referring here to developments relating to the legality of sanctions with an individual scope (due process) and to the humanitarian impact of broad-spectrum international sanctions, which, in essence, effectively question both the practice of unilateral and extraterritorial sanctions and that of sanctions decided by the United Nations Security Council.

The methodological focus of the Research Handbook on unilateral and extraterritorial sanctions, however, sheds light on specific aspects of this practice and reveals different legal issues. One of them, much noted in the discussion papers, concerns the possibility to challenge, both from the point of view of liability and reparation, the violations of the rights of the population of a target state that do not result from a single decision to impose one thread of international (UN/institutional) sanction. These violations rather result from a complex phenomenon, where multiple unilateral sanctions regimes turn into a form of de facto global sanction due to the duplication, the superimposition and the transnational execution of unilateral sanctions. The effects of this kind of very tight network of unilateral injunctions are then reinforced by various private overcompliance practices discussed above (Part III). The same holds true when it comes to due process issues, as unilateral and extraterritorial sanctions can give rise to various simultaneous listings, not only by different sending countries, but also by one sender when listing one person both on a state sanction regime and on a horizontal / thematic sanction regime (as shown in the book’s last chapter on horizontal sanctions).

Similarly, the distinction between unilateral sanctions on the one hand, and unilateral and extraterritorial sanctions on the other hand, raises the question of the unlawfulness of certain unilateral practices, not from the point of view of their legal regime, but of their effects. This is for instance the case in the field of human rights, where the accumulation of unilateral sanctions – and not necessarily extraterritorial sanctions, a quality that probably proves to be an aggravating factor here – is directly pointed at in the human rights violations experienced by the populations of targeted states. Distinguishing between extraterritoriality and unilateralism thus allows more questions to emerge than if one were to confine oneself exclusively to examining the most aggressive or the best-known practices.

Finally, the specificities of the analyzed infringements on human rights by unilateral and extraterritorial sanctions deserve a further tailored analysis to understand their complexities, and to answer such difficult questions as the establishment of causality in the contribution of sanctions in a deteriorated humanitarian situation, or burden shifting when is comes to challenging multiple individual listings across the world.

Furthering the Discussion

Whether examining the evolution of contemporary practice, the state of positive international law, or the impact on economic operators and human rights, a number of constants emerge from both the Research Handbook on Unilateral and Extraterritorial Sanctions and the contributions to this Symposium, some of which can be recapitulated here:

1. The need for more data to further the systematic analysis of an ever-expanding phenomenon: more country and regional case studies illustrating the scope of current practice, more empirical data aimed at economic analysis, more instrument-specific data illustrating the various forms of contemporary unilateral and extraterritorial sanctions;
2. The crucial importance of interdisciplinarity in this field of study to better understand the articulation of the political, sociological, legal and economic levels at work;
3. The concordance of voices, across disciplines, on the importance of ensuring greater clarity, certainty and effectiveness of norms and processes at play in the field of unilateral and extraterritorial sanctions, so as to offer a better understanding of the common rule(s) of this ‘game’ to its multiple players, involved directly or indirectly;
4. The need to return to what unfortunately seems to be seen, in a security-oriented analysis, as mere collateral damage of unilateral and extraterritorial sanctions: their impact on private persons.

These remarks pave the way for another research chapter, to which I sincerely hope many colleagues will contribute in its various future developments.