The Viewpoint: International Sanctions and its Growing Prominence

Bar & Bench September 5 2017
Zaiwalla & Co. Interpol notices

Kartik Mittal

In the past decade International sanctions have become a common feature in world politics. They are often considered as an alternative to war. There are a few recent examples of sanctions being used by a group of countries to compel another sovereign nation to re-consider or re-formulate its policies.

The effectiveness of International sanctions as a political tool was recently recognised when the International community was able to agree a deal with Iran whereby Iran agreed to work with the international community, on its nuclear programme, in return for some relief from crippling economic sanctions.

The growing prominence of international sanctions is evident from two recent examples. First, Saudi Arabia, United Arab Emirates, Bahrain and Egypt recently imposed sanctions on Qatar. Second, the European Union has put in place a sanctions regime against Russia following the events in Crimea, Ukraine.

With Globalisation, Indian companies are venturing abroad and many conduct business in multiple jurisdictions. The growing prominence of International sanctions has made it indispensable for Indian companies to take legal advice on the implications that a sanctions regime, against a particular country, could have on a particular transaction or their business generally.

Every sanctions regime has its own characteristics. A sanctions regime could include travel restrictions for listed individuals, freezing of assets of listed individuals or companies, restrictions on the supply or provision of listed goods, technology or services to individuals or companies of the sanctioned country and/or restrictions on doing business with a particular sector of the sanctioned country.

To illustrate, as part of the EU sanctions regime against Iran:

  • There were a few hundred listed individuals or companies whose assets were frozen. Assisting such listed individuals or companies to violate sanctions was itself a criteria for listing and could result in an individual or company being listed and their assets being frozen.
  • Providing material, logistical or financial support to the Government of Iran, and persons and entities associated with them was a criteria for listing which could result in an assets freeze.
  • There was a comprehensive list of dual use goods & technology and it was prohibited to make these items available to any Iranian person, entity or body, or for use in Iran.
  • It was prohibited to sell, supply, transfer or export gold, precious metals and diamonds to the Government of Iran, its public bodies, corporations and agencies, and anyone controlled by them.
  • It was prohibited to sell, supply, transfer or export key equipment and technology for use by the oil and gas sector in Iran.
  • There were prohibitions in relation to sale or purchase of oil from Iran.

Due to the wide ambit of sanctions regimes and serious consequences, including criminal sanctions, associated with a failure to comply with sanctions it is highly advisable to take legal advice to cater to risks which may be associated with dealing with a particular company, individual or sector in a sanctioned country.

The EU sanctions regime provides for a licensing regime. Therefore, an act which may otherwise be prohibited may be lawful if it is carried out under a license granted by the relevant regulatory authority.

Whereas this field of law has been developed and used by western countries for some time now, the law of sanctions is in its infancy in India. The United Kingdom has been at the forefront in developing the law relating to sanctions.

Over the years, the United Kingdom has evolved its legislation to give its executive bodies the necessary powers to impose sanctions by way of secondary legislation.

The English Courts have also played a crucial role. One of the leading cases in the field of sanctions law is the case of Bank Mellat v HM Treasury [2013] UKSC 38 & [2013] UKSC 39, in which my firm acted for Bank Mellat. In this case, the Supreme Court of the United Kingdom laid down guidelines for future conduct of cases in which confidential intelligence evidence is adduced and has to be considered by the courts, behind closed doors, to dispense justice. The court, in this case, has exquisitely drawn a balance between the need to protect confidential information, in the interest of national security, and the right of a party to know the allegations made against it.

India should give serious consideration to adopting a legislative and executive framework required to impose sanctions and if necessary, use sanctions as a tool to resolve disputes. Recent examples have shown us that sanctions can be effective in peacefully resolving disputes.

Sanctions are usually effective when a number of countries work collectively, and impose similar economic sanctions on a country so as to compel the rogue country to comply with international norms. The objective behind imposing economic sanctions is to isolate a particular country from the global economy, thereby restricting its ability to trade.

The ideal scenario is for sanctions to be imposed through a resolution passed by the United Nations Security Council. This is because it imposes an obligation on all members of the United Nations to give effect to that Resolution. Since the five permanent members of the United Nations Security Council (China, France, Russia, United Kingdom and United States) have a right to veto a United Nations Security Council Resolution, it is usually difficult to agree a sanctions regime at that level. The next best option is for a group of like-minded countries to come together, discuss and impose similar sanctions, through national legislation, against the rogue state. The least desirable option is for a country to act alone without support of the international community.

As the whole idea behind imposing sanctions is to exert economic pressure on a country, to force it to change its policy, a sanctions regime should be well thought out and cleverly crafted. It should take into consideration the economic reality but should never be used as a means to oppress or injure the citizens of that country.  A sanctions regime may be open to challenge in courts and therefore should always adhere to the Human Rights obligations that bind the international community.

India is unarguably a regional power, if not a world power. It has a strong voice in world politics with a strong historic relationship with the United States, Russia and some of the European Union member states. It would therefore be encouraging to see the law of sanctions develop in India and for India to work with the international community on the various challenges that the world faces today.

Kartik Mittal, Senior Solicitor at Zaiwalla & Co. LLP

[Zaiwalla & Co. LLP is an International Solicitors firm based in London. Kartik Mittal has considerable experience in the field of International sanctions having acted on various cases relating to sanctions regime against Iran, Democratic Republic of Congo, Ukraine and Russia]  

 

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