Teeth Can Bite: Towards Harmonized Rules on EU Sanctions Criminal Enforcement
On March 12, 2023, the European Parliament ("EP") formally endorsed the adoption of a Directive defining criminal offences and penalties for the violation of European Union ("EU") restrictive measures, colloquially known as sanctions ("Directive").1 As a political agreement on the text of the Directive had already been reached by the EP and the Council of the European Union ("Council") on December 12, 2023, the formal adoption of the Directive is imminent and will likely lead to a new era for EU sanctions criminal enforcement.
EU sanctions enforcement is and will remain a Member State prerogative. The Directive will neither replace the EU's decentralized enforcement approach nor establish an EU-wide enforcement authority. The Directive, rather, seeks to address perceived issues linked to the unharmonized enforcement of EU sanctions by setting minimum requirements that will have to be observed by all Member States.
1. Harmonization of conduct constituting criminal offences
Member States will be required to ensure that intentional conducts in violation of EU sanctions or implementing national measures constitute criminal offences. The scope of conduct covered by the Directive covers all potential EU sanctions violations as well as inciting, aiding, and abetting those violations. In most cases, attempts to violate EU sanctions would also have to be criminalized.2
Furthermore, violations of trade control measures would also have to be treated as criminal offences if committed with "serious negligence", at least for military and dual-use items.3
Specific rules are, however, foreseen to permit Member States to exclude criminal liability where the subject of the underlying offence represents a value of less than EUR 10,000. Likewise, Member States would be required to exclude criminal liability in relation to (i) legal professionals' reporting obligations that conflict with legal privilege requirements and (ii) humanitarian assistance.4
2. Harmonization of criminal liability and penalties
Criminal liability of legal persons – Member States will be required to ensure that legal persons can be held criminally liable for sanctions violations committed for their benefit (i) by a leading person or (ii) due to a lack of supervision or control by a leading person. The liability of legal persons would not exclude the liability of natural persons who commit, incite or are accessories to sanctions violations.
Penalties – While Member States will continue to be required to provide for effective, proportionate, and dissuasive penalties for sanctions violations, the Directive harmonizes penalties:
- For natural persons: maximum prison sentences,5 of at least one to five years for certain sanctions violations, and accessory criminal or non-criminal penalties.6
- For legal persons: criminal or non-criminal fines, in most cases of at least 5% of the legal person's total worldwide turnover or EUR 40 million.7 Member State may also provide for additional criminal or non-criminal penalties.8
Aggravating and mitigating factors – Member States will have to ensure that certain aggravating and mitigating factors are considered, although judges or courts will retain their discretion in setting the level of penalties to be adopted in light of the specific circumstances of each individual case.
Respect for fundamental rights – The Directive will have to be implemented in full compliance with the rights of suspected or accused persons in criminal proceedings and fundamental rights.
3. Rules to facilitate the investigation, prosecution, and penalization of sanctions violations
Minimum limitation periods – Member States will have to ensure that limitation periods enable the investigation, prosecution, trial, and adjudication of sanctions violations. The Directive provides for minimum limitation periods of three to five years for (i) the prosecution and enforcement of sanctions violations punishable by a maximum prison sentence of at least five years and (ii) the enforcement of prison sentences of more than one year.
Harmonized rules on jurisdiction – Member States will have to ensure that they have jurisdiction over sanctions violations committed (i) in whole or in part within their territory, (ii) on board a ship or an aircraft registered in that Member State or flying its flag, and (iii) by one of their nationals. Member States may also extend their jurisdiction to (i) habitual residents in their territories, (ii) their officials, (iii) offences for the benefit of a legal person established in their territory, or (iv) offences for the benefit of a legal person in respect of any business done in their territory.
Where more than one Member States are competent, they will have to cooperate to determine which Member State should conduct criminal proceedings, possibly by referring the matter to Eurojust.
Tools to investigate sanctions violations – Member States will have to ensure that effective and proportionate investigative tools are available to investigate and prosecute sanctions violations, such as those used in combatting serious crime cases.
Protecting whistleblowers – Member States will have to ensure the protection of whistleblowers reporting information related to past, ongoing, or planned sanctions violations that they have acquired in the context of their work-related activities, in accordance with the EU's whistleblower directive.9
Facilitating coordination at national, EU, and international levels – The Directive requires enhanced coordination (i) at the national level, between different national competent authorities under the supervision of a unit or body to be established; (ii) at the EU level, between the Member States, the European Commission (“Commission”), and the relevant EU bodies or agencies, through information and best practices exchange mechanisms; and (iii) possibly at the international level, in compliance with fundamental rights and international law. At the national level, Member States will have to designate a unit or body responsible for ensuring coordination and cooperation between the different authorities in charge of implementing EU sanctions.
Increased transparency and monitoring – The Commission may establish a network of experts and practitioners that would publish a mapping of EU sanctions violations or circumvention risks in specific geographic areas, sectors, or activities. Furthermore, Member States will be required to compile statistical data on sanctions violations reporting, investigations, and prosecution—data to be shared annually with the Commission and published at least every three years.
4. Promoting the use of existing criminal law tools
Reinforced rules on freezing and confiscating instrumentalities and proceeds from sanctions violations – The Directive provides that Member States shall, in accordance with directive 2014/42/EU,10 take the necessary measures to freeze and confiscate:
(i) instrumentalities and proceeds from sanctions violations and
(ii) funds or economic resources that should be frozen under EU sanctions, in case of offences relating to their concealment or the concealment of their ultimate owner or beneficiary.
Violation of EU sanctions as a predicate offence for money laundering – The Directive adds the violation of EU sanctions to the list of predicate offences for money laundering under EU rules on combatting money laundering by criminal law.11
5. Next steps
The Directive must now be formally approved by the Council before it becomes binding legislation. Once adopted, the Directive will be published in the Official Journal of the European Union and enter into force 20 days after such publication. Member States will then have 12 months to implement all laws, regulations, and administrative provisions required to comply with the Directive.
Except for Denmark, which has opted out and, therefore, will not be bound by the Directive, Member States will have a common baseline to criminally enforce EU sanctions. While some divergences should continue to be expected, the introduction of harmonised rules will undoubtedly support increasing enforcement efforts throughout the EU.
1 EP, EU sanctions: new rules to crack down on violations, March 12, 2024; See also the text adopted by the EP.
2 Exceptions concern (i) failures to freeze funds and economic resources, (ii) circumvention by failing to comply with reporting obligations, and (iii) breach or failure to fulfill conditions of authorisations.
3 As defined in the Common Military List of the EU and dual-use items listed in Annex I and IV to Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit, and transfer of dual-use items.
4 The absence of criminal liability is without prejudice to the requirement for Member States to provide for effective, proportionate, and dissuasive penalties in such cases.
5 The Directive does not expressly require penalties of imprisonment for offences resulting from inciting, aiding, abetting, or attempting the commission of a sanctions violation.
6 Those may include (i) proportionate fines, (ii) withdrawals of permits and authoritisations, (iii) disqualifications from holding leading positions in legal persons, (iv) bans from public office, or (v) publications of judicial decisions.
7 Member States will have the option to provide for a maximum level of fine expressed as a percentage of the legal person's worldwide turnover or as an absolute amount.
8 Those may include (i) exclusion from public benefits, aid, funding, tenders procedures, grants, or concessions; (ii) disqualification from the practice of business activities; (iii) withdrawal of permits and authorisations; (iv) placing under judicial supervision; (v) judicial winding-up; (vi) closure of establishments; or (vii) publication of judicial decisions.
9 Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law.
10 Directive 2014/42/EU of the European Parliament and of the Council of 3 April 2014 on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union.
Of note, a new Directive is being discussed to strengthen rules on the tracing, identification, freezing, confiscation, and management of criminal property.
11 Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combatting money laundering by criminal law.
