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We are all familiar with the concept of sanctions being imposed on countries; Sudan, Somalia, Libya, and many other nations are subject to United Nations imposed sanctions. Cuba, Iran, and North Korea have sanctions placed against them by the US. However, following the disastrous effects of sanctions on the people of Iraq in the 1990s, ‘smart sanctions’, sometimes known as ‘targeted sanctions’ or ‘restrictive measures’ (the latter being imposed by the European Union), have become more popular. These types of sanctions target a particular person, group of people (such as Al Qaeda), or an organisation. In most cases, these types of sanctions are financial.
Financial sanctions imposed by a government on an individual and/or entity include asset freezing and taking steps to prevent funds or assets being made available to the target.
A targeted asset freeze usually prohibits anyone from doing the following:
Smart sanctions may also consist of prohibiting the provision or performance of other financial services, such as insurance or banking, for the benefit of designated persons or organisations. Individuals can also be prevented from travelling and corporate entities may have trade restrictions placed on them.
The UK sanctions regime targets approximately 3,000 individuals and entities (some of whom are resident or based in the UK), with the aim of freezing their assets.
Research shows that smart sanctions targeting individuals and/or entities are shorter in their duration and mitigate the suffering of ordinary people, as opposed to traditional sanctions which can last for decades and cause immense misery. Furthermore, unlike smart sanctions, country sanctions are likely to increase an authoritarian government’s repression measures.
Despite these positive factors, government-backed freezing the assets and finances of a person or entity is a draconian step and not without controversy.
As far back as 2004 concerns have been voiced about potential hardships resulting from targeted sanctions. Sanctions were said to be difficult to challenge, and people could languish for years on the UN ‘blacklist’. Even death did not free some people - the Chairman of the 1267 Committee (a body tasked with monitoring Afghanistan sanctions) in 2010 pointed out.
“It’s not easy to get dead people off the list. We have to have convincing proof that they are really dead and also we have to have information on what happened to their assets, and this in many cases takes some time, but this is work that will have to continue.”
Furthermore, there is doubt as to whether smart sanctions achieve the desired aim of punishing those who break international law without placing the general population of a country under undue hardship. Smart sanctions can indirectly cause innocent people harm, although to a lesser degree than country sanctions. For example, Michael Brzoska, Senior Fellow at IFSH and author of numerous books on the arms industry states that arms embargoes levied against entities mean weapons cost more, leading “to a major shift in government spending priorities and a consequent reduction in the economic well-being of the general population in the targeted State”.
Another unintended consequence of smart sanctions is that they open up the floodgates to black market activity. Interfering with normal market activity can lead some entrepreneurs to engage in criminal activity, and as a reward, the profits enjoyed are usually significantly more.
More research needs to be done on the effectiveness of smart sanctions in reducing the funding of terrorism, facilitating regime change, and preventing international crime and corruption. If you have been made subject to a targeted sanction, getting expert legal advice is essential. Smart sanctions can be challenged - over half of the restrictive measure challenges in the General Court of the European Union (and on appeal to the Court of Justice) over the past decade have been successful. However, this complex area of criminal defence law requires the expertise of a legal team that has the knowledge and resources to understand your organisation, its background, and the market sectors in which it operates in.
For more information about any of the points raised in this article, please call Dapinder Singh QC on +44 (0)191 232 1980 or email clerks@newparkcourt.co.uk.
