Following the adoption of the EU Global Human Rights Sanctions Regime, which is set out in Council Regulation (EU) 2020/1998 and Council Decision (CFSP) 2020/1999 (see our previous client alert), the European Commission published a Guidance Note on the implementation of certain provisions under Council Regulation (EU) 2020/1998. The stated aim of the Guidance Note is to address the questions most likely to arise in the application of the new restrictions and to ensure their uniform implementation by EU operators and EU Member States competent authorities. Upon its issuance, Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, explained that this was the first time that a new EU sanctions framework is accompanied by such Note.
The Guidance Note provides guidance on the scope of financial restrictions, including the freezing of funds and economic resources and the prohibition to make funds and economic resources available to sanctioned persons, entities and organizations. It also addresses compliance obligations and specific notions, such as “ownership” and “control” of entities by listed persons. Further, the Guidance contains information on exceptions and derogations, including for the provision of humanitarian aid.
As regards the prohibition to make funds and economic resources available, the Commission explains that EU operators must not put any funds or economic resources at the disposal of listed persons directly or indirectly, whether by gift, sale, barter or any other means, including the return of the listed person’s own resources. Moreover, the Commission reiterates that, in principle, an EU business is not allowed to sell or deliver products or services to a listed person, even if in exchange for adequate payment, and that an EU citizen is not allowed to work for a listed company. However, the prohibition does not concern resources for personal use or consumption, such as electricity.
We recognize that the Guidance Note was issued in the context of the new EU Global Human Rights Sanctions Regime. However, this guidance document has the potential to exceed the scope of human rights sanctions since it sheds light on principles that are commonly applicable in other sanctions regimes. Unfortunately, the Guidance Note does not provide many detailed answers and mainly reiterates what is already included in Regulation 2020/1998 itself as well as basic concepts set out in the Council’s Sanctions Guidelines and Best Practices. Therefore, its practical relevance is rather limited.