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The Reformed EU Human Rights Sanctions Regime: A Step Forward or an Empty Threat?

Published online by Cambridge University Press:  31 August 2021

Jernej LETNAR ČERNIČ Open the ORCID record for Jernej LETNAR ČERNIČ [Opens in a new window]
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Extract

Human dignity, effective human rights protection and the rule of law are the backbones of the legal system of the European Union (EU).1 The EU and its member states have been front-runners in human rights protection not only on its own territory, but also beyond in their relationship with third countries. They have been the principal standard-setters in the field of business and human rights (BHR). The majority of the EU member states (15 out of 27) have so far adopted National Action Plans on Business and Human Rights.2 As far as legislative action goes, the EU has in recent years adopted two binding legal acts in the BHR field, namely, a Directive requiring obligatory non-financial reporting for large corporations3 and a Regulation concerning mandatory due diligence for the EU-based importers of minerals and metals from conflict-ridden areas.4 More recently, the European Parliament and the European Commission have been working towards adoption of a general directive for obligatory human rights and environmental due diligence for large corporations.5

Keywords

business and human rightscorporate accountabilityChinaEuropean Unionsanctions
Type
Developments in the Field
Information
Business and Human Rights Journal , Volume 6 , Issue 3 , October 2021 , pp. 559 - 566
Copyright
© The Author(s), 2021. Published by Cambridge University Press

I. Introduction

Human dignity, effective human rights protection and the rule of law are the backbones of the legal system of the European Union (EU).Footnote 1 The EU and its member states have been front-runners in human rights protection not only on its own territory, but also beyond in their relationship with third countries. They have been the principal standard-setters in the field of business and human rights (BHR). The majority of the EU member states (15 out of 27) have so far adopted National Action Plans on Business and Human Rights.Footnote 2 As far as legislative action goes, the EU has in recent years adopted two binding legal acts in the BHR field, namely, a Directive requiring obligatory non-financial reporting for large corporationsFootnote 3 and a Regulation concerning mandatory due diligence for the EU-based importers of minerals and metals from conflict-ridden areas.Footnote 4 More recently, the European Parliament and the European Commission have been working towards adoption of a general directive for obligatory human rights and environmental due diligence for large corporations.Footnote 5

Equally importantly, the Council of the EU, which shares the legislative role in the EU with the European Parliament and the European Commission, in December 2020 adopted the reformed sanctions regime with the objective of not turning a blind eye to human rights abuses beyond its borders. By its Decision 2020/1999 of 7 December 2020, the Council established ‘a framework for targeted restrictive measures to address serious human rights violations and abuses worldwide’.Footnote 6 It also adopted a Council Regulation (EU) 2020/1998Footnote 7 concerning restrictive measures against serious human rights violations and abuses, which has introduced detailed rules aimed at both natural and legal persons.

Both these instruments were adopted under the auspices of the EU’s common foreign and security policy and objectives set forth in Article 21 of the Treaty of the Functioning of the European Union.Footnote 8 As a result, the EU established a legal basis for adoption of restriction measures such as freezing of funds and economic resources of natural and legal persons involved in grave human rights abuses. Civil society organizations and member states have long lobbied for a European system of sanctions for human rights violations and abuses committed either by state actors and/or by private actors. With the adoption of both legal instruments, the Council of the EU has certainly taken a step forward in sanctioning human rights violations around the world and in turn added another piece in the puzzle of a growing trend to prevent and address business-related human rights violations.

This piece explores the actual or potential impact of the new EU sanctions regime on securing the various facets of accountability for business-related human rights abuses. What is possible added value for ensuring that not only states, but also business actors, comply with human rights responsibilities? The scope of the sanctions regime can potentially be very far-reaching, as we know that in some autocratic countries the largest corporations are linked to or owned by state authorities. At the same time, it is less clear whether the system will come to fruition in practice and how the newly adopted sanctions regime fits within the EU’s existing BHR framework. In other words, the piece will examine whether the new EU sanctions regime for human rights violations is a step forward for enforcement bodies and rights-holders to ensure accountability of business and governments for business-related human rights abuses, or it is just a threat in the air? Section II discusses the content and nature of the reformed EU human rights sanctions regime, whereas section III explores recent practice under this regime, linking it with the recent practice under previous EU economic sanctions regimes. Finally, section IV presents four proposals to further strengthen the EU sanctions regimes from the BHR perspective.

II. EU Human Rights Sanctions Regime: Content and Nature

The reformed EU human rights sanctions regime, in accordance with the proclaimed autonomy of EU law and its distinctness from international law,Footnote 9 is part of the self-standing EU sanctions regime.Footnote 10 In this way, it is distinguished from the sanctions deriving from the United Nations Security Council regime and also from the autonomous sanctions regime established by individual countries such as that of the United States of America.Footnote 11 The regime applies not only to natural persons, but also to corporations that are directly or indirectly involved in human rights abuses. It creates an administrative regime that guarantees a legal basis for imposing sanctions against individuals and corporations that have violated human rights. Generally, sanctions regimes aim to prevent further human rights violations and curtail (financial) power and business activities of individuals and businesses to propel further violations.Footnote 12

The EU human rights sanctions regime applies to ‘genocide’; ‘crimes against humanity’; ‘serious human rights violations or abuses’ such as ‘torture and other cruel, inhuman or degrading treatment or punishment’; ‘slavery’; ‘extrajudicial, summary or arbitrary executions and killings’; ‘enforced disappearance of persons’; and ‘arbitrary arrests or detentions’; ‘other human rights violations or abuses’ of ‘systematic or are otherwise of serious concern’.Footnote 13 The Council Regulation provides for restrictions on entry of individuals into the territory of the EU member statesFootnote 14, the freeze of fundsFootnote 15 and prohibition to make those funds available for natural and legal persons that have violated or have been involved in human rights violations.Footnote 16 The Regulation distinguishes between three types of involvement of natural or legal persons: direct involvement, indirect involvement by providing direct support, and involvement by association.Footnote 17

The Council of the EU periodically includes natural and legal persons that commit human rights violations in Annex 1 of the Regulation 2020/1998, where it also briefly explains reasons why they were included thereto.Footnote 18 The Regulation also obliges the Council to inform persons about the inclusion and provide them with the possibility to submit observations.Footnote 19 Moreover, it creates a legal basis for national authorities to unfreeze funds under some conditions.Footnote 20 The EU member states are also obliged to adopt national rules concerning criminal sanctions and administrative fines for infringement of regulation.Footnote 21 Types and nature of penalties often differ between EU member states, which are also responsible for their enforcement.Footnote 22 The reformed regime of restrictive measures grants the EU and its member states a comprehensive array of ways to restrict entry, freeze funds and limit availability thereof for individuals and legal persons that have been involved in committing serious human rights violations in third countries. More importantly, it recognizes that the EU is not willing to turn a blind eye to violations, even if that may endanger the interests of its business community.

III. Recent Practice under the EU Human Rights Sanctions Regime

Since its adoption in December 2020, the EU human rights sanctions regime has already been employed several times by way of several implementing regulations addressing persons from different countries. First, the Council of the EU agreed on 2 March 2021 in the form of Implementing Regulation to include the names of four high-ranking individuals in the Russian public administration in the Section A of Annex I to Regulation (EU) 2020/1998, which includes natural persons subject to restrictive measures.Footnote 23

Second, the Council of the EU adopted restrictive measures against several natural and legal persons connected to the human rights violations in the People’s Republic of China (PRC), the Democratic People’s Republic of Korea (DPRK), Libya, Eritrea, South Sudan and Russia.Footnote 24 More specifically, it included four Chinese nationals allegedly connected to human rights violations in the Xinjiang Uygur Autonomous Region.Footnote 25 One of these four individuals is Mr Wang Junzheng, a Party Secretary of the Xinjiang Production and Construction Corps (XPCC), which supervises all business activity in Xinjiang Uygur Autonomous Region.Footnote 26 The Council of the EU also imposed restrictive measures on two North Korean nationals,Footnote 27 two Libyan individuals,Footnote 28 two Russian nationalsFootnote 29 and one individual from South Sudan.Footnote 30

As far as legal persons are concerned, the Council placed four legal entities from PRC, DPRK, Libya and Eritrea in Section B of Annex I to Regulation (EU) 2020/1998.Footnote 31 While these are mostly military non-state actors, they also include an economic entity, XPCC, and its Public Security Bureau. XPCC ‘is a state-owned economic and paramilitary organisation in China’s Xinjiang Uyghur Autonomous Region, which exercises administrative authority and controls economic activities in Xinjiang’.Footnote 32 Moreover, XPCC has in the past created several subsidiaries, which are active in various industrial sectors.Footnote 33 The Public Security Bureau carries our security policies for XPCC. The XPCC Public Security Bureau was placed on the sanctions list for being ‘responsible for serious human rights violations in China, in particular large-scale arbitrary detentions and degrading treatment inflicted upon Uyghurs and people from other Muslim ethnic minorities’.Footnote 34

Section A of Annex I now includes the names of 15 individuals linked to human rights violations in the PRC, the DPRK, Libya, Eritrea, South Sudan, Russia and Myanmar.Footnote 35 As it stands, Section B of Annex I includes the names of only four legal entities.Footnote 36 Nonetheless, the Council of the EU may also place on the list businesses that have benefited from ongoing systematic human rights violations.

The adoption of the EU human rights sanctions regime appears to have encouraged the Council of the EU to update its existing economic sanctions regimes, particularly concerning recent human rights violations by authoritarian regimes in Myanmar and Belarus. Those economic sanctions regimes were established previously as autonomous sanctions regimes by separate legal acts of the Council. However, they also indirectly provide a legal basis for sanctions against governments for systemic human rights violations. As a result, the Council of the EU has recently imposed restrictive measures against 43 individuals and six legal persons in Myanmar, among them five businesses.Footnote 37 All those individuals and legal persons form the spider web of the Myanmar military regime, which has been involved in systematic and general human rights violations.Footnote 38 For instance, the Council observed that the Myanmar Economic Corporation Limited ‘financially supported the Tatmadaw and thus contributed to its capability to carry out the “clearance operations” and serious human rights violations in 2017 against the Rohingya population’.Footnote 39 Similarly, the Council of the EU has recently extended the list of sanctions against Belarus individuals and businesses, which now includes 166 individuals and 14 corporations that are connected and benefiting from the Lukashenka regime, which has been for years violating human rights and fundamental freedoms in Belarus.Footnote 40

The recent decisions of the Council of the EU illustrate that the new EU human rights sanction regime, together with the existing economic sanctions regimes, could accommodate an effective additional layer of accountability not only in human rights protection generally, but also in the BHR field specifically. Those target sanctions aim to curtail the capacity of the rogue regimes and their economic networks to commit further violations. What is perhaps unclear at the moment is how the EU regime fits with the recent developments at the EU level concerning BHR. The European institutions should therefore clarify how the reformed EU sanctions regime could complement the already existing binding instruments and how it would strengthen the proposed mandatory due diligence directive.

Undoubtedly, the EU human rights sanctions regime should be incorporated into the final draft of the proposed EU human rights and environmental due diligence directive in two ways. First, the forthcoming EU directive should also cover corporations from third countries even if there is only an indirect nexus with the EU’s internal market.Footnote 41 Second, the EU human rights sanctions regime and its restrictions measures should be included in the envisaged ‘early warning mechanism’ as a part of internal grievance mechanisms that corporations will have to grant rights-holders under the proposed EU due diligence directive.Footnote 42 Such a reformed mechanism could strengthen the existing binding BHR frameworks within the EU.

Nonetheless, it appears that the new EU sanctions regime has already borne some fruit in BHR contexts. One can draw such conclusions from quite aggressive reactions by the PRC’s government towards the restrictive measures imposed against some of its natural and legal persons. For example, the PRC government in March 2021 announced counter sanctions against several high-ranking EU individuals and organizations.Footnote 43 Placing PRC’s national and legal persons in the sanctions list has also placed ratification of the recent EU–China Comprehensive Agreement on Investment by the European Parliament into jeopardy.Footnote 44 Therefore, the actual and future potential impact of the new EU human rights sanctions regime should not be under-estimated. On the one hand, the sanctions mechanism aims to prevent further human rights violations. On the other hand, it aims to identify human rights violations and their perpetrators. As a result, the sanctions regime could serve as a preventative tool for engagement with third countries, where human rights violations are of general and systemic nature.Footnote 45 As such, it could provide a complementary umbrella of accountability for the most serious business-related human rights violations, particularly in the area of the extraterritorial operations of both EU member states and businesses. At the same time, its function to address human rights violations is questionable because it does not provide rights-holders with a possibility to take part in the proceedings before the Council of the EU.

IV. The Way Forward

The new EU sanctions regimes generally aim to restrict trade and business activities thereby (in)directly preventing business-related human rights violations. The first months since the adoption of this regime have demonstrated that the Council of the EU has taken its role in preventing human rights violations abroad seriously. As a result, it would be erroneous to dismiss restrictive measures under the novel regime as nothing more than an empty threat. They have the potential of curtailing future business-related human rights abuses despite their mostly administrative character, which results in freezing the funds of natural and legal persons. Their true potential, however, depends on the future activities of the national authorities of the EU member states, which are competent to impose sanctions and fines in the case of human rights violations. As yet, there is no real evidence of changes in the conduct of sanctioned state or corporate actors.

For the EU human rights sanctions regime to realize concrete potential to further complement the existing and forthcoming BHR regulations at the EU level, further reforms are necessary. First, the Council of the EU should try to merge its existing human rights and economic sanctions regimes into a single, uniform and transparent sanction regime. Second, the EU human rights sanctions regime should be clearly aligned with the existing and forthcoming mandatory human rights due diligence measures at domestic and international levels. Businesses would then include compliance with the restriction’s measures in the risk management of their global supply chains. Third, other EU institutions such as the European Parliament and also civil society organizations should in future be included in the procedure before the Council of the EU as to placing natural and legal persons on the sanctions list. Fourth, the supervision of the EU sanctions regime should be improved by strengthening cooperation between the Council of the EU and national authorities of member states.

In short, the reformed EU human rights sanctions regime should be welcomed as an additional layer of protection for enforcement bodies and rights-holders to ensure accountability of business and governments for business-related human rights abuses. Nonetheless, the Council of the EU should adopt further measures for the regime to become more than a symbolic tool in preventing and responding to business-related human rights abuses.

Footnotes

Conflicts of interest: The author declares none.

*

Professor of Constitutional and Human Rights Law, Faculty of Government and European Studies, New University, Ljubljana and Kranj, Slovenia. This piece was prepared within the framework of a research project co-financed by the Slovenian Research Agency: ‘A Holistic Approach to Business and Human Rights’ (no. JP-1790).

References

1 They are part of the fundamental values, pursuant to Article 2 of the Treaty on the European Union and form part of the EU Charter of Fundamental Rights, which proclaims in Article 1 that ‘Human dignity is inviolable. It must be respected and protected’.

2 OHCHR, ‘State National Action Plans on Business and Human Rights’, https://www.ohchr.org/en/issues/business/pages/nationalactionplans.aspx (accessed 12 July 2021).

3 ‘Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups Text with EEA relevance’, Official Journal of the European Union, L 330, 15.11.2014, 1–9.

4 ‘Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas’, Official Journal of the European Union, L 130, 19.5.2017, 1–20.

5 European Parliament, ‘Resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability’ (2020/2129(INL)).Google Scholar

6 ‘Council Decision (CFSP) 2020/1999 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses’, Official Journal of the European Union, L 410I, 7.12.2020, 13–19, art 1.

7 ‘Council Regulation (EU) 2020/1998 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses’, Official Journal of the European Union, L 410I, 7.12.2020, 1–12.

8 Treaty on the Functioning of the European Union, Official Journal of the European Union, C 326, 26.10.2012, 47–390.

9 Joined Cases C-402/05 P and C-415/05, P Yassin Abdullah Kadi and Al Barakaat International Foundation v Council of the European Union and Commission of the European Communities, EU:C:2008:461.

10 Nadia Zelyova, ‘Restrictive Measures: Sanctions Compliance, Implementation and Judicial Review Challenges in the Common Foreign and Security Policy of the European Union’ (2021) 22 ERA Forum 159, 161.

11 Ibid.

12 Ibid, 162.

13 Council Regulation (EU) 2020/1998, note 7, art (2)(1)(a–d).

14 Council Decision (CFSP) 2020/1999, note 6, art 2(1).

15 Council Regulation (EU) 2020/1998, note 7, art 3(1).

16 Ibid, art 3(2).

17 Ibid, art 3(3).

18 Ibid, art 14.

19 Ibid, art 14(2). See also Kadi II, Joined Cases C-584/10 P, C-593/10 P and C-595/10 P, Commission v Kadi, [2013] ECLI:EU:C:2013:518.

20 Council Regulation (EU) 2020/1998, note 7, art 4.

21 Ibid, art 16.

22 EU Commission, ‘Restrictive measures (sanctions)’, https://ec.europa.eu/info/business-economy-euro/banking-and-finance/international-relations/restrictive-measures-sanctions_en#tool (accessed 12 July 2021).

23 ‘Council Implementing Regulation (EU) 2021/371 of 2 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses’, Official Journal of the European Union, L 71 I, 2.3.2021, 1.

24 ‘Council Implementing Regulation (EU) 2021/478 of 22 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses’, ST/6935/2021/INIT, Official Journal of the European Union, L 99I, 22.3.2021, 1–12.

25 Ibid, 3–6.

26 Ibid, 4.

27 Ibid, 6–7.

28 Ibid, 7–8.

29 Ibid, 8–9.

30 Ibid, 10.

31 Ibid, 10–12.

32 Ibid, 10.

33 XPCC has ‘4391 industrial, construction, transport and commercial enterprises’. PRC, ‘Establishment, Development and Role of the Xinjiang Production and Construction Corps’, http://www.china.org.cn/e-white/20030526/9.htm (accessed 12 July 2021).

34 ‘Council Implementing Regulation (EU) 2021/478 of 22 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses’, ST/6935/2021/INIT, Official Journal of the European Union, L 99I, 22.3.2021, 1–12, Annex I, Section B, 1.

35 ‘Council Decision (CFSP) 2020/1999, note 6, Annex I, Section A.

36 Ibid, Annex I, Section B.

37 ‘Council Implementing Regulation (EU) 2021/998 of 21 June 2021 implementing Regulation (EU) No. 401/2013 concerning restrictive measures in view of the situation in Myanmar/Burma’, ST/9554/2021/INIT, Official Journal of the European Union, L 219I, 21.6.2021, 45–54.

38 See, for instance, Joshua Cheetham, ‘Myanmar coup: the shadowy business empire funding the Tatmadaw’, BBC News, https://www.bbc.com/news/world-asia-56133766 (accessed 12 July 2021).

39 ‘Council Implementing Regulation (EU) 2021/638 of 19 April 2021 implementing Regulation (EU) No 401/2013 concerning restrictive measures in view of the situation in Myanmar/Burma’, ST/7710/2021/INIT, Official Journal of the European Union, L 132I, 19.4.2021, 1–11, Annex 1, Section B, 2.

40 ‘Council Implementing Regulation (EU) 2021/997 of 21 June 2021 implementing Article 8a (1) of Regulation (EC) No. 765/2006 concerning restrictive measures in respect of Belarus’, ST/9448/2021/INIT, Official Journal of the European Union, L 219I, 21.6.2021, 3–44, Annex I, Sections A and B.

41 Article 2(1) of the Draft Proposal provides that the ‘Directive shall apply to large undertakings governed by the law of a Member State or established in the territory of the Union’. ‘Recommendations as to the Content of the Proposal Requested, Recommendations for Drawing up a Directive of the European Parliament and of the Council on Corporate Due Diligence and Corporate Accountability’ (10 March 2021) (2020/2129(INL)).

42 The current Draft Proposal provides for ‘an early-warning mechanism for risk-awareness and as a mediation system, allowing any stakeholder to voice reasonable concerns regarding the existence of a potential or actual adverse impact on human rights, the environment or good governance’. Ibid, art 9(1).

43 PRC’s Government, ‘Foreign Ministry Spokesperson Announces Sanctions on Relevant EU Entities and Personnel’ (22 March 2021), https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1863106.shtml (accessed 12 July 2021). See also Deutsche Welle, ‘EU–China investment deal put on ice over sanctions’ (4 May 2021), https://www.dw.com/en/eu-china-investment-deal-put-on-ice-over-sanctions/a-57427703 (accessed 12 July 2021).

44 European Commission, ‘EU–China Comprehensive Agreement on Investment’, https://trade.ec.europa.eu/doclib/press/index.cfm?id=2115 (accessed 12 July 2021). See also Surya Deva, ‘Being Naïve or Putting Business First?: The EU–China Comprehensive Agreement on Investment, Human Rights and the Hong Kong Situation’, VerfBlog (19 January 2021), https://verfassungsblog.de/being-naive-or-putting-business-first/ (accessed 12 July 2021).

45 See, for instance, ‘Dealing with China’, The Economist (20–26 March 2021) 7–8.