EU Considers Adding More Teeth to Sanctions Enforcement with Adoption of Draft Law Criminalizing Sanctions Evasion

On July 6, 2023, members of the European Parliament’s Civil Liberties Committee (CLC) adopted a draft negotiating mandate that would target those violating or circumventing EU Sanctions.

The legislation under consideration is a proposed directive, published by the European Commission in December 2022, on the definition of criminal offences and penalties for the violation of Union restrictive measures. It would introduce a common definition of violations and set minimum penalties to ensure that the perpetrators can be punished everywhere within the EU. Although the scope of the proposed directive is not limited to restrictive measures taken against Russia, its primary aim is to address problems of legal circumvention that have been identified since the invasion of Ukraine.

There is no doubt that this text is of great importance not only as regards sanctions, but also as regards EU law in general. This proposed directive marks a new stage in the recent expansion of the EU’s competence in criminal matters, following the creation of the EPPO which launched its operations in 2021. This proposal also suggests a quasi-harmonization between Member States for certain aspects of criminal practice.

Building on the Commission’s original proposal, MEPs in the CLC have now voted in favor of amendments that would (i) establish the European Public Prosecutor Office (EPPO) as a key player in the prosecution of violations of EU restrictive measures, (ii) detail what constitutes circumvention under the directive, and (iii) punish more severely those who violate EU restrictive measures:

1. MEPs favor an extension of the EPPO’s competence

   
   The CLC draft amendments make provision for EPPO competency in respect of criminal offences for the violation of Union restrictive measures in so far as they concern participation in a criminal organization or criminal offences inextricably linked to offences for which EPPO has material competence.
   
   In addition, the amendments leave the door open for a “possible extension of competence of the EPPO” beyond such situations. This is in line with the French and German Justice Ministers plea (in November 2022) for violations of EU sanctions to be prosecuted by the EPPO.
   
   To ensure the effectiveness of the EPPO investigations, the CLC has added a requirement that Member States participate in enhanced cooperation regarding the establishment of the EPPO, and closely cooperate with the central and decentralized levels of the EPPO.
   
   

2. A more detailed definition of “circumvention of EU restrictive measures”

   
   The CLC MEPs extensively amended the definition of circumvention as contained in Article 3 of the proposed directive. Their amended draft provides a more detailed list of prohibited behaviors and broadens the scope of application.
   
   Circumvention would no longer cover just the concealing of relevant funds or economic resources by their transfer to a third party, but would also cover:
   - the moving, transferring, altering, using, accessing, dealing with, selling, hiring or mortgaging of relevant funds or economic resources
   - owned, held, or controlled by a designated person, entity or body,
   - in a way that results in a change in the volume, amount, location, ownership, possession, character or destination of those funds or economic resources or any other change that would enable those funds and resources to be used, including by a third party or through portfolio management.
   
   

3. MEPs voted for more severe punishments for violations of EU 8

   
   The CLC voted to increase the lowest threshold for the maximum fine that companies would have to pay to EUR 10,000,000, or 15% of overall annual turnover (instead of just 1% as suggested in the proposal). 
   
   In addition, the lowest maximum penalty for a natural person has been increased to five years imprisonment (rather than one or four years in the proposal directive).
   
   Finally, the CLC draft adds four new “aggravating circumstances”, one of which covers when the offence is committed by senior management, or when senior management level should reasonably have been aware of the offence committed.

In the next step of the procedure, the CLC draft will now be voted on by the European Parliament in plenary session. If it is approved, it will become the European Parliament’s position in the inter-institutional negotiations on this piece of legislation.