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Trade with sanctioned countries

Trade with sanctioned countries

In principle, you are free to trade with whomever and in whatever you wish. However, there are particular (in principle legal) transactions with specific countries and/or persons that are prohibited on the basis of a sanction. An example of this is the recently announced restriction by the EU of the export of rubber boats and outboard motors to Libya. There are more such prohibitions or restrictions in respect of specific countries, the so-called sanctioned countries. You may not trade, directly or indirectly or only to a limited degree, with (specific persons in) these countries. Be very aware which countries qualify as a sanctioned country and which transactions are not permitted. A breach of these sanctions can be viewed as a breach under administrative law and in some cases even a criminal offence. This could lead to serious fines and other measures that you would rather prevent.

Sanctions A sanction is a measure by a country or an international organisation against another country, regime or (legal) person imposed to achieve particular economic, social and/or political objectives (hereinafter: ‘Sanction’). A Sanction is usually deployed as a (non-military) response to a breach of international law, and human rights in particular. Another reason for using Sanctions is to combat terrorism. Sanctions issued with this objective are in particular directed against specific persons. A Sanction is usually imposed by the United Nations (UN) and subsequently adopted by the European Union (EU). However, as shown in the tackling of human trafficking in Libya as referred to in the introduction, the EU (and an individual country) can also issue Sanctions independently. This may happen when no consensus can be reached at UN level on a particular sanction for example, as was the case when trying to tackle the human traffickers in Libya.

Implementation in the Netherlands In the Netherlands, the Sanctions Act 1977 provides the basis for implementing international Sanctions. This implementation can take place by:

  1. copying the content of the international rules (this is required if the Sanction has not been announced as a regulation)[1];
  2. if there is a regulation, by the creation of provisions that provide for the criminalisation of breaches of the relevant provisions of this regulation; or
  3. simply implementing the international standards. This because not every international sanction always requires the introduction of a national sanctions regime. This applies to provisions that are directly and exclusively aimed at government bodies.

Monitoring & enforcement Under administrative law Various bodies in the Netherlands are responsible for monitoring and implementing Sanctions. The body responsible for the (administrative) monitoring of import and export are Customs, more specifically the Central Import and Export Office (CDIU). The Netherlands Central Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM) monitor the compliance with the Sanctions by the financial institutions falling under their supervision. The supervisory bodies have far-reaching powers to carry out their supervisory duties. For instance, they are authorised to enter particular places, demand information and data, inspect proof of identity, take samples and inspect means of transport. This applies in principle to anyone, not just an alleged infringer of a Sanction therefore.

A breach can – as regards administrative law – lead to the imposition of an order for coercive administrative action, a periodic penalty payment and/or a fine. These measures can be imposed simultaneously and only require that the infringer or his manager can be accused of the breach of a Sanction (blame and intent are not important). Please be aware that acting in conflict with a Sanction by a purchaser or a subsidiary could possibly also be attributed to the supplier or the parent company. The administrative fine can amount to maximum €4,000,000 and in the event of a repeated breach within five years, the imposed fine can be doubled.

Under criminal law Every breach committed by a Dutch person (within the Netherlands or abroad) is, in principle, punishable. The officials charged with investigating breaches of Sanctions have far-reaching investigative powers. The criminal law measures and fines imposed on the breach of a Sanction are substantial. The maximum prison sentence is six years and the maximum fine is ‑ depending on the value of the transaction – €820,000. Additional measures can also be taken such as the shutting down of the particular company, denying (for a period of time) particular licences, exemptions and premiums, the removal, confiscation and forfeiture of particular goods, and placing the company under administration. Contrary to administrative law, in this criminal sphere intention and blame in respect of the breaches do play a (large) role. This does not alter the fact that you – under circumstances – could also be held to account for a breach of a Sanction by a purchaser or subsidiary.

Consequences for you As shown above, (legal) persons acting contrary to a particular Sanction can be tackled forcefully both under administrative and criminal law. To prevent any breach of a Sanction within your company it is important that all those in the company are aware of the prohibited and permitted activities. It is also important to inform third parties with whom you do business of these Sanction Regulations and the applicable restrictions. It could also be wise to include provisions relating to Sanctions in your agreements or general terms and conditions. As the Sanctions, and their adjustments, happen rapidly, it is recommended to keep properly up to date with the latest state of affairs and to share and include any new developments as soon as possible in your documentation.

Via this page we are keeping you up to date of the most important developments in the field of national and international Sanctions and the consequences they may have for you and your company. For an overview of the Sanctions currently in force, I refer you to the websites below.

See also: Peek & Smaric, Ondernemingsrecht [Company Law] 2016/106 and Daalderop & Gawronski, Tijdschrift Onderneming & Strafrecht in Praktijk 2015 [Business & Criminal Law in Practice Review], no. 3/4, p. 23-28.

By Bart Jacobs

[1] A regulation is directly applicable. This means that it directly creates law that has the same force in all EU Member States as national law without the content having to be included in national legislation.

 

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