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The Not So Targeted Instrument of Asset Freezes

  • Joy Gordon

Abstract

Asset freezes are sometimes viewed as the quintessential form of targeted sanctions—relatively effective in achieving their goals, while affecting only the individuals and companies that are “bad actors.” However, as part of the roundtable “Economic Sanctions and Their Consequences,” this essay argues that there are significant ethical problems raised by asset freezes and other forms of targeted financial sanctions. Sanctioners (specifically, the United Nations Security Council and the U.S. government) have long been criticized for targeting individuals and companies for arbitrary reasons or without adequate due process. However, there is a second concern that is less well known. Asset freezes and other targeted financial sanctions may be imposed on government officials, government agencies, or private companies that hold a critical role in the target country's economy. A country's central bank, national oil company, or national shipping line, for example, may be severely compromised as a result of its inclusion on a financial blacklist. In addition to the explicit prohibitions imposed by targeted financial sanctions, there is a chilling effect as well. This can be seen when international banks and corporations withdraw from the target country altogether because the burden of compliance with these measures is so great, and the potential penalties so high.

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The author is grateful to Nick Turner for his helpful comments and suggestions.

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NOTES

1 Berman, Howard, Dobriansky, Paula J., Eckert, Sue E., Ann Elliot, Kimberly, Goldwyn, David L., Harrell, Peter, Kassinger, Theodore, et al. , Maintaining America's Coercive Economic Strength: Five Trends to Watch in American Sanctions (Washington, D.C.: Center for a New American Security, 2019), p. 4, www.cnas.org/publications/reports/maintaining-americas-coercive-economic-strength.

2 Gordon, Joy, “The Hidden Power of the New Economic Sanctions,” Current History 118, no. 804 (January 2019), p. 3.

3 Amnesty International, The US Embargo against Cuba: Its Impact on Economic and Social Rights (London: Amnesty International Publications, 2009).

4 See, for example, Fassbender, Bardo, Targeted Sanctions and Due Process: The Responsibility of the UN Security Council to Ensure that Fair and Clear Procedures Are Made Available to Individuals and Entities Targeted with Sanctions under Chapter VII of the UN Charter (Berlin: Humboldt University Berlin, 2006).

5 Judgment in Joined Cases C-584/10 P, C-593/10 P and C-595/10 P Commission, Council of the European Union, United Kingdom v. Yassin Abdullah Kadi (2013), curia.europa.eu/juris/document/document.jsf?docid=139745&doclang=EN.

6 “Treasury Sanctions 13 Current and Former Senior Officials of the Government of Venezuela,” U.S. Department of the Treasury, July 26, 2017, www.treasury.gov/press-center/press-releases/Pages/sm0132.aspx; and “The Outlook for 2018: U.S. Economic and Trade Sanctions against Venezuela” (online panel proceedings, Gibson, Dunn & Crutcher LLP, March 13, 2018), p. 10, www.gibsondunn.com/wp-content/uploads/2018/03/WebcastSlides-US-Economic-and-Trade-Sanctions-Against-Venezuela-2018-03-13.pdf.

7 Francisco Rodríguez, “Why More Sanctions Won't Help Venezuela,” Foreign Policy, January 12, 2018, foreignpolicy.com/2018/01/12/why-more-sanctions-wont-help-venezuela/.

8 “Treasury Sanctions Companies Operating in the Oil Sector of the Venezuelan Economy and Transporting Oil to Cuba,” U.S. Department of the Treasury, April 5, 2019, home.treasury.gov/news/press-releases/sm643.

9 Eckert, Sue E., “The Evolution and Effectiveness of UN Targeted Sanctions,” in van den Herik, Larissa, ed., Research Handbook on UN Sanctions and International Law (Cheltenham, U.K.: Edward Elgar, 2017), p. 66.

10 Office of Foreign Assets Control, List of Foreign Sanctions Evaders Sanctioned Pursuant to Executive Order 13608 (Washington, D.C.: U.S. Department of the Treasury, February 7, 2019).

11 United States Treasury Department, Office of Foreign Assets Control, “List of Foreign Sanctions Evaders Sanctioned Pursuant to Executive Order 13608,” February 7, 2019, www.treasury.gov/ofac/downloads/fse/fselist.pdf.

12 Department of the Treasury, Office of Foreign Assets Control, “Appendix A to Part 501—Economic Sanctions Enforcement Guidelines,” 31 CFR, Federal Register 74, no. 215 (November 9, 2009), www.federalregister.gov/documents/2019/05/21/2019-10616/addition-of-entities-to-the-entity-list. Under § 744.11(b) (Criteria for revising the Entity List) of the EAR, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that he/she has been involved, is involved, or poses a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons may be added to the Entity List.

13 Leonid Bershidsky, “The U.S. List of Russian Oligarchs is a Disgrace,” Bloomberg, January 30, 2018, www.bloomberg.com/opinion/articles/2018-01-30/the-u-s-list-of-russian-oligarchs-is-a-disgrace.

14 Deripaska v. Mnuchin, Complaint for Declaratory and Injunctive Relief, U.S. District Court, District of Columbia, March 15, 2019, p. 15.

15 Borys Dackiw, Kerry Contini, Inessa Owens, Matthew Shanahan, and Sunny Mann, “Impact of Recent US and EU Sanctions on the Middle East,” Global Compliance News, October 11, 2018, globalcompliancenews.com/sanctions-roadshow-us-eu-sanctions-middle-east-20181010/.

16 “Enforcement Information for November 27, 2018: Cobham Holdings, Inc. Settles Potential Civil Liability for Apparent Violations of the Ukraine Related Sanctions Regulations,” U.S. Department of the Treasury, November 27, 2018, www.treasury.gov/resource-center/sanctions/CivPen/Documents/20181127_metelics.pdf; and Epsilon Electronics v. US Department of Treasury, No. 16-5118 (D.C. Cir. 2017).

17 Iván Olivares, “US Banks Pulling-Out of Nicaragua,” Confidencial, December 12, 2018, confidencial.com.ni/us-banks-pulling-out-of-nicaragua/.

18 Dackiw et al., “Impact of Recent US and EU Sanctions on the Middle East.”

19 “UN General Assembly Renews Long-Standing Call for End to US Embargo against Cuba,” UN News, November 1, 2018, news.un.org/en/story/2018/11/1024672.

20 Ashley W. Craig, “International Firms Caught between U.S. Iran Sanctions and EU Blocking Statute,” Lexocology, July 13, 2018, www.lexology.com/library/detail.aspx?g=dc6d6b88-c580-4cd9-a884-c43365856759.

21 Marc J. Bossuyt, “The Adverse Consequences of Economic Sanctions on the Enjoyment of Human Rights” (working paper E/CN.4/Sub.2/2000/33, United Nations Commission on Human Rights, June 21, 2000), p. 10.

22 Article 2, Charter of the United Nations, June 26, 1945, www.un.org/en/sections/un-charter/chapter-i/index.html.

23 Camilo Montoya-Galvez, “Senators Introduce Bill to Send $400 Million in Aid to Venezuela, Strengthen Sanctions,” CBS News, April 3, 2019, www.cbsnews.com/news/venezuela-bill-senators-introduce-legislation-to-send-400-million-in-aid-strengthen-sanctions/.

24 Trump Administration, quoted in Akin Gump Strauss Hauer & Feld LLP, New U.S. Sanctions Regime Targeting Nicaragua (Washington, D.C.: Akin Gump Strauss Hauer & Feld LLP, 2018), p. 2 (emphasis added), www.akingump.com/en/news-insights/new-u-s-sanctions-regime-targeting-nicaragua.html.

* The author is grateful to Nick Turner for his helpful comments and suggestions.

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