Targeted Sanctions – Enforcing International Norms Through the Backdoor?

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Introduction

On 10 April 2024, the EU General Court annulled the inclusion of Petr Aven and Mikhail Fridman in the list of persons subject to restrictive measures. The Court failed to establish causality and did not find sufficient evidence linking these individuals to the acts undermining territorial integrity of Ukraine. This decision by the EU Court is welcome as it provides a modicum of critical assessment of the sanctions regime that has been used extensively in the context of the war in Ukraine. The rulings in Mr. Aven’s and Mr. Fridman’s case continue the line of judgments reviewing compatibility of sanctions regimes with due process guarantees in the EU Kadi I and Kadi II being particularly well-known earlier precedents.

While sanctions may have strong moral appeal, their harmonization with the principle of legality remains questionable. It has been previously argued that imposing targeted sanctions on private individuals can undermine war effort by recognizing these people’s influence on state decision-making. While such ambition is noteworthy, the shadow side of this development is the erosion of trust of EU citizens and national authorities in the functioning of the rule of law and its core tenets, such as legal certainty and prohibition of arbitrariness of executive powers.

The European Council describes sanctions as restrictive measures that are not punitive in nature as they seek to bring about a change in the policy or conduct of those targeted. The effects of those measures, however, amount to severe limitations on core fundamental rights, such as the freedom of movement (impeded by travel bans) and the right to property (trumped by asset freezes), these measures raise concerns in the context of due process and non-discrimination provisions. All these rights are included in the EU Charter of Fundamental Rights as well as the European Convention on Human Rights, including Protocol No. 1.

There is an emerging scholarly debate regarding the nature of sanctions as possible countermeasures pursuant to Chapter II of the 2001 Articles on the Responsibility of States for Internationally Wrongful Acts, or ARSIWA. The EU Council does not frame them as such, and this legal qualification would be problematic for several reasons. Firstly, Article 49(1) of ARSIWA provides an injured state with the possibility to take countermeasures against the state responsible for an internationally wrongful act with the purpose of inducing compliance. It is highly contested that sanctions have such an incentivizing effect. Secondly, Article 50(1)(b) of ARSIWA prohibits taking countermeasures affecting obligations for the protection of fundamental human rights. Finally, the standing of indirectly injured states to take general interest countermeasures is currently lacking. This may change in the future as collective enforcement action by third states on behalf of the injured state is entering state practice now.  

Given the challenges of conceptualizing (targeted) sanctions as countermeasures and leaving aside the questions of their effectiveness in bringing about positive transformation, it is worth exploring whether (targeted) sanctions used as the EU Foreign policy tool deliberately blur the line between administrative and criminal law by imposing ‘punishment-like’ treatment on individuals without the guarantees of a criminal trial (eg. meeting the evidentiary burden of proof beyond reasonable doubt, prohibiting retroactive penalties, and allowing the defendant the right to be heard). The hybrid nature of sanctions as a quasi-criminal law instrument has been further reinforced by Council’s decisions of 28 November 2022 and 12 April 2024 to criminalize violations of restrictive measures. It is then worth asking whether blending political pressure with legally significant acts affecting individuals risks diluting the principle of legality, thereby chipping away from institutional trust within the EU in a long-term perspective.

Background of the case against Mr. Aven and Mr. Fridman

The European Council placed Mr. Fridman and Mr. Aven on the sanctions list on 28 February 2022 officially marking them as persons responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. The effect of such listing was freezing of all funds and economic resources belonging to, owned, held or controlled by these individuals. The EU Court in its April rulings concluded with respect to both Mr. Aven and Mr. Fridman that the Council in its listing decision failed to provide reliable evidence of applicants supporting any actions or policies which compromise or threaten the territorial integrity, sovereignty and independence of Ukraine or providing material or financial support to the Russian decision-makers and then taking advantage of these decision-makers.

The EU Council’s original motivation for the inclusion of Mr. Fridman and Mr. Aven in the sanctions list stemmed primarily from the association of these two individuals with Russia’s governing regime. More specifically, the EU Council described Mr. Aven as “one of approximately 50 wealthy Russian businessmen who regularly meet with Vladimir Putin in the Kremlin” and as someone who “does not operate independently of the President’s demands.” Mr. Aven’s business partner, Mr. Fridman, was defined in the same decision as a person who “managed to cultivate strong ties to the administration of Vladimir Putin and has been referred to as a top Russian financier and enabler of Putin’s inner circle.” The Council’s description further mentions Vladimir Putin’s eldest daughter – Maria – who ran a charity project, funded by Alfa Bank, of which Mr. Fridman is an important shareholder. The supporting evidence for these conclusions consisted of several journalistic pieces, such as the Reuters article dated 10 November 2015 concerning the financing by Alfa Bank of a charitable project led by Mr. Putin’s eldest daughter and an open letter published by twelve Russian and American journalists and intellectuals on 21 May 2018 on the website of the Atlantic Council (a foreign relations think tank), protesting against the invitation of Mr. Fridman and Mr. Aven to the headquarters of the Atlantic Council in Washington.

The Court concluded that such evidence is insufficiently “concrete, precise and consistent” to establish the existence of a link between the person subject to a measure freezing their funds and the regime. The Court also observed that some events described in the articles submitted as proof had occurred prior to acts undermining territorial integrity of Ukraine (as early as 2005) and cannot therefore be interpreted as linking listed individuals to any subsequent government’s decision. Furthermore, the Court rejected Council’s assertion that the inclusion was still justified due to the absence of a firm position against the invasion of Ukraine and lack of distancing from the regime. In a nod to a criminal law process, the EU Court highlighted that the burden of proof to demonstrate individual’s support for policies destabilizing Ukraine lies with the Council and a mere allegation of inaction is inadequate to meet this standard (para. 82 of the decision concerning Mr. Aven).

This is not the first ruling by the EU Court rejecting guilt by association in the context of sanctions regime. Last year, the Court annulled the restrictive measures applied to Violetta Prigozhina, mother of Yevgeniy Prigozhin responsible for the deployment of Wagner Group mercenaries in Ukraine. The Court rejected filial relationship as sufficient basis for sanctioning an individual.

The rule of law jeopardized?

As mentioned earlier, targeted sanctions pose overall challenges to the rule of law due to their nature as a hybrid administrative measure attracting severe consequences potentially rising to the level of a criminal penalty (eg. excessive financial burden, stigmatization and other restrictions). The rule of law is recognized as a common value in the EU pursuant to Article 2 TEU and it implies adhering to the principles of legality, legal certainty, prohibition of arbitrariness of executive powers, and respect for human rights.  

As explained by the Venice Commission of the Council of Europe, the principle of legal certainty in the context of a criminal process attracts the highest standard of prohibition on non-retroactivity and enforcing procedural fairness and foreseeability. It is therefore concerning that restrictive measures avoid this level of scrutiny by being disguised as an administrative or a foreign policy tool. It is nonetheless clear that the rule of law guarantees enshrined in Article 2 TEU still apply to an administrative procedure.

In the context of property rights, the rule of law demands that any interference by a public authority with the peaceful enjoyment of possessions should be lawful (Iatridis v. Greece, para. 58). Lawfulness of interference precedes any balancing act between the general interest of the community and the requirement of the protection of the individual’s fundamental rights (ibid). The Committee of Ministers of the Council of Europe explains in its recommendation on good administration that the principle of lawfulness requires public authorities to exercise their powers only if the established facts and the applicable law entitle them to do so (Article 2(4) of the recommendation). The same principle prohibits arbitrary measures by public authorities, even when exercising their discretion. In the cases of Mr. Aven and Mr. Fridman, the inclusion of individuals in the list of persons subject to restrictive measures was based on insufficient and incomplete evidence and therefore violated the principle of lawfulness in that the act of the public authority (in this case, the European Council) did not rely on the established facts. Compromised lawfulness of the measure then vitiates any proportionality assessment as to whether such interference was justified by the collective interests.

Another element of the rule of law that is arguably threatened in the context of targeted sanctions is the principle of legal certainty. Article 6 of the European Council’s recommendations on good administration requires that public authorities act in accordance with the principle of legal certainty and may not take retroactive measures except in legally justified circumstances. As mentioned earlier, the process of justification arises only out of the measure that is lawful. In line with this requirement, the EU Court correctly noted that political support given in 2005 by Mr. Putin to Alfa Group, of which the applicants were major shareholders, could not have been considered for the purposes of including the names of these persons in the sanctions list.

The Venice Commission of the Council of Europe expands on the principle of legal certainty by incorporating the elements of foreseeability and clarity in its definition. This wider understanding of legal certainty is arguably violated when individuals are targeted solely because of association. Mr. Aven and Mr. Fridman were described as having personal ties to the governing circles. The newspaper articles submitted as evidence primarily illustrated this assertion. Absent any express actions supporting governmental policies, it is not obvious that the allegation of personal relationships with members of the government is sufficiently clear and foreseeable criterion to merit severe limitations on core fundamental rights.

Conclusion

As mentioned in the introduction, there are several reasons why it is currently problematic to conceptualize targeted sanctions – especially those affecting obligations to protect fundamental rights – as countermeasures under international law. It is then necessary to look at those measures through some other legal prisms to better assess their compatibility with due process. Merging the regimes of administrative and criminal law to attain foreign policy objectives creates a risk of diluting the high standards of integrity and the rule of law enshrined in the founding documents of the EU. While it is understandable that the purpose of targeted sanctions is to pursue other extremely pressing objectives, such as promoting peace and respect for international law, it remains to be seen whether cutting corners on due process and fundamental rights is the right path towards these goals. Examining the sanctions regime requires long-term thinking outside of the immediate impulse to act. It is a step beyond sensationalism and towards a more sober assessment of the level of legal guarantees afforded to everyone. In this regard, the recent decisions of the EU Court in Mr. Fridman’s and Mr. Aven’s cases are to be applauded.

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