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European Commission Takes Steps Toward More Aggressive Approach to EU Sanctions

The European Commission ("EC") has transferred responsibility for EU sanctions implementation to the Directorate General for Financial Stability, Financial Services and Capital Markets Union ("FISMA"), paving the way for a more vigorous approach to EU sanctions implementation and enforcement.

The EU-wide sanctions program used to fall squarely within the responsibility of the EU High Representative for Foreign Affairs and Security ("EUHR"), currently Josep Borrell. Among the EUHR's responsibilities is the proposal of new EU sanctions measures, which require the unanimous agreement of all EU Member States before those measures can be implemented into EU law. Previously, implementation also took place under the auspices of the EUHR.

With the new EC in office as of December 1, 2019, the system for adopting new EU sanctions measures has changed. According to the distribution of portfolios, the responsibility for converting EU sanctions decisions into EU law has been transferred to the Directorate General FISMA, led by Commissioner Valdis Dombrovskis.

In her mission letter to Dombrovskis, EC President Ursula von der Leyen noted that she wants Dombrovskis "to ensure that the sanctions imposed by the EU are properly enforced…." FISMA appears equipped to meet this goal—it already monitors proper enforcement and implementation of other EU regulations, and it also frequently uses its powers to launch infringement proceedings against Member States that fail to do so.

While decisions on new EU sanctions are taken at the EU level, licensing and enforcement are left to the Member States. This has led to significant differences in licensing and enforcement policies, and in the interpretation of EU sanctions regulations, across the European Union.

If FISMA proceeds according to EC President von der Leyen's mandate, one can expect a much more stringent monitoring of proper execution and enforcement of EU sanctions. This may lead to a more consistent EU-wide implementation of EU sanctions measures. It will likely also mean that, faced with potential action by FISMA, Member States will in turn beef up their enforcement efforts against companies that violate EU sanctions.

The creation of FISMA's new responsibility is a reflection of the EC's wider ambition to employ its sanctions policy to bolster the European Union's position as a geopolitical force on the global stage. In fact, EC President von der Leyen has described her team as "a geopolitical Commission."

In addition, she has expressed that the European Union should be "more resilient to extraterritorial sanctions by third countries." In this context, the European Union already updated its EU Blocking Regulation last year in response to the U.S. withdrawal from the Joint Comprehensive Plan of Action, known as the "Iran Nuclear Deal." As we reported earlier, the EU Blocking Regulation places EU companies squarely between the competing demands of U.S. sanctions and EU and national requirements. The imposition of additional measures has the potential to put EU companies before even greater challenges to navigate the choppy waters of contrasting U.S. and EU measures.

These developments clearly demonstrate the EC's commitment to adopting a renewed and more aggressive approach to EU sanctions. As such, companies doing business in the European Union should be prepared for increased scrutiny. They should assess their current policies and procedures, and their exposure to EU and Member States sanctions, accordingly.

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