M. Cannon and David
In response to the escalation in the
level of violence perpetrated by the current Syrian regime against its people,
the EU has recently implemented additional measures directly targeted at
depriving the current regime of financial revenues and the support base
necessary for maintaining the internal repression. This client briefing
provides an update on the recent expansion of the EU sanctions on Syria,
following our client briefing of 16 May 2011 entitled "Further Controls
on Doing Business in the Middle East: New EU Sanctions on Syria",
and our client briefing of 19 August 2011 entitled, "The United States
Imposes Significant New Sanctions Against Syria; European Union May Soon Follow
The EU has dramatically increased
the pressure on President Bashar al-Assad's government by agreeing to a new
round of sanctions against Syria, including a ban on purchases of Syrian oil.
With this new sanctions regime reportedly affecting 95% of Syrian exports,
companies based in the EU, including international companies with subsidiaries
and operations in the EU, should carefully consider whether the new sanctions
have any effect on their business activities in the region.
In summary, the new sanctions
International organisations should
be aware that the new sanctions do not go as far as instituting an investment
ban, which was imposed by the U.S. in August 2011.
On 9 May 2011, the Council of the
European Union adopted Council Regulation (EU) No. 442/2011 (the
"Regulation") and a Council Decision 2011/273/CFSP (the "Council
Decision"). The Regulation and Council Decision, which came
into force on 10 May 2011, implemented amongst other restrictions asset
freezing measures on 13 officials and associates of the Syrian regime who have
been identified by the Council as being responsible for the violent repression
against the civilian population in Syria, as well as an embargo on exports of
certain arms and equipment that could be used for internal repression.
Ban on the Purchase of Syrian Oil
In an effort to restrict funding for
the current Syrian regime and increase political pressure on President Bashar
al-Assad, the EU has now agreed to ban all EU imports of Syrian oil products with
effect from 3 September 2011 (subject to certain exceptions set out below).
The newly implemented Council
Regulation (EU) No 878/2011 (the "New Regulation") amends the
previously existing Regulation to prohibit:
the importation into the EU of all crude oil and petroleum products which are
located in or originated in Syria;
the purchase of all crude oil or petroleum products which are located in or
originated in Syria;
the transportation of crude oil or petroleum products originating in Syria, or
being exported from Syria to any other country;
the provision, directly or indirectly, of finance or financial assistance,
including financial derivatives, as well as insurance and re-insurance, as they
relate to points (1), (2) and (3) above; and
the participation, knowing and intentional, in activities whose object or
effect is, directly or indirectly, to circumvent the prohibitions set out in
point (1), (2), (3) or (4) above.
This prohibition does not,
however, apply to:
When acting under the first of these
exceptions, companies must notify the competent authority of the Member State
in which it is established at least seven days in advance of any shipment.
Importantly, the Regulation has also
been amended to protect EU persons and entities from claims by the Syrian
Government in relation to contracts or transactions, the performance of which
was affected, directly, in whole or in part, by the measures imposed under the
To facilitate the implementation of
the New Regulation, the EU has suspended Articles 12, 14 and 15 of the
Cooperation Agreement between the European Economic Community and the Syrian
Arab Republic ("EU-Syria Cooperation Agreement"), as it relates to
the trade in crude oil and petroleum products.
Expansion of List of Individuals and
Entities Subject to Sanctions
The Council has added a further four
Syrian individuals and three Syrian entities to the "Annex II" list
of individuals, entities and bodies which are subject to financial sanctions
(including asset freezes) and travel bans imposed by the Regulation and the
Council Decision. The extended Annex II list includes fifty four individuals
and twelve entities. A consolidated list of the current
individuals and entities listed in Annex II, as it applies to the UK, can be
found on the HM Treasury website.
In addition, the New Regulation
expands the criteria for imposing financial sanctions by permitting the
European Council to add to Annex II any persons and entities determined by the
Council as benefiting from or supporting the Syrian regime.
The Regulation already requires that
if financial institutions maintain any accounts or otherwise hold any funds or
economic resources for the persons or entities listed in Annex II, they are
obliged to freeze those accounts and report their findings to the relevant
authority (e.g., HM Treasury in the UK), together with any additional
information that would facilitate compliance with the Regulation. Unless
licensed by the relevant authority, affected companies and individuals must
refrain from making funds or other economic resources available to the
designated persons or entities.
The New Regulation expands the
circumstances under which the competent authorities are permitted to license
the release of frozen funds or make funds available for certain activities for
As with the previous EU measures,
primary national legislation is not required to implement the restrictive
measures. However, Member States are required to implement their own rules on
the penalties applicable which must be effective, proportionate and
EU government ministers are expected
to have further talks on additional sanctions as events unfold in Syria. French
Foreign Minister, Alain Juppe and his British counterpart, William Hague, have
both already indicated that further sanctions on Syria's oil industry may be
With further prospective
restrictions in mind, companies currently and prospectively conducting business
in or in connection with Syria should review the provisions of the new
sanctions carefully (bearing in mind the scope of the new restrictions and the
revised list of designated individuals and entities), analyse the effect they
may have on their business activities and existing compliance programmes, and
monitor the situation as it continues to develop.
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 A full copy of the Regulation
and Council Decision can be found at www.eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:121:FULL:EN:PDF
See also Council Decision 2011/522/CFSP http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:228:0016:0018:EN:PDF
 For example, in the UK the
Competent Authority is the Department for Business, Innovation and Skills.
 As amended by Council Regulation
(EU) No 878/2011.
 Council Regulation (EC) No
442/2011, Council Implementing Regulation (EU) No 504/2011, Council
Implementing Regulation (EU) No 611/2011, Council Implementing Regulation (EU)
No 755/2011, Council Implementing Regulation (EU) No 843/2011, Council
Regulation (EU) No 878/2011
 For example, in the UK; The
Syria (Restrictive Measures) (Overseas Territories) Order 2011 and The Export
Control (Syria and Miscellaneous Amendments) Order 2011