In the context of foreign trade law, there is currently a discussion about the extent to which sanctions can have a so-called ‘extraterritorial effect’. I would like to shed light on this topic and discuss in particular the extent to which this currently applies to individual sanctions regimes.
In foreign trade law, extraterritoriality means that a state applies and enforces its law to persons and entities outside its borders. By nature, it seems obvious, that the implementation of foreign laws is not without problems. In addition to a lack of language skills – sources of law are usually only available in the national language – a lack of legal knowledge is the elementary problem. And also insufficient understanding of enforcement possibilities of foreign authorities can cause issues. In the following, I would like to examine examples of extraterritorially applicable sanctions law of individual states.
In EU law, Art. 13 of Regulation 883/2014 defines that the embargo regulation against Russia applies worldwide, but only if the following reference factors are present: citizenship in an EU member state (1) or legal entity established or registered under the law of an EU member state (2).
The UK Sanctions and Anit-Money Laundering Act 2018 is also designed to be extraterritorial, requiring as neuxs: a citizenship of the United Kingdom (1) or a legal entity formed or incorporated under the laws of the United Kingdom (2).
In US law, the Export Administration Regulations (EAR) apply worldwide when linked to US citizenship, green card or first residence in the US (1), in the case of a US entity (2). However, this only applies if the product is a product according to § 734.3 & 4 EAR. The sanctions provisions of OFAC, which are also based on U.S. law, do not apply extraterritorially. However, this principle is broken in the case of so-called ‘secondary sanctions’. These are the sanctions against Russia, Iran, North Korea, Hong Kong, and Syria. In the event of violations, secondary sanctions can restrict or even exclude access to the U.S. financial system and the U.S. market.
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