The sanctions system at the international level

The Russian-Ukrainian conflict situation and recent events represent - unfortunately -the most tragic exemplification of the innumerable critical issues related to international trade and, for what è is of interest here, of the innumerable issues of a judgmental nature underlying the same.

Disentangling embargoes, bans, boycotts, restrictions, technical barriers to import, formalities provided for anti-money laundering, and, more generally, among the measures adopted by International Institutions and Organizations, Sovereign States and Entitiesà various in the field of export and import control and international payment flows, è become really difficult, not only because of the increasing amount of statutory and regulatory provisions that are adopted with increasing rapidity and equally rapidly updated, but also because overlaps are constantly occurring between measures adopted, for example, by the United Nations or the EU, with measures adopted unilaterally by Sovereign States or other International Organizations.

In addition, the intensification of international terrorism and the increase in conflicts involving countries bordering the territory of the European Union have, over the years, made the demand for security from the Community exponentially increase; International and have entailed the problematic issue of control over the export of goods and transfer of technologies that, by their nature, and because of their high technological content, can be used both for peaceful civilian purposes (and in pursuit of which, they were conceived, designed and then implemented) but also for terrorist purposes and those of a highly aggressive warlike nature.

We are therefore talking about so-called dual-use goods (or also referred to as “dual use”) that is, technologies and goods that are designed and manufactured for civilian use, but can find military use, especially in unconventional sectors.

It seems useful to clear the field of a misunderstanding that, since the dual use legislation was adopted, continues to hover in the business world, since a multitude of companies (usually in good faith) è convinced that they are exporting non-dual use goods or technologies, solely and exclusively on the assumption that since they operate companies in a civilian sector (think, for example, of machinery and industrial plants intended for the manufacture of food) their products or technologies cannot have a different destination, and that they are not or cannot therefore be considered as WEAPONS. In reality, armament materials are designed and manufactured specifically for military use or for use by police forces; dual-use goods, conversely, are designed and manufactured for clear civilian purposes but which, because of the presence within them of certain materials, certain components, or because of their high technological content, can also find a warlike use.

In addition to the exponential development of dual-use and international sanctions laws and regulations, over time the very regulations on anti-money laundering, combating tax evasion, on customs, on the transfer of sensitive data, and so on have been added; via, with the consequence that, for a proper management of exports and imports, as well as payments and any type of contract that has points of contact with foreign counterparts, it is essential to carry out a whole series of preliminary analyses in order to ascertain the existence of risks related to the operation that is to be carried out.

The definition of “export control compliance” purposes and functions

The expression “export control compliance” is commonly understood to mean the framework, or rather, the multidisciplinary activity that addresses and touches all activities; of Export and Import (whether they are contracts for the sale of goods or services, tangible or intangible assets, or contracts for procurement, licensing and, in general, any type of agreement involving entities located abroad, as well as all the activities’related; related and connected, such as the transfer of money, the choice of means of payment, and so on), which in some way fall within the scope of application of the compulsory and public policy rules governing export control, having regard to the dual use discipline, and the control of both exports and imports, with regard to prohibitions, restrictions, and, more generally, measures taken by the competent Public Authorities (e.g. embargoes, boycotts, sanctions, restrictive measures, etc…….).

This control activity therefore has the purpose of making sure that the entity that has to carry out a transaction in international trade (i.e. companies, consortia, entities both public and private, professionals, universities, research centers, consulting companies, and so on, which, for convenience of exposition are henceforth cumulatively designated as the “Entità”) is placed in the condition of: (i) have a clear idea of the regulatory framework of reference; (ii) of the mapping of the risks potentially related to the performance of the transaction itself; (iii) consequently, arrange the most appropriate checks, so as to eliminate or, at least, significantly reduce, the risk of wrongdoing, possibly not only of an administrative nature but also of a criminal nature.

Bearing in mind that the penalty system that accompanies export and import control regulations è usually very severe, and beyond the relevance and severity in sé and for sé of the penalties that can be imposed (i.e. seizure or confiscation of assets, fines, measures restricting personal liberty, freezing of assets, disqualification from public office and the possibility of working with public administrations, etc.) one cannot overlook the negative consequences that the Entità recipient of a sanction could suffer for non-compliance with rules and/or prohibitions, in terms of reputational and image damage, violation of codes of conduct and good practices.

It should be noted, in this regard, that the ’ascertained violation of public policy rules on Export Control, can also have serious repercussions on the “legalità”rating;; as è known, the “legalità”” è a synthetic indicator of compliance with high standards of legalità by companies, which is attributed, at the request of the interested party, by the ’Autorità Garante della Concorrenza e del Mercato, a concession to which the Italian Order links the granting of advantages in the field of the disbursement of public financing and facilities for access to bank credit.

Not only that: the timely and exact compliance with the ’Export Control Compliance produces an additional positive effect, considering that, in case Entità are compliant and “converging with the trusted operators" program; adopted by Customs (AEO - Authorized Economic Operator) and with the equivalent programs applicable in other non-EU countries or with the “Export Compliance Certified Organization” program, they can take advantage of a number of facilitations, with the effect of streamlining the time of customs procedures, resulting in time and cost savings.

It should then be noted that the expression “Export Control” must be understood in a broad sense, and thus not limited only to the “export side” of a foreign transaction, since - as correctly è also been defined by the Code of Export Compliance drafted by EIFEC (European Institute for Export Compliance) - this term also includes the “import” side, from which it follows that the ’control activity must necessarily also include all import transactions from abroad, particularly those involving money transfers.

Export control compliance and international sanctions

The subject of ’Export Control è is characterized by’being a patchwork of legislative provisions, regulations, measures and acts that come not only from a pluralityà of International Organizations and Institutions, but also from Sovereign States, which adopt measures that are considered applicable even outside their territorial borders (see, for example, the system of so-called. “Secondary Sanctions” adopted by the U.S.A. in the matter of embargoes disposed towards certain countries, which exert effects also towards companies and subjects of different nationalities, including Italian companies), and which have very different characteristics and forms among them and obviously different from the characteristics that connote the normative measures provided for by the Italian Order.

It is precisely the variegativeness and the multitude of regulatory sources that must be taken into account when dealing with the subject of Export Control, which must induce the operator to pay the utmost attention also to the delicate issue related to the so-called. “Hierarchy of Sources”, an expression used in the world of law to indicate that a norm contained in a lower-ranking source cannot conflict with a norm contained in a higher-ranking source (e.g., an Ordinance issued by the Mayor of a city cannot conflict with a State Law).

In a nutshell, in dealing with the subject of ’Export Control one must have regard not only to the national legislation, which for all intents and purposes today has a relative, almost residual importance, but also and above all to the legislation [albeit of a technical nature, the already mentioned standardization] drawn up by the “International Community”, meaning by this term the existing set of international actors, i.e., sovereign states, International Organizations and Institutions, Standards Bodies, and entities, including private ones (e.g., the International Chamber of Commerce, which è a private entity for all intents and purposes) that play a significant function in the international community.

By way of guidance and without any claim to completeness, it can be stated that the main actors to be taken into account are the United Nations, the EU, the World Trade Organization, the OECD, and via the various International Organizations, the FATF, Sovereign States, and the entities indicated in the list given in the footnote.

As far as Europe is concerned, policy decisions pertaining to the interventions and measures to be taken under the Common Foreign Security Policy (CFSP) adopted by the various Bodies (EU Council and Commission) are binding on the Member States, which, according to the Treaty on the Functioning of the Union itself (TFEU), are obliged to conform their policies and legal systems to the decisions adopted by the Union.

All export and/or import restrictive measures, embargoes of any kind, sanctions, both political and economic, including the so-called. “smart sanctions” [which are the sanctions aimed at individuals or groups of individuals in order to reduce economic consequences] customs law, the discipline of countering criminal and terrorist phenomena, are adopted by the EU, and Member States must comply, also in deference to the principle of the primacy that European Union law holds over the national laws of individual Member States.

Decisions of a political nature adopted by the Council of the European Union with regard to Common Security issues, may extrinsic:

• Sanctions of a political nature, which may consist of diplomatic sanctions or embargoes;
• Sanctions of an economic nature, which usually consist of the interruption of economic and financial relations with the country targeted by the measure;
• Smart Sanctions, which are è just mentioned

Bearing in mind that, subject to due exceptions, in principle EU law is a normative source superordinate to national law, it must be said that generally EU legislation, in the field of Export Control, as far as the sanctioning system is concerned, provides only general indications, leaving to national legislators the task of defining the sanctioning precept, also from the criminal point of view. Having outlined this introductory framework, when one has to embark on a course of verification in entering into a commercial and/or financial transaction with interlocutors located abroad (having made the due premise that where the interlocutor is a subject residing in the EU or in an EEA or EFTA country, the verifications will be considerably more difficult), it is necessary to take into account the fact that the sanctions provided for by the law of the Member States are not applicable to the transaction;EFTA the verifications will be considerably more’reduced) it is considered that, from the methodological point of view, the’analysis of regulatory sources, by a subject of Italian nationality or resident in our country, should proceed according to the following order:

• 1) legislation adopted by the United Nations and, limited to certain trade issues, by the World Trade Organization (WTO);
• 2) legislation adopted by the European Union, including those measures that are not strictly binding, such as Recommendations and Opinions;
• 3) opinions and guidelines adopted by the OECD;
• 4) depending on the geographical location of the counterparty, the legislation adopted by the U.S. (due to the phenomenon of secondary sanctions), the relevant states and, if members of International Organizations, the legislation applicable to import/export adopted by the Organizations (e.g., the Arab League, SADC, UMA; CEN, etc…);
• 5) the recommendations, reports and documents adopted by the FATF, the’International Money Laudering Information Network and the MoneyVal;
• 6) Italian regulations;
• 7) the Circulars, reports and communications of the Ministry of Foreign Affairs, the Ministry of the Economy and Finance-Department of the Treasury, Section dedicated to the prevention of money laundering and the’Unit’di Informazione Finanziaria, formerly; Ufficio Italiano dei Cambi and the Bank of Italy;
• 8) the technical standardization, guidelines, best practices and standards adopted by the Bodies, even if private, of standardization (e.g., the’EIFEC)