United Nations Financial Sanctions

Sachiko Yoshimura

• Publisher: Routledge
• Year: 2020
• Print ISBN:
  9780367202323
• eBook ISBN:
  9780429535932
• Topic: Social Sciences
• Subtopic: Arms Control
• Index: Social Sciences

This book presents insightful perspectives on the invocation, implementation and application of UN-approved financial sanctions and related issues.

With contributions from academics, diplomats and UN panel experts, Yoshimura offers an analysis of how the UN financial sanctions have evolved, the different roles of various major international actors in agreeing and deploying them, and their success in achieving desired outcomes. It also sheds light on a vital role of Japan in the formulation and deployment of financial sanctions, as the third largest economy in the world with very limited armed forces and a pacifist constitution.

Offering valuable consideration into one of the key implements of international law, this is an essential guide for scholars and practitioners in Diplomacy and International Relations.

1UN economic sanctions and financial measures—evolution and challenges

Sachiko Yoshimura

Introduction

The Preamble of the Charter of the United Nations (UN) proclaims, “We the peoples of the United Nations determined to save the succeeding generations from the scourge of war … to unite our strength to maintain international peace and security … have resolved to combine our efforts to accomplish these aims.” And Article 1 of the UN Charter stipulates that the UN takes “effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace …” to achieve its purpose. The words “economic sanctions” do not appear in the UN Charter, but non-military “collective measures” can be regarded as economic sanctions.¹

Economic sanctions as coercive measures had been utilized long before the UN was established. Financial sanctions, a subset of economic sanctions, are also invoked by the UN Charter to achieve collective security. Today, financial sanctions are more targeted with the involvement of many actors. They will urge different kinds of economic sanctions to be used citing technological progress and transaction complexity.

This chapter first follows the institutionalization of economic sanctions and describes the difference between unilateral and UN economic sanctions from the perspective of international law. Next, an overview of the UN economic sanctions mechanism and practice of financial sanctions will be explored. Lastly, the issues with UN financial sanctions from the standpoints of invocation, implementation, and application, with the necessity of reexamination of UN financial sanctions will be discussed.

Economic sanctions and collective security

What are economic sanctions?

International Sanctions, edited by the Royal Institute of International Affairs in 1938, defines sanctions in international affairs as “action taken by members of international the community against an infringement, actual or threatened, of the law.”²

A study by Hufbauer, Schott, and Elliott demonstrated the use of non-military coercive measures to change the policy of targets in ancient Greece.³ Later, economic sanctions were utilized as a tool of warfare, for example, the Berlin Decree and the blockade of Britain by Napoleon.⁴ In the twentieth century, when the Covenant of the League of Nations and later, the UN Charter, forbade engaging in war and restrained or limited nations from using the “threat or use of force,” economic sanctions became an institutionalized instrument at the disposal of these international organizations.

Today, unilateral economic sanctions, which a state (or a group of states) decides to impose on another state, and UN’s economic sanctions as a means of collective security are invoked collaterally.⁵ The economic sanctions invoked by a group of states or by international organizations of limited membership (such as the European Union) are termed “organized unilateral sanctions,” and are different from the economic sanctions enforced by the UN.⁶

Economic sanctions and their institutionalization

Historically, economic sanctions were utilized by a state or a group of states to wage war on the enemy’s economy, or as a means to respond or coerce a policy change by the target nation.⁷ However, after World War I, economic sanctions were institutionalized by the League of Nations, as a way to achieve peace by a collective security system.

The Preamble of the Covenant of the League of Nations proclaimed, “The High Contracting Parties [sic] … achieve international peace and security by the acceptance of obligations not to resort to war …” And Article 16 (1) of the Covenant stipulated,

Should any Member of the League resort to war in disregard of its covenants under Articles 12, 13 or 15, it shall ipso facto be deemed to have committed an act of war against all other Members of the League, which hereby undertake immediately to subject it to the severance of all trade or financial relations, the prohibition of all intercourse between their nationals and the nationals of the covenant-breaking State, and the prevention of all financial, commercial or personal intercourse between the nationals of the covenant-breaking State and the nationals of any other State, whether a Member of the League or not.

At the League, economic sanctions were the primary tool to achieve collective security. After witnessing the dramatic scale of destructive power during World War I, more use of non-military measures for dispute settlement was decided. With advantage of interdependency among states, economic sanctions for inducing policy change in target nations came to be seen as more useful, as a natural corollary.⁸ Woodrow Wilson’s philosophy, “A nation that is boycotted is a nation that is in sight of surrender. Apply this economic, peaceful, silent, deadly remedy and there will be no need for force,” resonated throughout the process of creating the League of Nations.⁹

The UN, as well as the League of Nations, considers economic sanctions as one of the measures to achieve collective security. Theoretically, institutionalized economic sanctions are more effective than unilateral sanctions, because of the number of countries that participate in UN economic sanctions.

Difference between unilateral sanctions and sanctions imposed by UN

At present, both unilateral and institutionalized economic sanctions coexist, and are sometimes invoked at the same time on the same target country. But, from the perspective of international law, unilateral economic sanctions and UN sanctions are two different things.

In 1979, at the discussion of the Draft Articles on Responsibility of States for Internationally Wrongful Acts, the International Law Commission (ILC) suggested that the word “sanctions” be used only for mandatory measures by international organizations, and should be distinguished from other measures. At first, Special Rapporteur Robert Ago suggested “Legitimate application of a sanction” as the title of an article on preclusion of international wrongful acts by states, stating “the term ‘sanction’ should not be understood in too narrow or too broad sense.” Other members, though, dissented on the use of the word “sanctions.” They were of the belief that the use of the term “sanctions” should be limited to indicate coercive measures adopted by international organizations, and not be applicable to the measures of an individual state.¹⁰ In the end, Special Rapporteur Ago agreed to replace the word “sanctions” with “retaliatory measures” or “countermeasures.”¹¹

In the text adopted in 2001, the Draft Articles on Responsibility of States excludes the word “sanctions.” Instead, the term “countermeasures” is used in the equivalent article that Special Rapporteur Ago proposed,¹² and Part Three Chapter II of the Draft Articles provides the object, obligations and conditions for states to take such actions.

Kazuhiro Nakatani states that, unilateral economic sanctions have a narrower scope in legality under international law compared with sanctions imposed by the UN. He describes, whereas UN sanctions taken in accordance with law of international organizations can derogate from the conditions of legality to be permitted as countermeasures, it is harder for the unilateral sanctions to be legitimate since each state imposing the coercive measures uses its own discretion.¹³

UN economic sanctions and coercive measures

The League of Nations and financial sanctions

As described, Article 16 of the Covenant of the League of Nations lays out the system of economic sanctions. However, in 1920, the International Blockade Committee was established to consider aspects of economic sanctions.¹⁴ The League Assembly followed and adopted a resolution in 1921, stipulating that each member state has a duty to determine whether the Covenant is violated or not, and sanctions invocations shall be limited.¹⁵ Consequently, economic sanctions under the League became a decentralized and weak instrument.¹⁶

The League did impose sanctions only once, and it was against Italy for invading Abyssinia in 1935. The Assembly set up the Co-ordinating Committee to determine the sanction measures and the implementation mechanism,¹⁷ and it decided on five areas for sanctions: 1) ban on exports of arms and ammunition, 2) coercive financial measures, 3) ban on imports from Italy, 4) embargo on certain exports to Italy, and 5) organization of mutual support.¹⁸

Proposal II by the Co-ordinating Committee was devoted to the financial sanctions imposed by the League. Member states were requested to refrain from the transactions, such as, 1) all loans and subscriptions to or from the Italian government, any public authority, person, or corporation in Italy, 2) all banking or other credits and execution to lend to the Italian government, any public authority, person or corporati...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• List of contributors
• Preface
• 1 UN economic sanctions and financial measures—evolution and challenges
• 2 “Smart sanctions” by the UN and financial sanctions
• 3 Functions of Security Council subsidiary organs in the UN financial sanctions regimes: From the perspective of the law of international organizations
• 4 Recent challenges regarding the implementation of UN Security Council sanctions
• 5 How Japan implements UN financial sanctions
• 6 Implementation of financial sanctions by a state and its legal challenges: The case of sanctions-related laws of the United States
• 7 Financial sanctions implementation by the European Union—the jurisprudence of the CJEU on the balance between protections of fundamental rights and effectiveness of the restrictive measures implementing the UN Security Council Resolution 1373
• 8 Implementation and enforcement of UN sanctions—the private sector’s key role and evolving standards
• 9 Judicial challenges against UN financial sanctions
• 10 UN financial sanctions against the Democratic People’s Republic of Korea: Challenges and proposal for efficient implementation
• 11 UN sanctions on Iran and their financial elements
• 12 The UN Security Council Resolution 1540 and counter proliferation financing
• Annex I International and domestic documents related to United Nations financial sanctions (as of March 2018)
• Annex II Major economic sanctions adopted by the UN Security Council under Chapter VII of the UN Charter (as of March 2018)
• Index