DSpace at VNU: The Latest United States sanctions against Iran: What role to the WTO security exceptions?

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Journal of Conflict & Security Law ß Oxford University Press 2013; all rights reserved For permissions, please e-mail: journals.permissions@oup.com doi:10.1093/jcsl/krt004 Advance Access published on 10 April 2013 The Latest United States Sanctions Against Iran: What Role to the WTO Security Exceptions? George-Dian Balan* Abstract The Stages of Economic Sanctions Against Iran The imposition of economic sanctions against Iran can be easily divided into three main stages: a first stage when the sanctions are still timid, a second stage when the mushrooming US sanctions trigger a prompt answer from the EU, and a third stage, when sanctions are founded on a multilateral framework represented by a series of UN Security Council resolutions If in the first two stages United States is in isolation from the international community, the third stage marks a well orchestrated international containment policy against Iran At the * Teaching and Research Fellow, OSCE Academy, Visiting Lecturer in Law, Vietnam National University, Attorney-at-law, Ias° i Bar Email: d.balan@osce-academy.net I would like to express my gratitude to Professor George Poede for his PhD mentorship, to Pietro Poretti and the anonymous JCSL peer-reviewer for their comments on an earlier draft, as well as to the Society of International Economic Law (SIEL) and the Center of International Law (CIL) of the National University of Singapore (NUS) for making possible my participation in the SIEL 2012 Conference All expressed views and possible errors are mine Journal of Conflict & Security Law (2013), Vol 18 No 3, 365–393 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 The US initiated the sanctions campaign against Iran at the end of the 1970s for national security reasons The most significant step was arguably taken years later by the Clinton administration, by enacting the famous Iran and Libya Sanctions Act in 1996 Because of the extraterritorial effects of these sanctions, the European Commission reacted promptly, putting the matter on the table at the same time with the Helms-Burton claims, the latter becoming the first formal WTO request for the establishment of a panel related to security exceptions Since 2006 the landscape has been changing and the UN Security Council passed a series of resolutions culminating with Resolution 1929 of June 2010 The United States’ implementing measures go beyond the Security Council’s mandate and some of them can be characterized as secondary sanctions After a short overview of the possible violations of WTO law there follows a thorough analysis of the potentially available justifications One of the key questions is whether a WTO Member can justify economic sanctions in excess of the UN mandate by using a unilateral defense in addition to the obvious multilateral justification 366 George-Dian Balan same time, one can notice an evolution in time of the grounds of justification of the sanctions, from general national security interests to terrorism, threat of military nuclear proliferation and human rights concerns This article will focus on the latest US sanctions and will refer to sanctions imposed by other WTO Members only in specific instances Because of the complexity of the sanctions and of the links between present sanctions and old pieces of legislation, the introductory section will be more than a short historical excerpt Iran is nowadays associated with rogue dictators and terrorists and is commonly perceived as an existential threat to world peace and security This malignant aura is due to the alleged military purposes of its uranium enrichment program and to its connections with terrorist groups such as Hamas (Palestine), Hezbollah (Lebanon) and Al-Qaeda Former US President George W Bush mentioned Iran, alongside Iraq and North Korea, as part of the notorious category called ‘Axis of Evil’.1 In April 1979 the Islamic revolution, led by Ayatollah Ruhollah Khomeini, removed the last Shah, Mohammad Reza Pahlavi, proclaiming the Islamic Republic Soon afterwards, in November 1979, a group of Iranian students occupied the US embassy in Tehran, in response to the hosting of the Shah in exile in the United States The students took US diplomats hostage until January 1981 The first economic sanctions date from this period and were a consequence of the 1979 events But the United States was not taken by surprise; or at least not totally In the aftermath of the 1973 oil crisis, the United States equipped itself with the appropriate legal framework to deal with possible withdrawal of assets from the US banks The International Emergency Economic Powers Act (IEEPA), passed in 1977, provided large prerogatives for the President, Jimmy Carter at the time.2 The bill authorized the freezing of foreign finances in the United States for political, economic or national security reasons.3 ‘States like these, and their terrorist allies, constitute an axis of evil, arming to threaten the peace of the world By seeking weapons of mass destruction, these regimes pose a grave and growing danger.’ The White House, GW Bush, ‘State of the Union Address’ (Washington DC, 29 January 2002) 5http://georgewbush-whitehouse.archives.gov/news/releases/2002/01/20020129-11.html4 accessed 25 July 2012 International Emergency Economic Powers Act (IEEPA), PL 95-223, Title II, 91 Stat 1626, 50 USC 1701 note, 28 December 1977 Congress experts established that the conditions of invoking this law were fulfilled nine months prior to the taking of hostages in 1979 See S Fayazmanes, ‘The Politics of the US Economic Sanctions against Iran’ (2003) 35 Rev Radic Polit Econ 221 at 223 S 202(a) IEEPA provides that: ‘Any authority granted to the President by section 203 may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 A The Dawn of the Sanctions Policy Toward Iran Latest United States Sanctions Against Iran 367 B The Heyday of US Unilateral Sanctions The year 1995 is a turning point in the US sanctions policy toward Iran Some of the most controversial unilateral sanctions date from that period Although the most recent unilateral sanctions adopted by the United States are the most comprehensive ever, I called the period ranging from 1995 to 2006 the ‘heyday’ of unilateral sanctions because at the time there was no multilateral framework to support some of the measures This new sanction era was apparently triggered by the signing of a contract concerning the building of a nuclear reactor between Iran and Russia, in 1995.8 As President Bill Clinton was at the end of his first term in office, seeking foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat’ Executive Order 12170 of 14 November 1979, Blocking Iranian Government Property, 44 FR 65729 Executive Order 12205 of April 1980, Prohibiting Certain Transactions with Iran, 45 FR 24099; Executive Order 12211 of 17 April 1980, Prohibiting Certain Transactions with Iran, 45 FR 26685; Executive Order 12282 of 19 January 1981, Revocation of Prohibitions against Transactions Involving Iran, 46 FR 7925 Such goods were chemicals, aircraft, helicopters and related parts See ‘Case 84-1, US v Iran, Case Studies in Sanctions and Terrorism’ in GC Hufbauer and others (eds), Economic Sanctions Reconsidered (3rd edn, Peterson Institute for International Economics 2011) Iran–Iraq Arms Non-Proliferation Act of 1992, PL 102-484, 106 Stat 2571, 50 USC 1701 note, 23 October 1992 K Katzman, ‘The Iran-Libya Sanctions Act (ILSA)’ Report for Congress, Congressional Research Service July 2001 5http://www.globalsecurity.org/military/library/report/crs/rs20871.pdf4 accessed 25 July 2012 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 In late 1979, President Carter issued Executive Order (EO) 12170, finding that ‘the situation in Iran constitutes an unusual and extraordinary threat to the national security, foreign policy and economy of the United States’, declaring a national emergency and disposing the freezing of all Iranian assets directly or indirectly under the jurisdiction of the United States.4 New measures followed in 1980 and 1981, prohibiting in first instance transactions with Iran and then repealing the prohibitions.5 A new wave of sanctions came in 1984, during the term in office of President Reagan, as a response to Iran’s involvement in the bombing of the US marine base in Beirut, Lebanon It is on this occasion that Iran is directly linked for the first time to international terrorist groups, namely Hezbollah The export controls became more stringent and several goods were banned from exportation.6 Sanctions on Iran are for the first time linked to the threat posed by the acquisition of weapons of mass destruction (WMD), including nuclear weapons, during the George Bush Sr administration The Iran–Iraq Arms NonProliferation Act of 1992 addressed this issue, providing the basis for a more stringent policy on dual-use goods.7 368 George-Dian Balan 10 11 12 13 14 15 16 Executive Order 12957 of 15 March 1995, Prohibiting Certain Transactions with Respect to the Development of Iranian Petroleum Resources, 60 FR 14615; Executive Order 12959 of May 1995, Prohibiting Certain Transactions with Respect to Iran, 60 FR 24757, banning US trade with and investment in Iran There is a long record of Iranian civil plane crashes that followed and they were partly associated with the lack of spare parts However, some licenses have been granted on a case-by-case basis See Federation of American Scientists (FAS), ‘Clinton Report to Congress on Iran National Emergency’ (16 September 1996) 5http://www.fas.org/ news/iran/1996/960916-457048.htm4 accessed 25 July 2012 See eg R Bhala, ‘National Security and International Trade Law: What the GATT Says, and What the United States Does’ (1998) 19 U Pa J Int Econ Law 263, and RE Browne, ‘Revisiting “National Security” in an Interdependent World: The GATT Article XXI Defense after Helms-Burton’ (1997) 86 Geo LJ 405 For the purposes of this article the European Union (EU) will be used to designate the European Communities WTO Request for the Establishment of a Panel by the European Communities, WT/ DS38/2, ‘United States-The Cuban Liberty and Democratic Solidarity Act (US-Helms-Burton Act)’ October 1996 WTO Secretariat, The Legal Texts, The Results of the Uruguay Round of Multilateral Trade Negotiations (Geneva 2002) 424 ibid 284 L Von Lutterotti, ‘The US Extraterritorial Sanctions of 1996 and the EU Reaction’ in S Griller and B Weidel (eds), External Economic Relations and Foreign Policy in the European Union (Springer 2002) 237-70 at 263 See also WTO Minutes of the meeting held in the Centre William Rappard, 16 October 1996, WT/DSB/M/24 at and WTO Minutes of the meeting held in the Centre William Rappard, 20 November 1996, WT/ DSB/M/26 at 2–3 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 reelection, this may partly explain the tough sanctions adopted by the United States that year, namely EO 12957 and EO 12959.9 One of the most controversial sanctions from this period is the inclusion of civil aircraft parts on the list of banned items, because of humanitarian considerations.10 The sanctions on Iran did not come alone, but in the same ‘package’ with comprehensive sanctions on Cuba and Libya Accordingly, two major bills were passed by the Congress and signed into law by the President: the Cuban Liberty and Democratic Solidarity Act (LIBERTAD) in March 1996 and the Iran and Libya Sanctions Act (ILSA) in August the same year The EU became a collateral victim of US ‘friendly’ fire because of the extraterritorial effects of both measures, affecting EU companies.11 The EU reacted promptly,12 going as far as submitting a request for the establishment of a WTO panel.13 The main allegations of the EU concerned violations of several rules of the General Agreement on Tariffs and Trade (GATT) 199414 and of the General Agreement on Trade in Services (GATS).15 The United States attempted to defend its position arguing that security interests were beyond the WTO jurisdiction It suggested that the secondary sanctions could be justified under Article XXI(b)(iii) GATT 1994 and Article XIVbis:1(b)(iii) GATS as ‘measures taken in time of war or other emergency in international relations’.16 Latest United States Sanctions Against Iran 369 17 18 19 20 21 22 23 24 25 WTO Secretariat (n 14) 354 Understanding between the European Union and the United States on US extraterritorial legislation, 11 April 1997 5http://www.eurunion.org/partner/summit/ summit9712/understd.htm4 accessed 25 July 2012 EU Market Access Database, ‘Helms-Burton Act’ http://madb.europa.eu/madb_ barriers/barriers_details.htm?barrier_id¼960295&version¼4 accessed 25 July 2012 Iran and Libya Sanctions Act of 1996, PL 104-172, 110 STAT 1541, 50 USC 1701 note, August 1996 S 13(b) ILSA ibid s See s 2.B.(i) Iran Non-proliferation Act of 2000, PL 106-178, 114 Stat 38, 50 USC 1701 note, 14 March 2000 ILSA Extension Act of 2001, PL 107-24, 115 Stat 199, 50 USC 1701 note, August 2001 The Total-Petronas-Gazprom project represented a USD billion investment in Iran’s energy sector Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 The case was suspended due to intense negotiations between the parties and it became obsolete after a year in accordance with the provisions of Article 12.12 of the Dispute Settlement Understanding (DSU).17 It followed the signing of an agreement to suspend the effects of LIBERTAD vis-a`-vis European entities, providing in addition for the exemption of EU Member Sates and European companies from the application of the provisions of ILSA.18 Although the waivers were not granted as agreed, EU entities did not suffer in practice from imposition of sanctions, but were continuously monitored.19 ILSA was adopted several months after LIBERTAD.20 The bill was signed in the presence of the families of the victims of the Lockerbie terrorist attack of 1988 ILSA was initially adopted for a period of five years.21 The main target of the Clinton Administration was the energy sector of Iran, a country extremely rich in oil and gas resources but in serious need of modernization Less revenue for Iran from the energy sector meant in the view of the proponents less finance to support terrorism and uranium enrichment programs Entities that made investments in Iran’s energy sector, worth more than 20 million USD a year, were likely to be subject of at least two sanctions from a list of seven provided by ILSA.22 Reactions to ILSA were immediate, especially from the EU, dissatisfied with the extraterritorial application of its provisions As already stated, the ILSA claims did not reach the WTO because a political solution was found at the same time with the settlement of the LIBERTAD claims The Iran Non-proliferation Act of 2000 (INA) reiterated the restrictions with respect to trade in weapons and dual-use goods.23 One year later President George W Bush renewed ILSA for another five years,24 while no sanctions were imposed at the time, despite possible violations mainly by French, Malaysian and Russian entities.25 In 2002, the International Atomic Energy Agency (IAEA) started the investigations into the allegedly military purposes 370 George-Dian Balan of Iran’s nuclear program and several years later, in 2006, the matter was referred to the UN Security Council.26 C The New Era of Multilateral Sanctions 26 27 28 29 30 31 32 33 34 35 36 International Atomic Energy Agency (IAEA), ‘Statement by H.E Reza Aghazadeh, Vice-President of the Islamic Republic of Iran and President of the Atomic Energy Organization of Iran at the 46th General Conference of the International Atomic Energy Agency’ (Vienna, 16 September 2002) 5http://www.iaea.org/About/Policy/ GC/GC46/Statements/iran.pdf4 accessed 25 July 2012 UN SC Res 1929 (9 June 2010) UN SC Res 1737 (27 December 2006) UN SC Res 1747 (24 March 2007) UN SC Res 1803 (3 March 2008) In US language the listed entities are called ‘Specially Designated Nationals’ (SDNs) Para 18 Resolution 1737 For more information on the activity of the 1737 Committee see its official website, 5http://www.un.org/sc/committees/17374 accessed 25 July 2012 Para 29 Resolution 1929 ibid para ibid para Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 If the United States was originally isolated in the pursuit of the sanctions policy against Iran, since 2006 the landscape has changed, as the United States managed to persuade the other permanent members of the UN Security Council (UNSC) to pass a series of resolutions culminating with Resolution 1929 of June 2010 (Resolution 1929).27 Besides Resolution 1929, the other important UNSC resolutions dealing with non-proliferation in Iran are Resolution 1737 (2006),28 Resolution 1747 (2007)29 and Resolution 1803 (2008).30 The sanctions imposed by these resolutions are targeted toward the nuclear and ballistic missile programs, trade in conventional weapons, imposing an additional travel ban and an assets freeze on designated persons and entities (‘shame lists’).31 Without going into further details it is important to mention the establishment of the so-called 1737 Committee, charged, inter alia, with the monitoring of the implementation of the sanctions by the Members.32 The competence of the 1737 Committee was subsequently extended to the other mentioned resolutions dealing with Iran.33 Resolution 1929 is the most advanced UN instrument regarding sanctions on Iran It establishes a UN Panel of Experts to assist the 1737 Committee in discharging its tasks.34 The sanctions envisaged by the Resolution can be divided into mandatory and voluntary sanctions The mandatory sanctions include the prohibition of investment by Iran and its nationals in uranium mining, production or use of nuclear materials and technology, and in activities related to ballistic missiles technology,35 the prevention of technical assistance to Iran related to ballistic missiles capable of delivering nuclear weapons,36 a ban on trade in goods that could contribute to the uranium Latest United States Sanctions Against Iran 371 Analysis of the Latest US Sanctions The recent economic sanctions on Iran, culminating with Resolution 1929 and the UN Members’ implementing measures, pose some problems of WTO compatibility, to the extent that the measures fall under the scope of WTO law Let us recall that Iran is not a WTO Member and that previously some of the secondary measures taken by the United States were contested by the EU While the United States, the EU and other Members’ measures (eg Australia’s) go beyond the UN agreed framework, several UN members limited themselves to the sanctions mentioned in the text of the Resolution For instance, the Chinese and Russian implementing measures seem to stick to 37 38 39 40 41 42 43 44 45 ibid ibid ibid ibid ibid ibid ibid ibid ibid para 13 para para 18 para 10 paras 11 and 12 para 21 para 23 para 24 paras 14 and 15 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 enrichment or ballistic missiles projects, including dual-use goods,37 a prohibition on direct or indirect supply, sale or transfer to Iran of heavy weapons such as tanks, combat aircraft and helicopters, combined with a ban on technical training and assistance related to the manufacture, maintenance or use of the mentioned arms and related materiel,38 as well as a prohibition concerning the provision of bunkering services, such as provision of fuel or supplies, or other servicing of vessels.39 In addition, the mandatory sanctions impose a travel ban on persons involved in the nuclear and ballistic missile programs or controlled by the Iranian Revolutionary Guard Corps (IRGC)40 and the freezing of assets belonging to persons and entities involved in nuclear or ballistic missile development.41 A ‘humanitarian exception’ is maintained, comprising trade, travel and assets freeze The voluntary sanctions called for by the resolution include the prevention of the provision of financial services, including insurance or re-insurance, related to Iran’s nuclear activities, or the development of ballistic missiles,42 a ban on opening new branches, subsidiaries or representative offices of Iranian banks43 and a symmetrical prohibition on Members’ financial institutions to open representative offices, branches or bank accounts in Iran, where there is information linking these activities with Iran’s nuclear proliferation and ballistic missile activities,44 and cargo inspections on shipments to and from Iran.45 Resolution 1929 does not expressly mention energy-related sanctions due to a compromise with Russia and China, but contains a phrase in the preamble which shall be discussed in detail below 372 George-Dian Balan A Overview of the Latest US Sanctions The main US implementing measures of Resolution 1929 are the National Defense Authorization Act (NDAA) for Fiscal Year 2012, the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010, amending the famous Iran Sanctions Act (ISA) of 1996 and a series of Executive Orders At the time of writing, the Senate has just passed the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA), which awaits signing by the President.54 I will present below only sanctions in force which are in excess of the language of Resolution 1929 46 47 48 49 50 51 52 53 54 UN Security Council Committee established pursuant to Resolution 1737 (2006), ‘Reports from Member States Pursuant to Paragraph 19 of Resolution 1737 (2006), Paragraph of Resolution 1747 (2007), Paragraph 13 of Resolution 1803 (2008) and Paragraph 31 of Resolution 1929 (2010)’ 5http://www.un.org/sc/committees/1737/ memberstatesreports.shtml4 accessed 25 July 2012 Decree of the President of the Russian Federation no 1154 of 22 September 2010, concerning the measures aimed at the implementation of UN Resolution 1929 adopted on June 2010 N Kozhanov, ‘Russia’s Relations with Iran, Dialogue without Commitments’ (‘Policy Focus 120’, The Washington Institute for Near East Policy, June 2012) 17 For a detailed analysis of the latest EU sanctions from the perspective of international law see P-E Dupont, ‘Countermeasures and Collective Security: The Case of the EU Sanctions Against Iran’ (2012) 17 JCSL 301 The EU economic sanctions are put in place through a two-step process: it is adopted first an instrument of foreign and security policy (CFSP), on the basis of which a regulation is drafted afterwards See art 215 of the Treaty on the Functioning of the European Union (TFUE) Council Decision 2012/35/CFSP of 23 January 2012 amending Decision 2010/413/ CFSP concerning restrictive measures against Iran, OJ L 19/22 Council Decision of 26 July 2010 concerning restrictive measures against Iran and repealing Common Position 2007/140/CFSP, OJ L 195/39 Council Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran and repealing Regulation (EU) No 961/2010, OJ L 88/1 The Iran Threat Reduction and Syria Human Rights Act of 2012, HR 1905, passed in the US Senate on August 2012 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 the sanctions expressly authorized by the Resolution.46 The Russian implementation was actually a copy-pasting of the language of the Resolution,47 allowing additional delays before the sanctions came into force.48 Contrary to 1996, the EU has chosen this time to follow the tough approach led by the United States, adopting measures that exceed the sanctions expressly authorized by the Resolution.49 The dance continues, but the partners have changed Accordingly, the EU implemented Resolution 1929 in a two-step approach dictated by its own institutional architecture.50 On the basis of Council Decision 2012/35/CFSP51 and Council Decision 2010/413/CFSP,52 it adopted the Council Regulation (EU) no 267/2012,53 which consolidated the sanctions against Iran Latest United States Sanctions Against Iran 373 55 56 57 58 59 60 61 62 63 Executive Order 13606 of 23 April 2012, Blocking the Property and Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology, 77 FR 24571 Executive Order 13553 of 28 September 2010, Blocking Property of Certain Persons With Respect to Serious Human Rights Abuses by the Government of Iran and Taking Certain Other Actions, 75 FR 60567 Executive Order 13599 of February 2012, Blocking Property of the Government of Iran and Iranian Financial Institutions, 77 FR 6659 National Defense Authorization Act for Fiscal Year 2012, PL 112–81, 125 Stat 129831, December 2011 Consequently, the Iranian Financial Sanctions Regulations (IFSR) were amended by the Office of Foreign Assets Control (OFAC) and published in February 2012 IAEA, ‘Implementation of the NPT Safeguards Agreement and relevant provisions of Security Council resolutions in the Islamic Republic of Iran’ GOV/2011/65, November 2011 US Department of the Treasury, ‘Finding that the Islamic Republic of Iran is a Jurisdiction of Primary Money Laundering Concern’ 5http://www.treasury.gov/ press-center/press-releases/Documents/Iran311Finding.pdf4 accessed 25 July 2012 s 1245(d)(3) NDAA See s 2.B.(i) Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, PL 111–195, 124 Stat 1312, 22 USC 8501 note, July 2010 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 Accordingly, EO 13606 imposes a travel ban and an assets freeze on individuals involved in human rights abuses through contributing to IT disruption, monitoring and tracking.55 It follows a series of other human rights-related measures, such as EO 13553, adopted as a consequence of the controversial June 2009 elections in Iran.56 EO 13599 excludes all Iranian banks from the US financial system, authorizing the seizure of all property belonging to the specified entities.57 The most controversial among the recent US sanctions on Iran are those authorized by the National Defense Authorization Act for Fiscal Year 2012.58 NDAA comes just a month after an alarming report from the IAEA, issued in November 2011, which suggests a possible military dimension of Iran’s nuclear activities.59 In addition, on 21 November 2011 the US Secretary of Treasury identified Iran as a ‘jurisdiction of primary money laundering concern’ under Section 311 of the US Patriot Act.60 Section 1245 of the NDAA provides for the imposition of sanctions on foreign financial institutions owned or controlled by the respective government, including central banks, knowingly involved in petroleum transactions with Iran.61 These sanctions primarily targeting Iran make ‘collateral victims’ and have an obvious extraterritorial effect.62 CISADA was enacted immediately after the adoption of Resolution 1929.63 CISADA amends ISA, exceeding the mandate of the Resolution and imposing secondary sanctions in the energy sector of Iran, paving the way for the NDAA of 2012 374 George-Dian Balan B Extraterritoriality of the US Sanctions and Possible Violations of WTO Law As Iran is not a WTO Member, it is important to see which Members may be potential complainants and on which grounds Accordingly, it should be assessed first if the sanctions applied by the United States are extraterritorial (i) Extraterritoriality of the US sanctions 64 65 66 67 68 Von Lutterotti (n 16) 244-51 JA Meyer, ‘Second Thoughts on Secondary Sanctions’ (2009) 30 U Pa J Intl L 905 at 926 s 1245(d)(1)(A) NDAA ibid s 1245(d)(3) According to 31 USC s5318A(e)(1)(B) and (C), to which NDAA makes reference, ‘correspondent account means an account established to receive deposits from, make payments on behalf of a foreign financial institution, or handle other financial transactions related to such institution’, while ‘payable-through account means an account, including a transaction account (as defined in section 19(b)(1)(C) of the Federal Reserve Act), opened at a depository institution by a foreign financial institution by means of which the foreign financial institution permits its customers to engage, either directly or through a subaccount, in banking activities usual in connection with the business of banking in the United States’ Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 The notion of ‘extraterritoriality’ is highly controversial in international law.64 A particular form of extraterritoriality is represented by the so-called secondary sanctions By secondary sanctions it is widely understood ‘any form of economic restriction imposed by a sanctioning or sending state [ .] that is intended to deter a third-party country or its citizens and companies [ .] from transacting with a sanctions target’.65 In this article I refer to extraterritorial measures as secondary sanctions The most important secondary sanctions are to be found in Section 1245 NDAA The bill contemplates two categories of foreign financial institutions: institutions that the President determines have knowingly conducted or facilitated any significant financial transaction with the Central Bank of Iran or another Iranian financial institution designated by the Secretary of the Treasury66 and institutions owned or controlled by the government of a foreign country, including a central bank of a foreign country, only insofar as they engage in a financial transaction for the sale or purchase of petroleum or petroleum products to or from Iran.67 The applicable sanctions concern the prohibition of the opening, and prohibition or imposition of strict conditions on the maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution.68 The ‘humanitarian exception’ is maintained by the NDAA, which expressly exempts the conduct or facilitation of transactions for the Latest United States Sanctions Against Iran 379 C Availability of Unilateral National Security Justifications Some of the most important questions this article addresses are dealt with in this section Namely, one shall inquire whether the US sanctions on Iran exceed Resolution 1929 and, in the affirmative, the debate shifts to the possibility of using a unilateral defense on top of the multilateral defense guaranteed by the adoption of a UN instrument (i) Do the US sanctions against Iran exceed UNSC Resolution 1929? In the affirmative, are they authorized by the Resolution? First of all, it is not common for a UN Member to exceed the mandate of a UNSC Resolution, as ‘the problem of unilateral action is unlikely to arise in this context’.97 But it may very well happen Thus, to answer the present question I will start by recalling that Resolution 1929 contemplates two different kinds of measures, mandatory and voluntary The difference of characterization of the measures impacts only on the transposition obligations of the Members, it does not influence the justification under security exceptions, as both instances are covered by Article XXI(c) GATT 1994 96 97 For the Members not parties to the GPA, government procurement-related services are largely excluded from the GATS (art XIII GATS), while trade in goods is expressly exempted from the national treatment obligations (art III:8 GATT 1994) In addition, a MFN violation is uncertain under the present case law See eg D Palmeter and NP Meagher, ‘WTO Issues Relating to US Restrictions on Participation in Iraq Reconstruction Contracts’ ASIL Insights (Washington DC, December 2003) 5http://www.asil.org/insigh123.cfm4 accessed 25 July 2012 R Bhala, Modern GATT Law: A Treatise on the General Agreement on Tariffs and Trade (Thomson Sweet & Maxwell 2005) 564 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 and Awarding of Contracts) of the GPA for the parties to the agreement.96 The restrictions on imports in accordance with the IEEPA may amount to a violation of Articles I:1 (MFN), if discrimination can be proved, as well as of Article XI (General Elimination of Quantitative Restrictions) GATT 1994 The prohibitions of transactions in foreign exchange and the ban on banking transactions (transfers of credit or payments between financial institutions) may violate Article XI (Payments and Transfers) GATS, if the United States has undertaken specific commitments in the relevant services sectors, as contained in its Schedule Finally, the prohibitions on property transactions (acquiring, holding, withholding, using, transferring, withdrawing, transporting, importing or exporting property) may violate Articles V (Freedom of Transit) and XI (General Elimination of Quantitative Restrictions) GATT 1994 In all the cases where discrimination should be proved the waivers/exemptions accorded may play a role in the analysis 380 George-Dian Balan 98 99 100 101 102 103 Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 Art 31(2) VCLT NJ Calamita, ‘Sanctions, Countermeasures, and the Iranian Nuclear Issue’ (2009) 42 Vand J Transnatl L 1393 at 1411 MC Wood, ‘Interpretation of Security Council Resolutions’ in JA Frowein and R Wolfrum (eds), Max Planck Yearbook of United Nations Law (Kluwer Law International 1998) 73–95 at 86–87 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970) (Advisory Opinion [1971]) ICJ Rep 16 para 114 Apparently Russia went even further during the negotiations leading to the adoption of the resolution, making its consent conditional upon non-imposition of unilateral measures by other UNSC permanent members See SH Mousavi, ‘US, EU Unilateral Sanctions: Dimensions & Consequences’ Iran Review (Tehran, July 2010) 5http:// Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 Resolution 1929 does not mention specific measures on energy issues Instead, there is a short reference in the preamble: ‘while noting the potential connection between Iran’s revenues derived from its energy sector and the funding of Iran’s proliferation sensitive nuclear activities’ According to the customary rules of treaty interpretation, as codified by the Vienna Convention on the Law of Treaties (VCLT),98 the preamble is part of the context.99 Although the UNSC Resolutions are not treaties, there is no reason to not apply the known interpretation rules in this case as well.100 Thus, the preamble cannot serve alone as a justification for the imposition of sanctions, if there is no confirming operative provision And, as already stated, the words ‘energy sector’, ‘oil’ or ‘gas’ are nowhere else mentioned in the operative part of the Resolution There are a great deal of trade and financial sanctions, but associated with other activities The language of the resolution is clear in this respect, focusing on the nuclear proliferation activities and the ballistic missiles programs This assessment is confirmed by Wood, according to whom the preambles of UNSC Resolutions may assist in interpretation, but should be treated with caution as they often harbor proposals otherwise not politically acceptable in the operative part.101 The ICJ analyzed the link between the preamble of a UNSC Resolution and other provisions the preamble makes reference to (in that case Article 25 of the UN Charter) in an advisory opinion regarding Namibia The Court reiterated in other words the principles stated in the VCLT It considered that a case-by-case analysis should be conducted, taking into account the text, the context and all associated circumstances, including the preparatory work.102 Applying this test to the present case one notices, first, that the mentioning of the ‘energy sector’ of Iran does not find any support in the ‘terms’ (operative part) of the Resolution and second, that during the ‘discussions leading to’ the adoption (travaux pre´paratoires) of Resolution 1929 China and Russia opposed any language calling for the actual imposition of sanctions in the energy sector of Iran.103 The insertion of a short reference in the preamble is only the Latest United States Sanctions Against Iran 381 (ii) If the US sanctions exceed the UN mandate, can one still justify the measures in their entirety under WTO law? As already seen before, the United States has used different justifications for the comprehensive sanctions adopted against Iran This article analyzes only the national security-related justifications, leaving to another future study the discussion whether the public morals or human life and health exceptions may cover sanctions related to human rights abuses Thus, Article XXI(c) GATT 1994 and its counterpart, Art XIVbis:1(c) GATS, state that: Nothing in this Agreement shall be construed [ .] to prevent any Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security So far so good Multilateral measures authorized by the UN are virtually immune in the WTO, due to the specific place of the UN Charter and the UNSC in the post World War II international architecture.105 But if we find 104 105 www.iranreview.org/content/Documents/US_EU_Unilateral_Sanctions_Dimensions_ Consequences.htm4 accessed 25 July 2012 K Katzman, ‘Addendum US-Iranian Relations: An Analytic Compendium of US Policies, Laws, and Regulations’ (‘Atlantic Council’, 2010) See in particular art 103 and art 25 of the UN Charter Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 expression of a compromise among the permanent members, a rather ‘loose’ language, not intended to produce legal effects On a different view, Katzman contends that ‘much of the US intent of Resolution 1929 was to set up for further multilateral sanctions against Iran by like-minded countries, particularly in Europe The pre-ambular language of Resolution 1929 accomplished that objective [ .] Drawing that connection set the stage for a highly significant action by the European Union’.104 For the reasons mentioned above I tend to disagree with this view The quoted preambular phrase does not find any support neither in the operative part of the resolution nor in its travaux pre´paratoires It follows that the Resolution does not provide for or authorize trade and investment sanctions related to the petroleum sector of Iran Or, as we have seen, Section 1245 NDAA and Section 102 CISADA provide for a wide range of sanctions associated to trade and investment in Iran’s energy sector Furthermore, one may differentiate between measures covered by the Resolution, but exceeded (longer lists of designated entities, based on the same reasons, namely involvement in the nuclear proliferation and ballistic missiles programs) and measures completely new to the text of the Resolution (oil sanctions) 382 George-Dian Balan 106 107 108 109 110 111 112 113 114 T Cottier and P Delimatsis, ‘Article XIVbis GATS’ in R Wolfrum, P-T Stoll and C Feinaăugle (eds), WTO- Trade in Services, Max Planck Commentaries on World Trade Law Series (Martinus Nijhoff 2008) 329–48 at 345 WTO Secretariat (n 14) 59 ibid 121 WTO Appellate Body Report, Australia – Measures Affecting Importation of Salmon, (Australia- Salmon) WT/DS18/AB/R, adopted (6 November 1998) para 125 Art 3.1 SPS ibid art 3.3 Art 2.5 TBT ibid art 2.4 The Appellate Body reversed the panel’s finding that the AIDCP is an international standard and thus it did not elaborate on its appropriateness or effectiveness See WTO Appellate Body Report, United States – Measures Concerning the Importation, Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 that the measures go beyond the UN mandate, could the part in excess be justified under WTO law? The only reference in the existing literature is to be found in Cottier and Delimatsis They consider that the WTO adjudicating bodies have the jurisdiction to examine whether the measures of the Members exceed the UN mandate and, in the affirmative, such measures can be declared incompatible with the WTO commitments.106 In order to see how the relation between unilateral measures and UNSC measures is handled in the framework of the UN Charter, one may wish to consider the provisions on self-defense under Article 51 of the UN Charter But a careful look will actually reveal no additional relevant data to our debate However, a cumulative analysis of the WTO disciplines and case law concerning harmonization measures related to trade in goods may lead to a different conclusion The two instances are the Agreement on Sanitary and Phytosanitary Measures (SPS)107 and the Agreement on Technical Barriers to Trade (TBT).108 The SPS recognizes to Members the right to settle their own appropriate level of protection (ALOP), which may be as high as a ‘zero risk’ policy.109 While the measures based on international standards are presumed to be in conformity with the SPS,110 the Members are expressly allowed to introduce or maintain measures which result in a higher level of protection, if they are scientifically justified.111 In addition, the recent case law on the TBT may shed some light on the relationship between unilateral and multilateral measures in WTO law Accordingly, in a dispute concerning the use of a ‘dolphin-safe’ label on tuna products, the US relied on the TBT provisions allowing departure from international standards While a technical regulation adopted in accordance with international standards is presumed to be lawful,112 it is possible under the TBT to take unilateral measures, when international standards are inappropriate or ineffective.113 In the case at hand the disputed international standard was contained in the Agreement on the International Dolphin Conservation Program (AIDCP).114 The panel agreed on this point with the United States, Latest United States Sanctions Against Iran 383 D Analysis of Unilateral Security Exceptions Supposing that the exceeding measures can be justified under WTO law one may have a look at the unilateral security exceptions available To recall, Article XXI(b) GATT 1994 provides that: Nothing in this Agreement shall be construed [ .] (b) to prevent any contracting party from taking any action which it considers necessary for 115 116 Marketing and Sale of Tuna and Tuna Products (US-Tuna II (Mexico)) WT/DS381/ AB/R, adopted (13 June 2012) paras 381–401 WTO Panel Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US-Tuna II (Mexico)) WT/DS381/R, adopted (13 June 2012) paras 7.738-40 B Buzan, O Wæver and J De Wilde, Security: a New Framework for Analysis (Lynne Rienner 1998) 21 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 considering that the AIDCP standard failed to address properly some concerns related to the health of the dolphins, especially mothers and calves It thus concluded that ‘Mexico has failed to demonstrate that the AIDCP dolphinsafe standard is an effective and appropriate means to fulfill the US objectives at the United States’ chosen level of protection’.115 Accordingly, international standards are rather a ‘minimum standard of harmonization’ and Members can go beyond for justified reasons Using this finding, delivered in the context of international standards and unilateral measures for the protection of animals, one may say that if such a measure is lawful under WTO Law, a fortiori a unilateral measure based on national security concerns will be lawful under WTO Law, if the multilateral standard is ineffective National security ‘is about survival It is when an issue is presented as posing an existential threat to a designated referential object (traditionally the state, incorporating government, territory, and society)’.116 National security is a value important to the highest extent, recognized as such by the Members Yet, there is one important difference between the multilateral standards to which the SPS and the TBT Agreements make reference and a UNSC Resolution The Resolution is not a ‘simple’ multilateral standard, but it is supposed to be one of the most powerful tools in post World War II international relations This being said, it is questionable if the reasoning under the SPS or the TBT Agreements can be transferred to the security exceptions Finally, before drawing a final conclusion based on the possible analogy with the SPS and TBT provisions one should not forget two more things First, while the SPS and TBT texts expressly provide for the possibility of departure from international standards, Article XXI GATT 1994 is not clear in this respect Second, while the SPS makes express reference to scientific evidence, the invocation of security exceptions does not necessarily rely on a comparable risk analysis 384 George-Dian Balan the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations (i) The fissionable materials exception The rationale of the unilateral trade exception relating to fissionable (and fusionable) materials is preventing nuclear proliferation and protecting human life and health This provision is relatively clear, as there are no terms whose definition may raise interpretation problems Export of uranium, fissionable material or other related material may be prohibited regardless of its civil or military purpose.119 It is controversial whether international trade of nuclear energy services for pacific purposes is covered as well, due to the potential spillovers in the military field.120 Trade in fissionable materials is prohibited in certain situations by UNSC Resolutions In that case it will become applicable to the multilateral exception in Article XXI(c) GATT 1994 or its GATS counterpart In the particular case at hand, one of the aims of the US sanctions is preventing Iran from acquiring nuclear weapons by limiting the available financial 117 118 119 120 Art XXI GATT 1994 (or Art XIVbis GATS) does not have a proper ‘chapeau’ like the general exceptions However, letter b has a common introductory clause and three sub-paragraphs which depend on it See eg WTO Panel Report, United States - Standards for Reformulated and Conventional Gasoline (US–Gasoline) WT/DS2/R, adopted (20 May 1996) para 6.20; WTO Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef (Korea–Beef) WT/DS161/AB/R, WT/DS169/AB/R, adopted (10 January 2001) para 156; WTO Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US – Gambling) WT/DS285/AB/R, (20 April 2005) para 292; WTO Appellate Body Report, China – Measures Related to the Exportation of Various Raw Materials (China–Raw Materials) WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/AB/R, adopted (22 February 2012) para 354 M Matsushita, T Schoenbaum and P Mavroidis, The World Trade Organization Law, Practice and Policy (2nd edn, OUP 2006) 596 WTO Council for Trade in Services, ‘Energy Services, Background Note by the Secretariat’ S/C/W/52 (9 September 1998) para 28 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 Because of a partially similar structure,117 the order of analysis may be inferred from the rich case law on Article XX GATT 1994 (General Exceptions), consecrating a two-tiered test.118 Accordingly, one shall see first if the measure falls under one of the three subparagraphs and afterwards if the conditions of the introductory clause of paragraph b) are met Latest United States Sanctions Against Iran 385 (ii) The supply of military establishment exception The rationale of this exception is the particular role played by military forces and the defense industry in ensuring the national security This exception is relevant especially in the public procurement field.122 There may be some overlap between this exception and the exception concerning fissionable materials In this case the latter will apply, as a more specific exception The two controversial parts of this exception are the phrases ‘other goods and materials’ and ‘military establishment’ It is largely agreed that the category of ‘other goods and materials’ may include the so-called ‘dual-use’ goods, that can be used both for civilian and military purposes, such as computers, telecommunications equipment and other high tech equipment.123 The phrase ‘military establishment’ does not refer expressly to state armed forces Therefore, this exception may apply in the case of private armed forces and of terrorist organizations Restrictions on exports are easily justifiable under this exception.124 In the present case, the US measures have as one of the justifications the fight against terrorism and the alleged link between terrorist organizations and Iran.125 As mentioned above, terrorist organizations may fall within the definition of 121 122 123 124 125 S 1245(d) NDAA; s 102 CISADA The GPA contains a similar exception in Article XXIII (Exceptions to the Agreement) See s 2.D.(v) Such examples can be police helicopters used for ambulance services but which can also be used for military purposes or joysticks, commonly used in video games, but which may become a powerful tool to guide bombs GATT Secretariat, Analytical Index Guide to GATT Law and Practice vol I (6th edn, 1995) 602 This security exception is one of the most criticized, opening the door wide to major governmental investments in the research, development and production of weapons, thus encouraging the militarization of the economy See S Staples, ‘The WTO and War: Making the Connection’ Ratical (Washington DC, 28 November 1999) 5http:// www.ratical.org/co-globalize/WTOandGWSfp.html4 accessed 25 July 2012; The Hindu, ‘India and WTO’s Security Exception’ (17 May 2001) 5http://www.hinduonnet.com/2001/05/17/stories/0617000g.htm4 accessed 25 July 2012 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 resources resulting from oil-related transactions.121 The present exception could apply provided that it covers not only the trade in the fissionable materials and such, but all other related measures, such as the investment of oil-derived revenues in the nuclear sector It is unclear if a direct relationship between the revenues derived from oil, their investment in the alleged military component of the nuclear program of Iran and the security of the United States can be proved As the language of the preamble of Resolution 1929 itself suggests, it is a rather ‘potential connection’ However, one may attempt to prove this link by relying on recent reports on the slowing down of the nuclear program due to significantly reduced oil revenues 386 George-Dian Balan (iii) The war or other emergency exception The rationale of this exception is the actual or imminent threat posed to the very existing of a nation by a war or a comparable international situation It is probably the most controversial security exception due to the lack of clarity of the phrase ‘emergency in international relations’ The term ‘war’ poses no particular problem of interpretation Its scope extends not only to declared war, but to any armed conflict An international armed conflict occurs when one or more states have used armed force against each other, irrespective of the reasons or intensity of the conflict.127 The interposition of ‘other’ between ‘war’ and ‘emergency’ suggests that the war is one particular example of emergency.128 Accordingly, the other cases of emergency should be of comparable gravity.129 As Cottier and Delimatsis 126 127 128 129 See s 2.D.(vi) International Committee of the Red Cross (ICRC), ‘How is the Term ‘Armed Conflict’ Defined in International Humanitarian Law?’ Opinion Paper, March 2008 at 5http://www.icrc.org/web/eng/siteeng0.nsf/htmlall/armed-conflict-article-170308/ $file/Opinion-paper-armed-conflict.pdf4 accessed 25 July 2012 See also the UN General Assembly Resolution 3314 (XXIX) (‘Definition of Aggression’) 14 December 1974 HL Schloemann and S Ohlhoff, ‘ “Constitutionalization” and Dispute Settlement in the WTO: National Security as an Issue of Competence’ (1999) 93 AJIL 424 at 446 This reading is not necessarily confirmed by the French (‘applique´es en temps de guerre ou en cas de grave tension internationale’) and the Spanish (‘aplicadas en tiempos de guerra o en caso de grave tensio´n internacional’) versions of the text, where the word ‘other’ is missing We shall recall that according to the Final Act all three linguistic versions are authentic The gravity is confirmed by the French version of the text, which uses the phrase ‘grave tension internationale’ and by the Spanish version, reading ‘grave tensio´n internacional’ Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 ‘military establishment’ So it remains to demonstrate that the two other conditions of subparagraph (ii) are met: trade in ‘arms and other goods’ and the purpose of the trade Accordingly, petroleum and petroleum products may fall within the category of ‘other goods’ What matters the most in this case is the link between the trade in such goods and the supply of the military establishment As the text uses the phrase ‘directly or indirectly’ one may argue that the trade in oil is carried indirectly for the purposes of supplying terrorist organizations, in the sense that the revenues resulting from such trade are oriented toward sponsorship of terrorism From the text of the exception as such it is not clear if it covers only trade in the actual goods destined to the beneficiary (eg oil products destined to terrorist organizations) or if covers revenues resulted from the trade in such goods as well As in WTO law it is not clear if exceptions should be construed narrowly, a liberal interpretation giving satisfaction to the United States may be possible.126 Latest United States Sanctions Against Iran 387 130 131 132 133 134 135 136 137 Cottier and Delimatsis (n 106) 344 They suggest that similar provisions in investment agreements may be invoked in the context of the food crisis and financial crisis, in the absence of other adequate tools (eg safeguards) to justify the restrictions See C Smaller and H Mann, ‘A Thirst for Distant Lands: Foreign Investment in Agricultural Land and Water’ (2009) IISD 12 Cottier and Delimatsis (n 106) 344 See s 1.A s 1245(a)(3) NDAA s 2(1) CISADA According to the existing case-law one measure can concurrently pursue different objectives and may benefit from separate justifications to the extent it serves each purpose See WTO Panel Report, European Communities - Measures Affecting the Approval and Marketing of Biotech Products (EC-Biotech) WT/DS291/R, WT/DS292/ R, WT/DS293/R, adopted (21 November 2006) para 7.172 See n and n Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 highlight, ‘an emergency situation [ .] cannot be construed to cover a measure that is taken as a response to an action that occurred many years ago Rather, the threat should be imminent or the security measure should reflect a rapid response and action in order to deal with a dangerous situation that arose suddenly and recently’.130 Some authors argue that the ‘emergency in international relations’ is so broad as it includes not only political considerations, but also economic or social risks.131 It is of relevance to the present case the existing consensus that the phrase ‘emergency in international relations’ covers terrorism.132 As stated above, the United States began using terrorism as a justification for the imposition of sanctions on Iran since 1984.133 Section 1245 NDAA expressly mentions ‘terrorist financing’ among its findings,134 while CISADA uses the phrase ‘support for international terrorism’.135 As it is not required that there is only one objective of the measure in order to be justified under Article XXI(b)(iii) GATT 1994, the oil-related sanctions imposed under Section 1245 NDAA and Section 102 CISADA are covered by this exception.136 Provided that the United States can demonstrate that the terrorist threat is imminent and that there is a direct link between the revenues resulted from trade and investment in the oil sector of Iran, the financing of terrorist organizations and US security, this may be a relatively strong US defense under the security exceptions In addition, the United States may attempt to justify the measures under a more general ‘international emergency’ defense To recall, the IEEPA dates back from 1977 and it includes the phrase ‘international emergency’ in its title It served as basis for a number of sanctions on Iran throughout the years, beginning with EO 12170 from 1979.137 Several other Executive Orders, some already mentioned, have reiterated the ‘national emergency’ justification, during the heyday of US unilateral sanctions and later on, till the present day, often using the original language from 1979, which states that the actions of Iran pose ‘an unusual and extraordinary threat to the national security, foreign policy 388 George-Dian Balan and economy of the United States’.138 However, this more general defense may suffer from lack of precision and, in addition, the United States may encounter problems relating to the demonstration of an imminent threat which continues to exist as such after more than 30 years, under different facets (general national security concerns, terrorism, nuclear weapons) It is questionable to which extent the IAEA reports assist the US position and this issue in itself deserves a separate analysis Differently from Article XX GATT 1994 devoted to general exceptions, Article XXI(b) GATT 1994 does not have a comprehensive introductory clause reiterating the non-discrimination principle Instead, it establishes a balance between a subjective criterion (necessity as assessed by the Member itself) and an objective criterion (the existence of an ‘essential’ security interest) It has been much debate in the literature if security exceptions can be reviewed at all.139 It is beyond the scope of this article to reproduce the chronology of this debate or to go into further details I will resume myself to adopting the view according to which the security exceptions can be submitted for scrutiny to the WTO adjudicating bodies, under a standard of review deferential to Members’ political choices.140 The necessity test provided in the introductory clause differs from necessity tests under the three general exceptions of Article XX GATT 1994.141 The placing of the additional words ‘it considers’ before ‘necessary’ underlines the specificity of security exceptions and the great margin of maneuver left to the Members This is a rather political tool and Members should be left with considerable discretion.142 Nevertheless, necessity implies proportionality and the measure must be proportionate to the causing action.143 So this discretion is not absolute The objective criterion of the chapeau limits the measures only to those essential security interests A mere important security 138 139 140 141 142 143 See n The continuation of the national emergency declared by EO 12957 with respect to Iran is decided in March each year See eg Bhala (n 11); Browne (n 11); Cottier and Delimatsis (n 106); Schloemann and Ohlhoff (n 128); A Emmerson, ‘Conceptualizing Security Exceptions: Legal Doctrine or Political Excuse?’ (2008) 11 J Intl Econ L 135; S Schill and R Briese, ‘ “If the State Considers”: Self-Judging Clauses in International Dispute Settlement’ in A von Bogdandy and R Wolfrum (eds), Max Planck Yearbook of United Nations Law vol 13 (Martinus Nijhoff 2009) 61–140 For an opposite opinion, based on a survey of state practice see R Alford, ‘The Self-Judging WTO Security Exception’ (2011) Utah L Rev 697 Arts XX(a), XX(b) and XX(d) GATT 1994 Emmerson (n 139) MJ Hahn, ‘Vital Interests and the Law of GATT: an Analysis of GATT’s Security Exception’ (1991) 12 Mich J Intl L 603 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 (iv) The introductory clause Latest United States Sanctions Against Iran 389 (v) The special exceptions in the GPA As we have seen before, there may be a number of violations of the GPA In that particular case the GPA security exceptions may provide the grounds for justification Article XXIII:1 GPA reads as follows: Nothing in this Agreement shall be construed to prevent any Party from taking any action [ .] which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defense purposes This exception in the GPA reiterates the introductory words of the other exceptions the reader is already familiar with, namely those found in the GATT 1994 and the GATS The subjective criterion is reflected in the phrase ‘it considers’, placed before the word ‘necessary’, while the objective limitations are reflected in the intensity of the interests, only ‘essential’ security interests qualifying for the possible justification However, the United States will need to establish the nexus between each of the public procurement sanctions applied and its essential national security interests In some cases the nexus may be too remote.148 144 145 146 147 148 Cottier and Delimatsis (n 106) 340 Bhala (n 11) 263 Cottier and Delimatsis (n 106) 343 ibid 340 J Pauwelyn, ‘Iraqi Reconstruction Contracts and the WTO: “International Law? I’d Better Call My Lawyer” ’ Jurist (19 December 2003) 5http://jurist.law.pitt.edu/forum/ forumnew133.php4 accessed 25 July 2012 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 interest will not be covered by the exception; it has to be an interest important to the highest degree Thus, the measure should be credible, as implied by the words ‘essential’ and ‘necessary’,144 the limit being the abuse of rights.145 In this case ‘the WTO scrutiny will be limited to the identification of a measure which is manifestly unnecessary or disproportionate to the threat’.146 It is not clear if the recent US sanctions against Iran fully comply with the introductory clause test In spite of the great margin of maneuver the United States enjoys, the sanctions are rather disproportionate to the threat to the US security, affecting not only the targeted country but making a significant number of collateral victims among third country entities However, the specificity of how terrorism operates and is financed may plead in favor of proportionality of the measures as long as they relate to terrorism, as a complete isolation of the targeted country could prove necessary.147 390 George-Dian Balan (vi) Other common aspects This section is dedicated to briefly reminding three other important aspects in the analysis of the unilateral security exceptions These aspects are the interpretation of security exceptions, the debate opposing actual to potential threats and the notification requirements Without going into any details, it is well known that different domestic law systems and EU law recognize the principle according to which exceptions should be narrowly interpreted (exceptio est strictissimae interpretationis).152 However, it is not clear if this principle applies in WTO law as well.153 In the context of the SPS, the Appellate Body stated that ‘merely characterizing a treaty provision as an “exception” does not by itself justify a “stricter” or “narrower” interpretation of that provision than would be warranted by examination of the ordinary meaning of the actual treaty words, viewed in context and in the light of the treaty’s object and purpose, or, in other words, by applying the normal rules of treaty interpretation’.154 Although there is no doubt that security exceptions cover actual threats, it not totally clear if potential threats are covered as well The question has arisen in the context of Article XXI(b)(iii) GATT, during the accession of Portugal 149 150 151 152 153 154 Cottier and Delimatsis (n 106) 343 WTO Secretariat (n 14) 143 See WTO Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services For Certain Publications and Audiovisual Entertainment Products (China-Publications & Audiovisual) WT/DS363/AB/R, adopted (19 January 2010) para 233 See eg ECJ, Case C-414/97 Commission v Spain (1999) ECR I-05585, para 21; and ECJ, Case C-61/05 Commission v Denmark (2009) ECR I-11887, para 52 and the case law quoted in these judgments See eg AH Qureshi, Interpreting WTO Agreements: Problems and Perspectives (CUP 2006) 104–12 WTO Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones) (EC- Hormones) WT/DS26/AB/R, WT/DS48/AB/R, adopted (13 February 1998) para 104 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 Finally, there may be an overlap between this exception and the exception contained in Article XXI(b)(ii) GATT 1994 or Article XIVbis:1(b)(i) GATS For the parties to the GPA the specific exception will apply.149 In addition, briefly referring to the possible application of Article XXI GATT 1994 and Article XIVbis GATS to the GPA, one may wish to take into account the following elements: first, the GPA embodies its own set of exceptions, and second, there is no textual basis to link the GPA to the GATT 1994 and GATS security and general exceptions The textual basis exists, for instance, in the express case of Article of the Trade Related Investment Measures Agreement (TRIMS)150 or it was judged to exist in the case of paragraph 5.1 of China’s Accession Protocol.151 Latest United States Sanctions Against Iran 391 Conclusions Although Resolution 1929 makes mandatory or authorizes a great deal of sanctions against Iran, including a compulsory ban on trade in military equipment, 155 156 157 158 159 160 GATT Secretariat (n 124) 600 Cottier and Delimatsis (n 106) 340 GATT Decision Concerning Article XXI of the General Agreement, L/5426, 29S/23, 30 November 1982 In order to make the notification requirements effective, one possible approach would be the recognition of a sanction (ubi remedio, ibi jus) Such a sanction could be the non-opposability of the security exceptions which are not notified During the Uruguay Round Nicaragua came up with a proposal concerning good faith bilateral negotiations prior the adoption of a security exceptions justified measure It further proposed recourse to multilateral organizations, such as the UN, in case of an unsuccessful outcome of the negotiations See Cottier and Delimatsis (n 106) 336 Art XIVbis:2 GATS In practice such notifications are extremely scarce In the view of Switzerland, the ‘quasi absence of any notification to date under this GATS provision is simply a confirmation that no such measure has ever been introduced by Members’ See WTO, Council for Trade in Services, ‘Communication from Switzerland, Compliance with notification requirements under the GATS’ S/C/W/297 (13 March 2009) Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 Ghana boycotted the Portuguese goods, considering that Angola poses a threat to its national security.155 While considering potential threats in the context of Article XXI(b)(iii) GATT 1994 may not be problematic, as long as the threats are imminent, it is debatable if potential threats should be taken into account in the case of the other security exceptions.156 This distinction may prove important in the case of the US sanctions, as most of the security threats they address are rather potential and not necessarily actual Finally, in the case of the recent sanctions on Iran some clarifications may be sought from the Decision Concerning Article XXI of the General Agreement The preamble of the Decision states that ‘in taking action in terms of the exceptions provided in Article XXI of the General Agreement, [Members] should take into consideration the interests of third parties which may be affected’.157 However, the Decision is rather concerned with notification and transparency issues,158 stating in addition that ‘When action is taken under Article XXI, all [Members] affected by such action retain their full rights under the General Agreement’.159 There is no equivalent language on third parties’ interests in the field of trade in services, the GATS text being limited to a notification requirement ‘to the fullest extent possible’ of the Council for Trade in Services.160 In conclusion, third parties retain their full rights under the GATT and, in spite of the fact that Section 1245 NDAA and CISADA secondary sanctions clearly disregard the interests of third parties, their capacity of reacting to the measures should not be questioned 392 George-Dian Balan 161 In the case of Iraq the oil-related sanctions were multilaterally agreed Because of their effects, the UN Security Council allowed partial trade in oil in order to cover basic needs of the Iraqi people, ‘concerned by [their] serious nutritional and health situation’ See UN SC Res 986 (14 April 1995) Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 it lacks the teeth to bite decisively and to isolate Iran from the international community That is why the United States has imposed devastating unilateral sanctions, targeting all oil transactions-related aspects These comprehensive sanctions have not only a direct effect on third parties, but also an important side-effect concerning all trade in USD As a result, companies are faced with the choice of doing business with the United States or trading with Iran on energy A significant number of foreign companies have complied with the US rules, avoiding the imposition of sanctions and impacting on Iran’s energy sector However, it remains to be seen if this strategy succeeds in weakening the nuclear program or if it rather affects the population In this case a similar approach to the Iraqi oil-for-food program may be suitable.161 Section 1245 NDAA and Section 102 CISADA are the main instruments of the US foreign policy against Iran While the United States exempted 20 countries from the secondary sanctions provided by Section 1245 NDAA, OFAC has already imposed sanctions on several third country companies under Section 102 CISADA It is true, these sanctions are on the lighter end of the scale, but it is also true that for more than a decade no sanctions were imposed under ILSA at all Having at least partial international support, the United States is more determined than ever to contain Iran But this action may violate the main principles of WTO law regarding non-discrimination and market access As long as the United States takes actions within the limits mandated by the UN Security Council it is on a safe side and justification is de facto automatic under the security exceptions of Article XXI(c) GATT 1994 and Article XIVbis:1(c) GATS But once it leaves this safe harbor, a series of questions arise One of these questions is if a WTO Member can legitimate unilateral measures after a multilateral instrument has been adopted While there is nothing preventing an affirmative answer in the text itself and, on the contrary, relevant case law in the context of SPS and TBT seems to confirm the possibility of Members to go unilateral even in the existence of a harmonized standard, the final answer is far from being clear for reasons mainly related to good faith and the special place of the UN Security Council acts Assuming that a unilateral measure is still available as a justification for actions in excess of the UN Security Council mandate, further clarifications are needed The main clash points are the standard of review, the meeting of the specific conditions of each of the three possible exceptions and the fulfillment of the conditions imposed by the introductory clause In my opinion, the security exceptions, although explained by the realism doctrine, should be considered in the neo-liberal context of trade liberalization It means that they should be reviewed by a competent body The recent offer and acceptance of waivers is not a signal that the international community considers that the Latest United States Sanctions Against Iran 393 Downloaded from http://jcsl.oxfordjournals.org/ at University of Utah on December 3, 2014 security exceptions are just political tools, but it rather means that they are mainly political tools This does not exclude referral to the WTO, when necessary But because security interests are vital to the very existence of the state, the standard of review should be deferential All three GATT 1994/GATS unilateral grounds of justification may be applicable to the present case, depending very much on the establishment of a direct link between the revenues derived from oil-related trade and investments, nuclear arms proliferation and sponsorship of terrorism, and the US national security After the analysis of the possible grounds of justification one should turn to the introductory clause Although there is a wide margin of discretion of the Member concerned, which may take the measures ‘it considers’ necessary, the action should be always proportional to the threat In addition, the measure should address ‘essential security interests’ and not only important concerns, the limits being the abuse of rights ... on the International Dolphin Conservation Program (AIDCP).114 The panel agreed on this point with the United States, Latest United States Sanctions Against Iran 383 D Analysis of Unilateral Security. .. of sanctions in the energy sector of Iran.103 The insertion of a short reference in the preamble is only the Latest United States Sanctions Against Iran 381 (ii) If the US sanctions exceed the. .. Cottier and Delimatsis They consider that the WTO adjudicating bodies have the jurisdiction to examine whether the measures of the Members exceed the UN mandate and, in the affirmative, such measures