Belgium (finally) implements sanctions for violation of the EU Blocking Regulation

Last week, the Belgian Act implementing the EU Blocking Regulation was published in the Belgian Official Gazette (see here).

By Bert Gevers & Maria-Clara Van den Bossche, Loyens & Loeff | June 3, 2019

Why is it important ?

On 8 May 2018, President Trump announced that the US would cease its participation in the JCPOA and would re-impose US secondary sanctions in relation to Iran in two phases: the first phase took effect on 7 August 2018; and the second phase took effect on 5 November 2018 which included secondary sanctions. In response, the EU has updated Council Regulation (EC) No. 2271/1996 (the “EU Blocking Regulation“), which is intended to “provide protection against and counteract the effects of the extra-territorial application of the laws specified in the Annex” (Article 1)[1].

The EU Blocking Regulation foresees among other a (i) prohibition to comply and a (ii) possibility to recover damages.

1. Prohibition to comply

Article 5, first paragraph, read in conjunction with Article 11 of the EU Blocking Regulation, provides that:

“no legal person incorporated within the EU shall comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition (…) based on or resulting, directly or indirectly, from the laws specified in the Annex or from actions based thereon or resulting therefrom”.

2. Recovery of damages

Article 6, first paragraph, read in conjunction with Articles 1 and 11 of the EU Blocking Regulation, provides that:

“any legal person incorporated in the EU, engaging in international trade and/or the movement of capital and related commercial activities between the EU and third countries, shall be entitled to recover any damages, including legal costs, caused to that person by the application of the laws specified in the Annex or by actions based thereon or resulting therefrom”.

The Guidance note on the EU Blocking Regulation confirms that the scope of damages that can be claimed is thus very broad, in line with the protective aim of the Regulation.[2]

Article 6, second paragraph, provides that the recovery may be obtained from the natural or legal person or any other entity causing the damage or from any person acting on its behalf or intermediary[3].

Article 6, third paragraph states that damages can be recovered before the courts.

The Guidance Note specifies that, the question which court will be competent will depend on the specifics of the case, the applicable rules on jurisdiction, the national civil procedure etc. As a general rule, the third paragraph of Article 6 refers to the rules enshrined in the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters.

Because it is a regulation and it does not provide anything to the contrary, the Blocking Regulation is directly applicable in all EU Member States. A recovery of damages claim can thus be filed before the Belgian courts on the basis of the EU Blocking Regulation.

However, the Member States’ authorities are responsible for the implementation of the Blocking Statute, including for the adoption and implementation in their respective legal orders of penalties for possible breaches. Until recently Belgian legislation did not foresee any sanctions for violating the Blocking Regulation including its ‘prohibition to comply with the sanctions mentioned in Annex 1”.

On 21 May 2019, the Belgian Act implementing the EU Blocking Regulation was finally published.

Who are the competent authorities in Belgium?

Pursuant to the Belgian Act implementing the EU Blocking Regulation, the Belgian Federal Public Service for Foreign Affairs now is the competent authority as referred to in Article 2(3) and Article 10 of the EU Blocking Regulation, i.e. the competent authority in view of Belgium’s obligation to inform the EU Commission of any information it receives from EU operators within the context of the reporting obligation and of any measures taken under the EU Blocking Regulation.

Pursuant to the same Act, the Belgian Federal Public Services for Finance and for the Economy are now the competent authorities for supervising compliance with the obligations laid down in Article 2(1) and (2) and Article 5 of the EU Blocking Regulation, i.e. the competent authorities to monitor compliance in Belgium by EU operators with the reporting obligation and the prohibition to observe the specified sanctions.

Administrative fines

Importantly, if the competent authorities (the Federal Public Services for Finance and for the Economy) establish an infringement of the EU Blocking Regulation in Belgium, the relevant Minister (of Finance or Economy) may now impose administrative fines on “the infringer(s) and, where appropriate, one or more members of its executive board, of its executive committee, or if there is no executive board or committee, on the effective managers, responsible for the infringements”.

For legal entities, the administrative fine ranges from EUR 10,000 to 10% of the entity’s annual net turnover of the previous business year. For individuals, the fine ranges from EUR 250 to EUR 5,000,000.

The actual amount of the fine is determined having regard to all relevant circumstances, and in particular: the seriousness and duration of the breach, the responsibility of the infringer, the infringer’s financial strength, the benefit or advantage obtained through the breach, the damages caused, any prior and the infringer’s willingness to cooperate with the authorities.

Entry into force

The Act enters into force on 31 May 2019.

[1]See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.LI.2018.199.01.0001.01.ENG&toc=OJ:L:2018:199I:TOC

[2]See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOC_2018_277_I_0003

[3] More info on the exact meaning and responsibilities can be found in the Guidance Note on the EU Blocking Regulation issued by the European Commission clarifies that liability in damages not only arises for the responsible entity but also for its ‘representatives’.

Bert Gevers

Maria-Clara Van den Bossche

Author
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Bert Gevers

Attorney at law, Local Partner at Loyens & Loeff Belgium

Bert is a partner of the Brussels office, he heads the Loyens & Loeff Indirect tax group in Brussels and co-chairs the firm’s International Trade Group. He advises clients on matters related to international and domestic exchange of goods and services. Matters such as export controls and sanctions, FTA's, customs valuation, origin, classification, excise duties and VAT are familiar parts of my practice. He is also co-heading the Food & Beverages team and he is a core member of the firm's Corporate Investigation Team.

Bert assists clients by drafting compliance programmes, giving trainings, as well as in performing internal scans and audits. He also represent clients before the Belgian and Dutch authorities and courts as well as before the European Commission, its advisory committees and the Court of Justice of the European Union. He has ample experience in counselling clients involved in (criminal) investigations on suspected tax and trade law violations.

He is a member of the Brussels Bar since 2000, the current President of the Global Legal Customs Association, a global network of trade-lawyers, a correspondent for the international VAT Club, a member of the ICC section on Customs and trade facilitation and the sub-committee on indirect taxes and a member of the steering committee of the ABA International Law Section on sanctions and export controls.

He is the co-founder and scientific coordinator of the blog www.worldtradecontrols.com in cooperation with ICC Belgium, VBO/FEB and Bryan Cave LLP where he comments the recent developments in sanctions and export controls.