EU implements and extends UN Sanctions on North Korea

The EU has amended the regulation underpinning its sanctions regime on the Democratic People’s Republic of Korea’s (“DPRK”).

On 4 May 2016 (Council Regulation (EU) 2016/682) (the “EU Regulation“) entered into force. The EU Regulation implements the UN’s wide-ranging sanctions in the EU and expands the current EU sanctions regime against DPRK, amending Regulation 392/2007 (“the Old Regulation”). The adoption of the EU Regulation follows the UN Security Council’s unanimous adoption of Resolution 2270 (2016) (the “UN Resolution“) on 2 March 2016 after the latest nuclear test and rocket launch by DPRK on 6 January 2016 and 7 February 2016 respectively.

It also follows the subsequent adoption by the European Council of Regulation (EU) 2016/315 and Council Decision (CFSP) 2016/319 of 4 March 2016 (“the March Decision”), adding 16 individuals and 12 entities to its list of designated persons (“DPs“). Please see our earlier “UN, US, EU and Switzerland impose tough new sanctions on North Korea as a result of its nuclear programme” blog post for further details on the March Decision.

Broadened Asset Freeze Restrictions

Asset freeze restrictions introduced by the EU Regulation includees:

1. a ban on directly or indirectly participating in a joint venture or other business arrangements with a designated party or someone acting on their behalf/direction; and
2. a ban on providing funds/economic resources to persons, entities or bodies of the Government of North Korea, the Worker’s Party of North Korea, or persons or entities owned/controlled by them or acting on their behalf/direction where determined they are associated with DPRK’s nuclear or ballistic missile programmes; and

The EU Regulation also expands the definition of “economic resources”. “Economic resources” is now expressly extended to cover: “assets of every kind, whether tangible or intangible, movable or immovable, actual or potential, which are not funds but can be used to obtain funds, goods or services, including vessels, such as maritime vessels.”

Luxury Goods

The EU Regulation further extends the ban on luxury goods to cover an extensive list of items that goes beyond the items listed in the UN Regulation which included luxury watches, high-value transportation items such as snowmobiles, items of lead crystal and recreational sports equipment.

The list in the EU Regulation maintains its restrictions on certain types of high quality cigars and cigarillos in respect of tobacco products, but the inclusion of items such as caviar and caviar substitutes amongst the list of luxury goods indicates the EU’s intention to broaden the specific controls on such goods in relation to DPRK.

Financial Institutions

 The UN Sanctions include a prohibition on financial institutions opening new branches, subsidiaries, or representative offices in DPRK. The EU Regulation also prohibits financial institutions from establishing correspondent banking relationships with financial institutions in DPRK. In addition, the EU Regulation requires financial institutions to terminate current correspondent banking relationships by 31 May 2016. This prohibition will have implications for entities that receive or pay funds to or from DPRK.

The EU Regulation also imposes a broad ban on providing financial support for trade with DPRK where such financial support could contribute to DPRK’s nuclear and ballistic missile programs or other activities.

 Import/Export Restrictions

 The UN Sanctions and the EU Regulations enhanced increased import/export restrictions against DPRK aimed at cutting off funds for DPRK’s nuclear and other banned weapons programmes by making any cargo originating in or destined for DPRK liable for inspection. They also introduced a ban on importing DPRK’s coal, iron, and iron ore.

In addition, the EU Regulation extends import/export restrictions to impose:

1.  A broad restriction on the export to or import from DPRK of any item (except food or medicine) that could contribute to the development of the operational capabilities of armed forces; and
2. Heightened requirements for the inspection of cargo within or transiting through EU Member States where the cargo:
   1. originates in or is destined for DPRK;
   2. has been brokered or facilitated by DPRK or its nationals or individuals or entities acting on their behalf or at their direction, or entities owned or controlled by them; or
   3. where the cargo is being transported on DPRK flagged vessels or aircraft registered in DPRK, or on a vessel or aircraft that is stateless.