chapter 37 european union export controls · § 37:28 internal compliance program (icp) and...

Chapter 37

European Union Export Controls

By: Dr. Gerd M. Schwendinger, LL.M.*

§ 37:1 Checklist§ 37:2 Introduction—Background of export control§ 37:3 EU export controls—Military items§ 37:4 —Military Items—EU Regulatory Framework§ 37:5 —EU Regulatory Framework—Common Position

2008/944/CFSP de�ning common rules governingthe control of exports of military technology andequipment

§ 37:6 — —EU Common Military List§ 37:7 — —Common Position on the control of arms

brokering§ 37:8 Military Items—Member State Legislation§ 37:9 —Competent authorities

*Dr. Gerd M. Schwendinger, LL.M. (mailto:[email protected]),is a partner at the Hamburg and Brussels o�ces of the law �rm GvW Grafvon Westphalen and a member of the �rm's Customs & International Tradepractice group. His main area of expertise focuses on various subjects relatedto European Union law. In particular, he advises and represents companiesof all kinds on customs and foreign trade law, export controls and sanctionslaw, EU market regulation, anti-dumping/anti-subsidy law, WTO law, excisetax law, as well as EU state aid and subsidies law. He has extensive litiga-tion experience and represents clients in front of national courts and EUcourts in Luxemburg, as well as the European Commission and stateauthorities. He studied law at the universities of Giessen (Germany) andBordeaux (France) as well as at the European University Institute in Flor-ence (Italy). After having obtained his PhD in EU Law his professional careerbegan in 2005 at the US law �rm of Latham & Watkins LLP. Before joiningGvW Graf von Westphalen he was a judge both at the administrative courtand at the district court in Hamburg. He is a member of the European Forumfor Foreign Trade, Customs and Excise, and is a lecturer on export controland customs law at the Hamburg Customs Academy and at the BuceriusLaw School in Hamburg. He is a frequent speaker at conferences andsymposiums and is an author of numerous articles in trade journals, com-mentaries, and handbooks.

Philip Bentley and Elena Kostadinova authored the prior version ofthis Chapter.

37-1K 2014 Thomson Reuters, 12/2014

§ 37:10 EU export controls—Dual-use items§ 37:11 — —Competent authorities§ 37:12 — —De�nition of Dual-use items§ 37:13 — —Items listed in Annex I of the Dual-Use

Regulation§ 37:14 — —“Catch-all” provisions regarding non-listed

items§ 37:15 — —Intra-EU transfers§ 37:16 — —Authorizations and procedures§ 37:17 — —Record keeping requirements§ 37:18 — —Brokering services§ 37:19 Embargoes and Sanctions—Overview and

competent authorities§ 37:20 —Types and scope of restrictive measures§ 37:21 —Country-related embargoes§ 37:22 — —Trade sanctions§ 37:23 — —Arms embargos§ 37:24 — —Financial and other economic restrictions§ 37:25 —Person-related embargoes (anti-terrorism)§ 37:26 EU export controls—Other export control measures§ 37:27 —Penalties§ 37:28 Internal Compliance Program (ICP) and Contract

drafting§ 37:29 Developments in EU export controls§ 37:30 —Dual-use export control review§ 37:31 —Embargoes and sanctions§ 37:32 Conclusion

KeyCiteL: Cases and other legal materials listed in KeyCite Scope can beresearched through the KeyCite service on WestlawL. Use KeyCite to checkcitations for form, parallel references, prior and later history, andcomprehensive citator information, including citations to other decisionsand secondary materials.

§ 37:1 Checklist

EU export controls of military itemsE EU Regulatory FrameworkE Member State LegislationE Competent authoritiesEU export controls of Dual-use itemsE Competent authoritiesE De�nition of Dual-use items

International Contract Manual

37-2

E Items listed in Annex I of the Dual-Use RegulationE “Catch-all” provisions regarding non-listed itemsE Intra-EU transfersE Authorizations and proceduresE Record keeping requirementsE Brokering servicesEU Embargoes and SanctionsE Competent authoritiesE Types and scope of restrictive measuresE Country-related embargoesE Person-related embargoes (anti-terrorism sanctions)Other EU export control measuresPenaltiesInternal Compliance Program (ICP) and Contract draft-ingDevelopments in EU export controls

§ 37:2 Introduction—Background of export controlTwo fundamental principles of European Union (EU) law are

the free movement of goods between Member States (Articles28 and 29 of the Treaty on the Functioning of the EuropeanUnion)1 and the free exportation of goods outside the EU(Article 1 of Council Regulation No 1061/2009, as amended).2

The free movement and exportation of goods can be re-stricted, however, to protect both national interests and theEU's interests in areas such as public security, particularly asit relates to the goal of �ghting global terrorism. Exportcontrols of military and dual-use items and embargoes/sanctions, etc., are considered to be justi�ed exceptions to thegeneral principle of free movement.

[Section 37:2]1Cf. the consolidated version of the Treaty on the Functioning of the

European Union (TFEU), O�cial Journal of the European Union (OJ) 2012C 326/47; see also Articles 45 et seq., 49 et seq., 56 et seq. and 63 et seq.TFEU regarding other fundamental freedoms the free movement of persons,services and capital. A consolidated version of the TFEU can be accessed at:http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12012M/TXT&from=EN (all hyperlinks quoted in this chapter were last accessed on July16, 2014).

2Council Regulation No 1061/2009 establishing common rules forexports, OJ 2009 L 291/1 as amended.

§ 37:2European Union Export Controls


Export control in the EU3 combines the laws of MemberStates with EU laws and regulations regarding speci�c transac-tions, such as the export/transfer of certain items outside theEU and between Member States, in particular military anddual-use goods as well as software and technology.4 In a simpli-�ed form, in export control law, there are four main questionsto always keep in mind:

E What is being exported?E Where is the item being exported?E Who is the contracting party/end-user?E Why is the item being exported? (What is the purpose?)However, other economic activities, for example the import

or transport of goods or the provision of services etc., can alsobe subject to EU export controls and may require a license/authorization or even be prohibited.

Although export control law in the EU is to a large extentcomprised of EU law,5 the European Commission (hereinafter:Commission) in general does not work directly with exportersor issue authorizations. Instead, export control is implementedby the competent national authorities of the Member States. Ingeneral, to ship military items or dual-use items outside theEU, one must apply for a license or authorization from the

3For further information on EU export controls see: Schwendinger/Bender, in: Hamburg Handbook of Export Law (Hamburger Handbuch desExportrechts), 2nd ed. (edited by Paschke/Graf/Olbrisch; published in Ger-man by Beck; forthcoming), Section 35 on export restrictions for dual-useitems and embargoes & sanctions, and Section 36 on authorizationprocedures, penalties, internal export control compliance programs andexport control-related contract-drafting; see also Bender, op. cit, Section 37on export restrictions for military items, chemicals and waste.

4Such export controls should not be confused with export controls ongoods such as food, antiques, chemicals, animals, drugs, plants, medicinalproducts, etc., controls which are designed to protect public health, safety,intellectual property, national heritage, etc.

5The O�cial Journal (OJ) of the EU is the only legally binding o�cialrecord of the EU legal acts in force. The OJ provides consolidated versions ofthe legal acts published on the OJ website. It is noted that, contrary to thelegal acts themselves, the consolidated versions are not legally binding andproduced by the EU for ease of reference only. To access the legal acts andthe consolidated versions, consult the OJ website at: http://eur-lex.europa.eu/homepage.html?locale=en. It is further noted that consolidated versions arenot always updated to include the most recent amendments to the legal act.In that case it is necessary to take into account those amendments that werepublished after the date of the consolidated act to obtain a full overview ofthe current status of the legal act in question.

§ 37:2 International Contract Manual

37-4

competent Member State authority where the exporter isestablished. In the UK, for example, this body is the ExportControl Organisation (ECO)6 as part of the British Departmentfor Business, Innovation & Skills (BIS). In Germany, thecompetent authorities are the Federal O�ce of Economics andExport Control (Bundesamt für Wirtschaft und Ausfuhrkon-trolle—BAFA)7 and the Federal Ministry for Economic A�airsand Energy (Bundesministerium für Wirtschaft und Energie—BMWi).8

§ 37:3 EU export controls—Military items

Within the regulatory framework of the EU the exportationof military items is, by and large, a matter of national law andrequires an authorization from the competent Member Stateauthority.

§ 37:4 EU export controls—Military Items—EURegulatory Framework

At the EU level, export controls related to military items arecoordinated within the EU Common Foreign and SecurityPolicy (CFSP). Pursuant to the CFSP, the EU has adopted aseries of measures.1

6See ECO's website at: https://www.gov.uk/government/organisations/export-control-organisation.

7BAFA's website can be accessed in English at: http://www.bafa.de/bafa/en/index.html.

8BMWi's website can be accessed in English at: http://www.bmwi.de/EN/root.html.

[Section 37:4]1For further information see: http://eeas.europa.eu/non-proliferation-an

d-disarmament/arms-export-control/index�en.htm.



§ 37:5 EU export controls—EU RegulatoryFramework—Common Position 2008/944/CFSPde�ning common rules governing the control ofexports of military technology and equipment

In 1998 the Council of the EU adopted the European UnionCode of Conduct on Arms Exports1 which established a noti�ca-tion and consultation mechanism for export license denials,included a transparency procedure through the publication ofthe EU annual reports on arms exports and laid down criteriafor the export of conventional arms. The Code contributedsigni�cantly to the harmonization of national arms exportcontrol policies and its principles and criteria have been of-�cially subscribed to by a number of third countries.

The Common Position 2008/944/CFSP de�ning common rulesgoverning control of exports of military technology and equip-ment2 marked the formal successful conclusion of a review ofthe Code and set another milestone in improving the EU'sexport control standards. The Common Position that updatesand replaces the Code of Conduct on Arms Exports includesseveral new elements, which deepen and widen the scope ofapplication. These elements include the extension of controls tobrokering, transit transactions and intangible transfers oftechnology, as well as the implementation of strengthenedprocedures in order to further harmonize Member States'export policies. Recognizing the special responsibility ofmilitary technology and equipment exporting states, MemberStates have shown their determination to prevent the export ofmilitary technology and equipment which might be used forundesirable purposes such as internal repression or interna-tional aggression or contribute to regional instability. The eightcriteria that guide national licensing policies as set down inthe Article 2 of the Common Position are:

(1) Respect for the international obligations and commit-ments of Member States, in particular the sanctionsadopted by the UN Security Council or the European

[Section 37:5]1European Union Code of Conduct on Arms Exports, 8675/2/98; the

Code can be accessed at: http://www.consilium.europa.eu/uedocs/cmsUpload/08675r2en8.pdf.

2Council Common Position No 2008/944/CFSP of 8 December 2008de�ning common rules governing control of exports of military technologyand equipment, OJ 2008 L 335/99.


37-6

Union, agreements on non-proliferation and othersubjects, as well as other international obligations.

(2) Respect for human rights in the country of �nal destina-tion as well as respect by that country of internationalhumanitarian law.

(3) Internal situation in the country of �nal destination, asa function of the existence of tensions or armed con�icts.

(4) Preservation of regional peace, security and stability.(5) Behaviour of the buyer country with regard to the

international community, as regards in particular its at-titude to terrorism, the nature of its alliances and re-spect for international law.

(6) National security of the Member States and of territorieswhose external relations are the responsibility of aMember State, as well as that of friendly and alliedcountries.

(7) Existence of a risk that the military technology or equip-ment will be diverted within the buyer country or re-exported under undesirable conditions.

(8) Compatibility of the exports of the military technology orequipment with the technical and economic capacity ofthe recipient country, taking into account the desirabil-ity that states should meet their legitimate security anddefense needs with the least diversion of human and eco-nomic resources for armaments.

The User's Guide to Council Common Position 2008/944/CFSP,3 drawn up and regularly updated by the Working Partyon Conventional Arms Exports, serves as guidance to assistMember States in implementing the Common Position (cf.Article 13 of the Common Position). It is intended for use pri-marily by export licensing o�cials.

§ 37:6 EU export controls—EU RegulatoryFramework—EU Common Military List

The EU Common Military List has the status of a politicalcommitment in the framework of the CFSP. The most recentversion of the EU Common Military List which updates previ-

3See: http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%209241%202009%20INIT.



ous versions was adopted by the Council on April 9, 2014.1

Article 12 of Common Position 2008/944/CFSP stipulates thatthe EU Common Military List shall act as a reference point forMember States' national military technology and equipmentlists, but shall not directly replace them. The list will beupdated to re�ect changes in relevant international lists, andto incorporate any other changes agreed upon by MemberStates. Member States are free to adopt stricter policies.

§ 37:7 EU export controls—EU RegulatoryFramework—Common Position on the control ofarms brokering

On June 23, 2003, the Council adopted Common Position2003/468/CFSP on the Control of arms brokering1 aimed atregulating arms brokering. The Common Position establishes aset of provisions to be implemented through national legisla-tion, requiring the Member States to take all the necessarymeasures to control brokering activities on their territory orcarried out by brokers of their nationality. In particular, itrequires the Member States to subject speci�c brokeringtransactions to license applications, to establish a system forthe exchange of information on brokering activities, and to es-tablish adequate sanctions to ensure that controls are ef-fectively enforced.

§ 37:8 Military Items—Member State Legislation

As noted, the exportation of military items requires an au-thorization from the competent Member State authority. Anexporter may even need to apply for an authorization beforeentering into contractual discussions. Each Member State hasa list which not only includes the items listed in the CommonMilitary List, but also may include additional items or itemsfrom the Common Military List of which the Member Stategives a wider interpretation.

[Section 37:6]1OJ 2014 C 107/1.

[Section 37:7]1OJ 2003 L 156/79.


37-8

France's Military List, for example, is contained in DecreeNo 95-589 of 6 May 1995.1 In Germany, military items areidenti�ed in the War Weapons List (Kriegswa�enliste)2 and inPart I Section A of the Export List (Ausfuhrliste).3 The UK hasalso adopted a Military List under the Export Control Act 2002and its implementing legislation.4 Further national MilitaryLists can be found on the websites of the various MemberStates' export control authorities.

§ 37:9 Military Items—Competent authoritiesThe Member States' national authorities that control the

export of military items are not necessarily the same as thenational authorities that control the export of dual-use items.Information about the national authorities responsible forexport controls of military items, as well as other country-speci�c information, can be obtained either from the MemberState's websites and certain information can be found at thewebsite of the Stockholm International Peace Research

[Section 37:8]1The full name of the Decree is No 95-589 of May 6, 1995, on the

Implementation of the Decree of April 18, 1939, on Weapons of War, Fire-arms and Ammunition. The Decree can be accessed (albeit in French) fromthe Government's website at: http://www.legifrance.gouv.fr/a�chTexte.do?cidTexte=LEGITEXT000005618597&dateTexte=vig#.

2The War Weapon List is an Annex to the War Weapons Control Act(Kriegswa�enkontrollgesetz), Federal Law Gazette (Bundesgesetzblatt) Part I1990 p. 2515 as amended. The list can be accessed (in German) from theGovernment's website at: http://www.gesetze-im-internet.de/krwa�kontrg/anlage�46.html. An English translation can be accessed at: http://www.bafa.de/bafa/en/export�control/legislation/index.html. Further information related tothe same can be accessed (in German) at: http://www.bafa.de/ausfuhrkontrolle/de/krwa�kontrg/vorschriften/index.html.

3The Export List is an Annex to the Foreign Trade and PaymentsOrdinance (Aussenwirtschaftsverordnung) of August 2, 2013 (Federal LawGazette Part I p. 2865), which has been enacted on the basis of the ForeignTrade and Payments Act (Aussenwirtschaftsgesetz) of June 6, 2013 (FederalLaw Gazette Part I p. 1482). English translations of the AWG and the AWVcan be accessed from the Government's and BAFA's websites at: http://www.gesetze-im-internet.de/Teilliste�translations.html and http://www.bafa.de/bafa/en/export�control/legislation/index.html.

4UK Strategic Export Control Lists, the consolidated list of strategic,military and dual-use items that require export authorization, May 2014.The List can be accessed at: https://www.gov.uk/government/uploads/system/uploads/attachment�data/�le/184049/strategic-export-control-consolidated20130320.pdf.



Institute (SIPRI).1 For example, German-speci�c regulationsare published by BAFA2 and BMWi3 on their websites.

§ 37:10 EU export controls—Dual-use items

Export controls of dual-use items is mainly conductedthrough EU law,1 in particular Council Regulation (EC) No428/20092 (hereinafter: Regulation 428/2009 or Dual-UseRegulation).

§ 37:11 EU export controls—Dual-use items—Competent authorities

According to Article 9(6) of Regulation 428/2009, the list ofnational authorities competent to grant authorizations for theexport1 of dual-use items and to decide to prohibit the transit2

[Section 37:9]1See: http://www.sipri.org/research/armaments/transfers/research/arma

ments/transfers/transparency/national�reports/sipri-national-reports-database.

2http://www.bafa.de/bafa/en/export�control/index.html (Englishversion).

3http://www.bmwi.de/DE/Themen/Aussenwirtschaft/aussenwirtschaftsrecht.html (German only).

[Section 37:10]1For more information see: http://ec.europa.eu/trade/import-and-export-

rules/export-from-eu/dual-use-controls/.2Council Regulation (EC) No 428/2009 setting up a Community regime

for the control of exports, transfer, brokering and transit of dual-use items,OJ 2009 L 134/1 as amended.

[Section 37:11]1According to Article 2(2) of Regulation 428/2009 “export” shall mean (i)

an export procedure within the meaning of Article 161 of Regulation (EEC)No 2913/92 (the Community Customs Code); (ii) a re-export within the mean-ing of Article 182 of that Code but not including items in transit; and (iii)transmission of software or technology by electronic media, including by fax,telephone, electronic mail or any other electronic means to a destinationoutside the EU; it includes making available in an electronic form suchsoftware and technology to legal and natural persons and partnershipsoutside the EU; export also applies to oral transmission of technology whenthe technology is described over the telephone.

2According to Article 2(7) of Regulation 428/2009 “transit” means atransport of non-EU dual-use items entering and passing through thecustoms territory of the EU with a destination outside the EU.


37-10

of non-EU dual-use items are to be published by the Commis-sion in the C series of the O�cial Journal of the EU.3

§ 37:12 EU export controls—Dual-use items—De�nitionof Dual-use items

According to Article 2(1) of Regulation 428/2009, “dual-useitems” are de�ned as “items, including software and technol-ogy, which can be used for both civil and military purposes,and shall include all goods which can be used for both non-explosive uses and assisting in any way in the manufacture ofnuclear weapons or other nuclear explosive devices.”

§ 37:13 EU export controls—Dual-use items—Itemslisted in Annex I of the Dual-Use Regulation

According to Article 3(1) the items listed in Annex I ofRegulation 428/2009 cannot be exported outside the EUwithout an export authorization granted by the competentauthorities of the Member State where the exporter1 isestablished. Annex I contains 10 categories of controlled items.The categories are:

E Cat. 0: Nuclear materials, facilities, and equipment;E Cat. 1: Special materials and related equipment;E Cat. 2: Materials Processing;E Cat. 3: Electronics;E Cat. 4: Computers;

3A regularly updated list of the Member States' licensing authorities'contacts and websites is also published by the Commission's DirectorateGeneral Trade and can be accessed at: http://trade.ec.europa.eu/doclib/docs/2011/july/tradoc�148094.pdf.

[Section 37:13]1According to Article 2(3) an “exporter” is any natural or legal person or

partnership (i) on whose behalf an export declaration is made, that is to saythe person who, at the time when the declaration is accepted, holds thecontract with the consignee in the third country and has the power fordetermining the sending of the item out of the customs territory of the EU; ifno export contract has been concluded or if the holder of the contract doesnot act on its own behalf, the exporter shall mean the person who has thepower for determining the sending of the item out of the customs territory ofthe EU; (ii) which decides to transmit or make available software or technol-ogy by electronic media including by fax, telephone, electronic mail or by anyother electronic means to a destination outside the EU. Where the bene�t ofa right to dispose of the dual-use item belongs to a person established outsidethe EU pursuant to the contract on which the export is based, the exportershall be considered to be the contracting party established in the EU.



E Cat. 5: Telecommunications and information security;E Cat. 6: Sensors and lasers;E Cat. 7: Navigation and avionics;E Cat. 8: Marine; andE Cat. 9: Aerospace and propulsion.Each category is divided into �ve sub-categories depending

on the type of item, namely: (A) Systems, Equipment, andComponents, (B) Test, Inspection, and Production Equipment,(C) Materials, (D) Software, and (E) Technology. Because itmay be di�cult to navigate through these de�nitions, it is es-sential to know the technical characteristics of the product oneproposes to export. In addition, one may note that Annex Iprovides items with numbers which are di�erent from theCombined Nomenclature customs codes under which an item isexported out of or imported into the EU.2

In order to ensure regular and timely updates of the commonlist of dual-use items in conformity with the obligations andcommitments taken by Member States within the internationalexport control regimes, the power to adopt acts in accordancewith Article 290 TFEU has recently been delegated by theEuropean Parliament and the Council to the Commission inrespect of amending Annex I to Regulation 428/2009.3 Accord-ing to Articles 15(3) and 23a of Regulation 428/2009 the powerto adopt such delegated acts is conferred on the Commissionfor a period of �ve years from July 2, 2014, and shall be tacitlyextended for periods of an identical duration unless theEuropean Parliament or the Council opposes such extensionnot later than three months before the end of each period. Thedelegation of power may be revoked at any time by theEuropean Parliament or by the Council.

§ 37:14 EU export controls—Dual-use items—“Catch-all” provisions regarding non-listed items

In addition to being aware of listed items, exporters must

2The Combined Nomenclature (CN) of the EU integrates the Harmo-nized System (HS) Nomenclature published by the World Customs Organiza-tion. Each CN subheading has an eight digit code number: (a) the �rst sixdigits shall be the code numbers relating to the headings and subheadings ofthe HS nomenclature; (b) the seventh and eighth digits shall identify the CNsubheadings speci�cally created to address the needs of the EU.

3Regulation (EU) No 599/2014 of the European Parliament and of theCouncil of 16 April 2014 amending Council Regulation (EC) No 428/2009 set-ting up a Community regime for the control of exports, transfer, brokeringand transit of dual-use items, OJ 2014 L 173/79.


37-12

also be aware of the so-called “catch-all” rules which areprovided for in EU and Member State legislation.

Such provisions are contained in Article 4 of Regulation 428/2009, which applies to dual-use items not listed in Annex I.For the export of such non-listed items, an authorization isrequired if the exporter has been informed by the competentauthorities of the Member State in which he is establishedthat the items in question are or may be intended, in their en-tirety or in part, for the following uses:

(1) for use in connection with the development, production,handling, operation, maintenance, storage, detection,identi�cation or dissemination of chemical, biological ornuclear weapons or other nuclear explosive devices orthe development, production, maintenance or storage ofmissiles capable of delivering such weapons (Article 4(1)of Regulation 428/2009);

(2) for a military end-use (i.e., incorporation into militaryitems listed in the military list of Member States; use ofproduction, test or analytical equipment and componentstherefor, for the development, production or maintenanceof military items listed in this list; use of any un�nishedproducts in a plant for the production of military itemslisted in this list) if the purchasing country or country ofdestination is subject to an arms embargo imposed bythe EU, OSCE or UN (Article 4(2) of Regulation 428/2009);

(3) for use as parts or components of military items listed inthe national military list that have been exported fromthe territory of that Member State without authorizationor in violation of an authorization prescribed by nationallegislation of that Member State (Article 4(3) of Regula-tion 428/2009).

Furthermore, pursuant to Article 4(4) of Regulation 428/2009, if an exporter is aware that non-listed dual-use items areintended for any of the uses referenced above, he must notifythe authorities, which will then decide whether or not it is ex-pedient to authorize the export.

In addition, Article 4(5) of the Regulation provides thatMember States may adopt legislation imposing an authoriza-tion requirement on the export of non-listed dual-use items ifthe exporter has grounds for suspecting that the items are ormay be intended for any of the uses referred to above.

Finally, Article 8(1) of Regulation 428/2009 allows Member



States to prohibit or impose an authorization requirement onthe export of non-listed, dual-use items for reasons of public se-curity or human rights considerations.1 Member States mustreport such measures to the Commission, which publishes suchmeasures in the C series of the O�cial Journal of the EU.2

§ 37:15 EU export controls—Dual-use items—Intra-EUtransfers

Under Article 22 of Regulation 428/2009, an authorization isrequired from the Member State from which the dual-use itemsare to be transferred for intra-EU transfers of dual-use itemslisted in Annex IV of Regulation 428/2009.

Pursuant to Article 22(2) of Regulation 428/2009, MemberStates may additionally impose an authorization requirementfor the transfer of other dual-use items from its territory to an-other Member State in cases where, at the time of transfer:

(1) the operator knows that the �nal destination of the itemis outside the EU;

(2) the export to that �nal destination is subject to an au-thorization requirement pursuant to the above-mentioned Articles 3, 4 or 8 of Regulation 428/2009 inthe Member State from which the items are to betransferred, and such export directly from its territory is

[Section 37:14]1E.g., pursuant to Sec. 9 of the German Foreign Trade and Payments

Ordinance, the export of goods which are not listed in the German ExportList or in Annex I of Regulation 428/2009 are subject to an authorizationrequirement if the exporter has been informed by BAFA that (i) these goodsare or can be wholly or partly destined for the construction or the operationof a facility for nuclear purposes within the meaning of Category 0 of AnnexI of Regulation 428/2009 or for installation in such a facility and (ii) thecountry of destination is Algeria, Iran, Iraq, Israel, Jordan, Libya, theDemocratic People's Republic of Korea, Pakistan, or Syria.

2Cf. Information note—Council Regulation (EC) No 428/2009 of 5 May2009 setting up a Community regime for the control of exports, transfer,brokering and transit of dual-use items: Information on measures adopted byMember States in conformity with Articles 5, 6, 8, 9, 10, 17 and 22, OJ 2012C 67/1.


37-14

not authorized by a general authorization or a global au-thorization;1

(3) no processing or working is to be performed on the itemsin the Member State to which the goods are to betransferred.

§ 37:16 EU export controls—Dual-use items—Authorizations and procedures

According to Article 2 (paragraphs 8-11) of Regulation 428/2009 and Regulation 1232/2011, there are four types ofauthorizations that are valid throughout the Union: (i) individ-ual export authorizations; (ii) Union General Export Authoriza-tions (EU GEAs); (iii) national general export authorizations;and (iv) global export authorizations.

The individual export authorization is an authorizationgranted to one speci�c exporter for one end user or consigneein a third country and covering one or more dual-use items.

The EU GEAs address exports to certain listed countries ac-cording to the conditions and requirements for use as listed inAnnexes IIa to IIf of Regulation 428/2009. There are a total ofsix possible licenses depending on the destination, the good,and the use. For example, EU GEA 1 addresses exports toAustralia, Canada, Japan, New Zealand, Norway, Switzerland(including Liechtenstein) and the United States. EU GEA 2 ad-dresses exports of certain categories of dual-use items to certainother destinations (Argentina, Croatia, Iceland, South Africa,South Korea and Turkey). The remaining EU GEAs addressother goods and uses to speci�ed countries (EU GEA 3: exportafter repair/replacement; EU GEA 4: temporary export for ex-hibition or fair; EU GEA 5: telecommunications; and EU GEA6: chemicals). In order to ensure that only low-risk transac-tions are covered by the EU GEAs included in Annexes IIa toIIf, as of July 2, 2014, the Commission is empowered by theEuropean Parliament and the Council to adopt delegated actsin accordance with Articles 9(1) and 23a of Regulation 428/2009 in order to remove destinations from the scope of those

[Section 37:15]1Regarding the various types of authorizations refer to the following

sections.



EU GEAs if such destinations become subject to an armsembargo as referred to in Article 4(2) of the Regulation.1

The national general export authorization (national GEA) isan export authorization de�ned by national legislation inconformity with Article 9 and Annex IIIc, but which excludesitems in Annex II(g). Several Member States, including theUK, France and Germany,2 have adopted national generalexport authorizations.3

The global export authorization is an authorization grantedto one speci�c exporter in respect of a type or category of dual-use item which may be valid for exports to one or more speci-�ed end users and/or in one or more speci�ed third countries.

With respect to individual and global export authorizations,exporters are required to supply the competent authoritieswith all relevant information (in particular, information aboutthe end user, the country of destination, and the end use of theitem exported). The authorization may be subject, if appropri-ate, to an end-use statement. Furthermore, Member States, indeciding whether to grant an individual and global export au-thorization (or for a brokering authorization), must take intoaccount the factors identi�ed in Article 12 of Regulation 428/2009.

Use of the EU GEA or a national GEA may be subject toprior registration of the economic operator who makes use ofthis authorization with the competent national authority. Theaverage period needed to obtain an individual authorization isabout 30 days but may take signi�cantly longer, depending onthe individual case.

Under Article 16 of Regulation 428/2009, when completingthe formalities for the export of dual-use items at the customs

[Section 37:16]1Cf. Regulation (EU) No 599/2014 of the European Parliament and of

the Council of 16 April 2014 amending Council Regulation (EC) No 428/2009setting up a Community regime for the control of exports, transfer, brokeringand transit of dual-use items, OJ 2014 L 173/79.

2For an overview (in German) over the German national GEAs refer to:http://www.ausfuhrkontrolle.info/ausfuhrkontrolle/de/verfahrenserleichterungen/allgemeingenehmigungen/index.html.

3Under Article 22 of Regulation 428/2009, items listed in Part 2 of An-nex IV shall not be covered by a general authorization.


37-16

o�ce responsible for handling the export declaration,4 theexporter is required to furnish proof that any necessary exportauthorization has been obtained. In addition, a translation ofany document furnished as proof into an o�cial language ofthe Member State where the export declaration is presentedmay be required.

§ 37:17 EU export controls—Dual-use items—Recordkeeping requirements

Under Article 20 of Regulation 428/2009, for at least threeyears from the end of the calendar year in which the exporttook place, exporters are required to keep detailed registers orrecords of their exports in accordance with the national law orpractice in force in the respective Member State. The registersor records must include commercial documents such asinvoices, manifests, and transport and other dispatch docu-ments containing su�cient information regarding the descrip-tion and quantity of the dual-use items, the name and addressof the exporter and consignee, and, where known, the end-useand end-user of the dual-use items.

§ 37:18 EU export controls—Dual-use items—Brokeringservices

Regulation 428/2009 also regulates the brokering of dual-useitems. Article 2(5) of the Regulation de�nes “brokering ser-vices” as “the negotiation or arrangement of transactions forthe purchase, sale or supply of dual-use items from a thirdcountry to any other third country, or the selling or buying ofdual-use items that are located in third countries for theirtransfer to another third country.” According to Article 2(6) ofthe Regulation a “broker” is any natural or legal person orpartnership resident or established in a Member State thatcarries out such services from the EU into the territory of athird country.

Under Article 5 of Regulation 428/2009, an authorization isrequired for brokering services of dual-use items listed in An-nex I if the broker has been informed by the competent authori-ties of the Member State in which he is resident or establishedthat the items are or may be intended, in their entirety or in

4In Article 2(4) of Regulation 428/2009 an “export declaration” is de�nedas the act whereby a person indicates in the prescribed form and manner thewish to place dual-use items under an export procedure.



part, for any of the uses referred to in Article 4(1) of the Regula-tion (i.e., uses in connection with the development, production,handling, operation, maintenance, storage, detection, identi�ca-tion or dissemination of chemical, biological or nuclear weaponsor other nuclear explosive devices or the development, produc-tion, maintenance or storage of missiles capable of deliveringsuch weapons).

If a broker is aware that (all or part of) such listed dual-useitems for which he proposes brokering services are intended forsuch uses, he must notify the competent authorities, which willthen decide whether or not it is expedient to make such broker-ing services subject to authorization.

In addition, Member States may extend the application ofthis authorization and noti�cation requirement to non-listeddual-use items for uses referred to in Article 4(1) and to dual-use items for military end use and destinations (i.e., a countrythat is subject to an EU, OSCE or UN arms embargo) referredto in Article 4(2). Member States may also adopt nationallegislation imposing an authorization requirement on thebrokering of dual-use items if the broker merely has groundsfor suspecting that the items are or may be intended for any ofthe uses referred to in Article 4(1).

Article 20 of Regulation 428/2009 also imposes similarrecord-keeping obligations on brokers as dual-use exporters. Inaccordance with national law or practice in force in the ap-plicable Member States, for a period of three years, brokers arerequired to keep registers or records for brokering services soas to be able to prove, on request, the description of the dual-use items that were the subject of brokering services, the pe-riod during which the items were the subject of such servicesand their destination, and the countries concerned by thosebrokering services.

§ 37:19 Embargoes and Sanctions—Overview andcompetent authorities

The EU applies sanctions or restrictive measures in pursuitof the speci�c objectives of the Common Foreign and SecurityPolicy (CFSP). Such sanctions constitute exceptions to the EUprinciples of free movement of goods, services, capital, and oftrade liberalization under the WTO and, therefore, are usedcautiously as an instrument of foreign policy. They take the


37-18

form of EU embargoes1 which, in particular, implement Resolu-tions of the Security Council of the UN, or Decisions of theOSCE, but may also decide to apply further “EU-autonomous”restrictive measures.

However, CFSP decisions providing for EU sanctions are notdirectly binding and need to be implemented, in particular,through EU Council Regulations. Such Regulations are directlyapplicable and have direct e�ect in the Member States, creat-ing obligations and rights for those subject to them (includingEU citizens and economic operators). Depending on the divi-sion of competences between the EU and the Member States,some sanctions provided for in CFSP decisions have to beimplemented by Member States on the basis of national controllegislation, in particular arms embargoes.

The Commission makes proposals for Regulations imposingrestrictive measures that fall within the scope of EU compe-tence, which are to be adopted by the Council. The Commissionhas also been empowered to make certain implementingRegulations amending such legislation, in particular bypublishing lists of targeted persons, groups or entities. For allmeasures that fall within the sphere of the EU, the Commis-sion has to ensure by way of monitoring that Member Statesimplement the Sanctions-Regulations in a proper and timelymanner and take appropriate action to apply and enforce theseRegulations.

The competent authorities of the Member States are identi-�ed on the websites listed in the relevant EU Regulations onrestrictive measures. Typically the competent authorities ofMember States are responsible for:

E determination of penalties for violations of the restrictivemeasures;

E the granting of exemptions;E receiving information from, and cooperating with, eco-

nomic operators (including �nancial and credit institu-tions);

E reporting upon their implementation to the Commission;E for UN sanctions, liaison with Security Council sanctions

committees, if required, in respect of speci�c exemptionand delisting requests.

[Section 37:19]1The terms embargoes or sanctions or restrictive measures are usually

used interchangeably.



Sanctions are subject to amendment and change. Compiledlists of the sanctions in place are published by the EuropeanExternal Action Service (EEAS) of the EU2 and by the exportcontrol authorities of the Member States.3 These lists of re-strictive measures in force are sorted by country or targetedgroups and are regularly updated to re�ect amendments to thelegal acts.4

General guidance on the implementation of restrictivemeasures can be found in the Guidelines on implementationand evaluation of restrictive measures in the framework of theEU CFSP5 or the EU Best Practices6 for the e�ective implemen-tation of restrictive measures.7

§ 37:20 Embargoes and Sanctions—Types and scope ofrestrictive measures

A variety of restrictive measures can be imposed by the EUin reaction to terrorism, violations of international law and ofhuman rights, and regimes that do not respect democraticprinciples or the rule of law. There is a wide range of possiblerestrictive measures, including:

E diplomatic sanctions (expulsion of diplomats, severing ofdiplomatic ties, suspension of o�cial visits);

2A list updated on May 26, 2014, can be accessed at: http://eeas.europa.eu/cfsp/sanctions/docs/2014�05�26-measures-in-force�en.pdf.

3See the lists on BAFA's website (German only) and on the UKGovernment's website: http://www.ausfuhrkontrolle.info/ausfuhrkontrolle/de/embargos/ and https://www.gov.uk/current-arms-embargoes-and-other-restrictions.

4However, it is noted once again that these documents are onlyproduced for ease of reference. The OJ of the European Union and theMember States' law gazettes are the only legally binding o�cial records ofthe EU/national restrictive measures in force.

5The Guidelines can be accessed at: http://register.consilium.europa.eu/pdf/en/12/st11/st11205.en12.pdf.

6The EU Best Practices can be accessed at: http://register.consilium.europa.eu/pdf/en/08/st08/st08666-re01.en08.pdf.

7Additional information about EU restrictive measures can be found onthe EEAS's website at: http://eeas.europa.eu/cfsp/sanctions/index�en.htm;this website also includes a comprehensive presentation about EU sanctionsof Spring 2008 (http://eeas.europa.eu/cfsp/sanctions/docs/index�en.pdf) and alist of FAQs on EU restrictive measures of November 2013 (http://eeas.europa.eu/cfsp/sanctions/docs/frequently�asked�questions�en.pdf); one may canalso �nd additional information the websites of the competent authorities ofthe Member States.


37-20

E suspension of cooperation with a third country;E boycotts of sport or cultural events;E trade sanctions (general or speci�c trade sanctions, arms

embargoes);E �nancial sanctions (freezing of funds or economic re-

sources, prohibition on �nancial transactions, restrictionson export credits or investment);

E �ight bans; andE restrictions on admission.1

EU embargoes have an extended scope of application, includ-ing EU nationals abroad and foreign companies doing businessin the EU. In general EU sanctions apply:

E within the territory of the EU, including its airspace;E on board any aircraft or any vessel under the jurisdiction

of a Member State;E to any person inside or outside the territory of the Union

who is a national of a Member State;E to any legal person, entity or body, inside or outside the

territory of the Union, which is incorporated or consti-tuted under the law of a Member State;

E to any legal person, entity or body in respect of any busi-ness done in whole or in part within the Union.2

Restrictive measures imposed by the EU may target govern-ments of third countries (country-related embargoes), or non-state entities and individuals such as terrorist groups and ter-rorists (person-related embargoes).3

[Section 37:20]1See: http://eeas.europa.eu/cfsp/sanctions/docs/index�en.pdf.2Cf., e.g., Article 49 of Council Regulation (EU) No 267/2012 concerning

restrictive measures against Iran and repealing Regulation (EU) No 961/2010, OJ 2012 L 88/1 as amended.

3For more information see: http://eeas.europa.eu/cfsp/sanctions/index�en.htm.



§ 37:21 Embargoes and Sanctions—Country-relatedembargoes

Examples of country-related embargoes imposed by the EUare those against Iran,1 Syria2 and the Democratic People's Re-public of North Korea. Particularly noteworthy are also therecent sanctions taken by the EU against Russia in respect ofactions undermining or threatening the territorial integrity,sovereignty and independence of Ukraine.3

§ 37:22 Embargoes and Sanctions—Country-relatedembargoes—Trade sanctions

Trade sanctions can be bans on all economic transactions, inparticular all exports and/or imports (total embargoes), ormerely restrictions limited to certain economic areas (partialembargoes).

Currently there is no total embargo in force in the EU. Allsanctions of the EU are partial embargoes which can compriseinter alia measures like prohibitions or authorization require-ments regarding:

E export/import bans con�ned to speci�c products (such asoil, speci�c metals, speci�c software, key equipment andtechnology for certain industries, other listed items, etc.);

E the provision of certain services (e.g., technical assistance,

[Section 37:21]1Council Regulation (EU) No 267/2012, OJ 2012 L 88/1 as amended; for

more information on the EU embargoes against Iran see: Schwendinger/Trennt, ExportManager 4/2014, p. 23; Schwendinger, ExportManager 1/2014,p. 18; Schwendinger, Aussenwirtschaftliche Praxis (AW-Prax) 2013, p. 37;Harings/Schwendinger, ExportManager 9/2012, p. 16; Schwendinger,ExportManager 3/2012, p. 16; Harings/Schwendinger, ExportManager9/2010, p. 19; the ExportManager (published by F.A.Z. Institute) can be ac-cessed (in German) at: http://www.exportmanager-online.de/.

2Council Regulation (EU) No 36/2012, OJ 2012 L 16/1 as amended; formore information on the EU embargoes against Syria and on the MiddleEast Area see: Schwendinger/Trennt, ExportManager 4/2014, p. 23; Harings/Schwendinger, ExportManager 9/2012, p. 16.

3Cf. Regulation (EU) No 269/2014 of 17 March 2014, OJ 2014 L 78/6 asamended; Regulation (EU) No 208/2014 of 5 March 2014, OJ 2014 L 66/1 asamended; see also on EU sanctions in the context of the Ukraine crisis thefollowing articles: Schwendinger, ExportManager 2/2014, p. 5; Schwendinger/Trennt, ExportManager 3/2014, p. 21; the articles can be accessed (in Ger-man) at: http://www.exportmanager-online.de/ (published by F.A.Z. Institute).


37-22

brokering services, �nancing or �nancial assistance re-lated to listed goods and technology, etc.);

E restrictions on transport (e.g., prohibition to make avail-able vessels designed for the transport of speci�c goods,prohibition to provide classi�cation or bunkering or shipsupply services for certain vessels, etc.);

E withdrawal of tari� preferences, etc.If restrictive measures are in place in respect to the speci�c

country exporters/importers must check, in particular, if therespective product to be exported/imported is listed among theprohibited products in the Annexes to the relevant Regulation.In case of doubts, the competent authority of the relevantMember State, as identi�ed on the websites listed in the rele-vant Regulation can provide companies either with clari�ca-tion whether the exports/imports of particular goods arepermissible, or with an authorization to export/import thesegoods, if this is allowed under the applicable legislation.

§ 37:23 Embargoes and Sanctions—Country-relatedembargoes—Arms embargos

The EU's most frequently used trade restriction is probablythe arms embargo, which generally comprises a prohibitionagainst selling, supplying, transferring, or exporting arms andrelated materiel of all types, including weapons and ammuni-tion, military vehicles and equipment, paramilitary equipmentand spare parts, and a prohibition to provide �nancing and�nancial assistance, technical assistance, brokering servicesand other services related to military activities, and to the pro-vision, manufacture, maintenance, and use of arms and relatedmaterials of all types.

§ 37:24 Embargoes and Sanctions—Country-relatedembargoes—Financial and other economicrestrictions

Given that trade restrictions are sometimes di�cult to adjustto the di�erent objectives of the EU, the EU has often limiteditself to �nancial restrictions. Financial restrictions compriseboth an obligation to freeze all funds and economic resources oftargeted persons and entities, and a prohibition to make fundsor economic resources available directly or indirectly to or forthe bene�t of these persons and entities (see below regardingperson-related embargoes). As explained above, these measureshave to be applied inter alia by all persons and entities doing



business in the EU, including nationals of non-EU countries.Nationals of Member States and entities incorporated and con-stituted under the law of one of the Member States also havean obligation to apply them when doing business outside theEU.

Other economic restrictions are:E restrictions on �nancing of certain enterprises (restric-

tions on investments in speci�c economic sectors, such asgranting of loans, creating joint ventures, acquisition ofcertain companies, etc.);

E restrictions on transfer of funds and on �nancial services(noti�cation/authorization requirements for payments andcapital movements, prohibition to provide/broker insur-ance or re-insurance to speci�c persons/entities).

§ 37:25 Embargoes and Sanctions—Person-relatedembargoes (anti-terrorism)

An embargo of designated individuals, groups and entities,usually in the form of �nancial restrictions, aims at limiting itsimpact to the people responsible for the undesirable conduct.These embargoes are imposed either by a Resolution of the UNSecurity Council or within the framework of the CFSP.

Currently, there are three so-called EU Anti-terrorism-Regulations containing person-related embargoes directedagainst:

E certain persons and entities associated with the Al-Qaidanetwork;1

E certain individuals, groups, undertakings and entities inview of the situation in Afghanistan2 (i.e., the Taliban andpersons/entities associated with them);

[Section 37:25]1Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain

speci�c restrictive measures directed against certain persons and entities as-sociated with the Al-Qaida network, OJ 2002 L 139/9 as amended.

2Council Regulation (EU) No 753/2011 of 1 August 2011 concerning re-strictive measures directed against certain individuals, groups, undertakingsand entities in view of the situation in Afghanistan, OJ 2011 L 199/1 asamended.


37-24

E certain persons and entities with a view to combatingterrorism.3

As in the case of persons and entities associated with Al-Qaeda, a person-related embargo may involve an explicit banon provision of services for military purposes or activities orthe provision of technical advice or assistance.

Most importantly, however, these embargoes involve thefreezing of funds and economic resources and contain a provi-sion which states that no economic resources should be madeavailable, directly or indirectly, to or for the bene�t of a natu-ral or legal person, group, or entity listed in the respectiveRegulation. As explained above, such person-related sanctionsare also frequently used as elements of country-relatedembargoes (see above regarding �nancial restrictions). Theterms “funds” and “economic resources” are very broad, andcomprise assets of every kind, whether tangible or intangible,movable or immovable (in particular exported goods andtechnology). The freezing of funds and economic resourcesmeans preventing their use for obtaining funds, goods, or ser-vices in any way.

Thus, exporters must make sure that the persons, groups orentities they are trading with are not listed, or that the envis-aged transaction would not bene�t them directly or indirectly.This can prove particularly problematic in cases where thebusiness partner of the exporter is a non-listed legal person orentity which, however, is owned or controlled by a listed personor entity. In principle, such transactions will be considered asprohibited, unless it can be reasonably determined, on a case-by-case basis using a risk-based approach, taking into accountall of the relevant circumstances, including certain criteriadeveloped by the EU, that the funds or economic resourcesconcerned will not be used by or be for the bene�t of that listedperson or entity.4

Consequently, it is important for exporters to check the list

3Council Regulation No 2580/2001 on speci�c restrictive measuresdirected against certain persons and entities with a view to combating ter-rorism, OJ 2001 L 344/70 as amended.

4For further information on indirect supply of funds or economic re-sources and notions of ownership and control please consult the Council doc-ument 9068/13 of 30 April 2013 at: http://register.consilium.europa.eu/pdf/en/13/st09/st09068.en13.pdf; see also on this topic the following articles (inGerman): Schwendinger, AW-Prax 2013, p. 103; Schwendinger, ExportMan-ager 2/2013, p. 15; the latter article (published by F.A.Z. Institute) can be ac-cessed at: http://www.exportmanager-online.de/.



of embargoed persons and entities before establishing businessrelations involving the transfer of economic resources. The EUo�ers a consolidated list containing the names and identi�ca-tion details of all persons, groups and entities targeted by�nancial restrictions (i.e., including anti-terrorism measures aswell as �nancial sanctions against listed persons/entities whichare stipulated in country-related embargo regulations). Thislist can be accessed through the EU's website.5 Many companiesalso use speci�c IT-tools in order to screen their businesspartners and personnel (which can be subject to dispute from adata protection point of view). In cases of doubt, an enquirywith the national authorities may be advisable.

It should be noted that individuals, groups and entities canseek legal protection against their listing in EU sanctions listsbefore the General Court of the EU and, in the appeal instance,before the European Court of Justice (ECJ) and many of themhave done so successfully in the past.6 However, the annul-ment of the listing, i.e. of the acts imposing restrictivemeasures against the persons and entities concerned, does nottake e�ect immediately after the judgment made by the Gen-eral Court. The e�ects of any acts that have been annulled inthe �rst instance by the General Court are maintained untilexpiry of the period for bringing an appeal (i.e., two monthsand 10 days from noti�cation of the judgment). During that pe-riod, the Council, or the Commission where appropriate, canremedy the infringements established by adopting, if appropri-ate, new restrictive measures with respect to the persons andentities concerned. Alternatively, the Council, or the Commis-sion where appropriate, can bring an appeal, in which case thelisting remains in full force pending the appeal. If none of

5The current EU link which provides access to this very extensive listcan be accessed at: http://eeas.europa.eu/cfsp/sanctions/consol-list�en.htm.One can �nd a “Day-to-day use” notice in the following link: http://ec.europa.eu/external�relations/cfsp/sanctions/list/version4/global/help�online/help.html. However, the EU institutions do not accept any liability for possibleomissions of relevant data or mistakes, and for any use made of theconsolidated list as only the information published in the OJ of the EU isdeemed authentic.

6See, e.g., ECJ, Judgment of 18 July 2013, Joined Cases C-584/10 P,C-593/10 P und C-595/10 P, Commission et al./Kadi; ECJ, Judgment of 28May 2013, Case C-239/12 P, Abdulbasit Abdulrahim; General Court, Judg-ment of 29 January 2013, Case T-496/10, Bank Mellat, (Appeal pendingbefore the ECJ in Case C-176/13 P); General Court, Judgment of 5 December2012, Case T-421/11, Qualitest FZE; the judgments can be accessed at: http://curia.europa.eu/.


37-26

these steps is taken the restrictive measures against thisperson/group/entity will end.7

§ 37:26 EU export controls—Other export controlmeasures

It has to be noted that apart from export controls of militaryand dual-use items and embargoes/sanctions explained above,there are further export control measures on EU and MemberState level which have to be taken into account.

An example is Regulation (EC) No 1236/2005 concerningtrade in certain goods which could be used for capital punish-ment, torture, or other cruel, inhuman or degrading treatmentor punishment.1 Pursuant to this Regulation an authorizationis required from the competent Member State when the goods“could be used” for the purpose of torture and other cruel,inhumane or degrading treatment or punishment. The de�ni-tions of what comprises these goods are set out in the Regula-tion and the Annexes.

§ 37:27 EU export controls—PenaltiesAs the EU has no competence to impose sanctions with

regard to infringements of the Dual-Use Regulation or EUembargo Regulations, etc., such sanctions can only be imple-mented by the relevant national authorities of the MemberStates. According to Article 24 of Regulation 428/2009,1 eachMember State is required to take appropriate measures toensure proper enforcement of the provisions of the Dual-UseRegulation, including laying down penalties for infringements.The penalties must be “e�ective, proportionate and dissuasive.”

In the majority of national regimes, there are penalties forexporting military or dual-use items without an authorizationor for violating embargo provisions. The penalties vary but, inthe UK or France for example, penalties may amount to up to

7See FAQ No 12 at: http://eeas.europa.eu/cfsp/sanctions/docs/frequently�asked�questions�en.pdf.

[Section 37:26]1Council Regulation (EC) No 1236/2005 concerning trade in certain

goods which could be used for capital punishment, torture or other cruel,inhuman or degrading treatment or punishment, OJ 2005 L 200/1 asamended.

[Section 37:27]1Similar provisions can be found in EU embargo Regulations.



10 years imprisonment for serious o�enses. Penalties also typi-cally include con�scation of the military and/or dual-use items,con�scation of vehicles that transport them and the objectswhich served to hide illegal exports (e.g., in France and Ger-many), as well as �nes. In addition, the future use of generalauthorizations or of all types of authorizations may berestricted. In the UK, failure to comply with the requirementsof maintaining records of export transactions, of ful�llingexport formalities, or providing false or misleading particularswhen applying for an export license are o�enses which canlead to imprisonment of up to two years or unlimited �nes. Thefuture use of authorizations may also be restricted.

In Germany, a breach of an arms embargo is considered acrime and may result in a prison term of one year up to 10years (in cases of intent) or up to three years imprisonment ora �ne (in cases of gross negligence).2 For other criminal o�en-ses, each (intentional) breach of an export control provision(e.g. export prohibitions or authorization requirements basedon the Dual-use regulation or EU embargoes) may result in aprison sentence from three months up to �ve years.3 If theaforementioned o�ences are not committed intentionally butmerely negligently they are not considered criminal but onlyadministrative o�ences4 which can, however, result in high�nes for the o�enders. In addition, the company as well as itso�cials can be held liable for additional �nes for employee ac-tions under certain conditions.5 Fines may go up 10 millionEUR.6

These penalties may inter alia also apply to Member States'nationals abroad.

§ 37:28 Internal Compliance Program (ICP) andContract drafting

In the light of the various obligations on exporters describedabove, the movement of goods and services outside a MemberState, in particular potential dual-use or military items,

2Cf. Sec. 17 of the Foreign Trade and Payments Act.3Cf. Sec. 18 of the Foreign Trade and Payments Act.4Cf. Sec. 19 of the Foreign Trade and Payments Act; however some

administrative o�ences under Sec. 19 can also be committed intentionally.5Cf. Sec. 30 and 130 of the Act on Regulatory O�ences (Ordungswidrig-

keitengesetz).6Cf. Sec. 30(2) of the Act on Regulatory O�ences.


37-28

software, and technologies, should be reviewed in advance todetermine whether export to the particular destination or useris banned or is subject to an authorization. An Internal Compli-ance Program (ICP) is a method for complying with aspects ofexport control and for demonstrating that the company isorganized so as to be able to comply. The establishment of anICP under the direction of an export control o�cer is importantfor any company that is active in international business for avariety of reasons:

E To avoid committing regulatory and/or criminal o�enseswith consequential bad publicity for the company (and therisk of imprisonment for company o�cials);

E To centralize company export control procedures andrender them more e�cient;

E To facilitate the obtaining of global export authorizationsby maintaining proper record and audit procedures; and

E To facilitate the obtaining of individual export licenses bymaintaining good relations with the licensing authority.

There are several publications containing useful informationfor companies on establishing an ICP. For example, BAFApublished a manual (in English and in German) on the basicsof establishing an ICP which addresses a series of frequentlyasked questions about ICP (e.g., Why does a company need anICP? Which legal requirements apply to an ICP? What are theICP criteria? Are there warnings/“red �ags”?).1 Likewise, in itspublication on establishing an ICP, SIPRI has summarizedwhat it views to be the most essential elements of a good ICP:

(1) A commitment from senior management to comply withnational export controls.

(2) The designation of a senior member of the company ashead of the ICP to ensure implementation of the ICP.

(3) A regularly updated written guide detailing companycompliance policies and procedures, possibly in the formof a software package.

(4) Ongoing training of sta� dealing with di�erent aspectsof processing exports.

(5) The screening of all aspects of an export (products,customer and end-user; destination; end-use).

[Section 37:28]1BAFA: Internal Compliance Programmes—ICP, Internal Export

Control Systems (June 2012). The English version of the manual can be ac-cessed at: http://www.bafa.de/bafa/en/export�control/publications/export�control�icp.pdf.



(6) Adherence to national export control legislation record-keeping requirements.

(7) Establishment of procedures for regular internal auditsand compliance monitoring within companies.

(8) Establishment of procedures for handling and resolvingcompliance problems and violations.2

In addition, US Department of Commerce, although not aEuropean source, has published a list of helpful “red �ags” inexport transactions of which exporters may need to be on guardalso with regard to EU export controls.3

Exporters should also establish a screening procedure anddetailed checklists to evaluate the propriety of the export,particularly as it relates to the screening of the customer (es-pecially new ones) and the end-user.

In principle, the establishment of an ICP is not legallymandatory. Some Member States, however, require theestablishment of an ICP (or an export control o�cer) in orderto grant certain types of authorizations (e.g., Germany, Poland,and Romania).

Also of great practical importance for a company in connec-tion with export control (and as part of an e�ective ICP) is thedrafting of contracts with business partners, especially busi-ness suppliers and consumers. In order for the exporter or bro-ker to be able to meet the requirements of export control law,he must know exactly what goods he is exporting and who theend user is. So long as he does not fully control the supplychain, he is dependent on information that he can obtain fromsuppliers and customers. In order to ensure the necessarycooperation with business partners and to protect the companyagainst liability risks, the contracts with both the suppliersand the customers must take export control into account. Itwill often be a question of one's own bargaining power and aconsideration of to what extent it is possible to enforce clausesthat ensure a favorable distribution of risk vis-à-vis thecontracting partner. Therefore, particularly in view of the factthat a dispute is a possibility, when one is drafting contracts

2SEESAC: Internal Compliance Programmes (2011), p. 14. The guidecan be accessed at: http://www.sipri.org/research/armaments/transfers/controlling/research/armaments/transfers/publications/other�publ/other%20publications/Internal%20Compliance%20Programmes.pdf.

3https://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/freight-forwarder-guidance/23-compliance-a-training/51-red-�ag-indicators.


37-30

one should always consider speci�c export control clauses aspart of the company's risk management (in addition, one shouldconsider choice of law and dispute resolution provisions,jurisdictional and arbitration provisions, etc.).

§ 37:29 Developments in EU export controls

Export controls, as a security-related trade instrument,remain, more than ever, at the forefront of international andEU non-proliferation e�orts. They need to adjust to the evolu-tion of security risks and threats—including the various formsof terrorism and the e�orts by some States and non-state ac-tors to acquire weapons of mass destruction and correspondingcarrier technology and armaments. Thus, the European Com-mission regularly holds public consultations, and maintains aconstant dialogue with industry associations, academia andcivil society in order to strike the right balance between secu-rity and competitiveness. Moreover, EU Member States alsoconduct outreach and dialogue with business associations andstakeholders at the national level.1 Thus, the EU export controlregime is in an evolutionary process entailing legal changes ofwhich exporters must be aware. Against this background, thefollowing developments in EU export controls should behighlighted.

§ 37:30 Developments in EU export controls—Dual-useexport control review

Article 25 of the Dual-Use Regulation calls on the Commis-sion to review its implementation and present proposals foramendments. Moreover, 10 years after the adoption of the EUStrategy against the proliferation of weapons of mass destruc-tion (WMD) of December 2003,1 the Council recently called forthe continued pursuit of an e�ective EU WMD counter-proliferation policy and for a review and strengthening of

[Section 37:29]1Cf. the website of the Commission's Directorate General Trade: http://

ec.europa.eu/trade/import-and-export-rules/export-from-eu/dual-use-controls/index�en.htm.

[Section 37:30]1For more information see: http://www.eeas.europa.eu/non-proliferation-

and-disarmament/wmd/index�en.htm.



export controls.2 As a �rst step toward preparing the review,the Commission issued a Green Paper launching a broad pub-lic debate concerning the EU export control system and, inJanuary 2013, published a Sta� Working Document3 identify-ing the main issues raised by over 100 stakeholders, includingtheir views concerning possible evolutions towards a moreintegrated EU export control regime in order to ensure secu-rity and a more level-playing �eld. A report to the EuropeanParliament and Council on the implementation of the Regula-tion was adopted on October 16, 2013,4 marking a second stepin the review process.

On April 24, 2014, as part of an ongoing review of the EUexport controls system, the European Commission has adopteda Communication5 establishing concrete policy options for themodernization of EU export controls and their adaptation torapidly changing technological, economic and politicalcircumstances. Before taking concrete initiatives for action, theCommission invited the Council and the European Parliamentto consider the approach set out in this Communication, andwill conduct an impact assessment of the review optionsoutlined in the Communication.

§ 37:31 Developments in EU export controls—Embargoes and sanctions

Sanctions and embargoes have been frequently imposed bythe EU in recent years (in particular with regard to Iran, Syriaand the so-called Arab spring nations, etc.), either on an auton-omous EU basis or by implementing binding Resolutions of the

2Cf. Council Conclusions on ensuring the continued pursuit of an e�ec-tive EU policy on the new challenges presented by the proliferation ofweapons of mass destruction (WMD) and their delivery systems, October 21,2013.

3Commission Sta� Working Document SWD(2013) 7 �nal of 17 January2013, “Strategic export controls: ensuring security and competitiveness in achanging world—A report on the public consultation launched under theGreen Paper COM(2011) 393 �nal”; the Working Document can be accessedat: http://trade.ec.europa.eu/doclib/docs/2013/february/tradoc�150459.pdf.

4Commission Report to the European Parliament and Council,COM(2013) 710 �nal of 16 October 2013.

5Communication from the Commission report to the Council and theEuropean Parliament, COM(2014) 244 �nal of 24 April 2014, “The Review ofexport control policy: ensuring security and competitiveness in a changingworld”; the Communication can be accessed at: http://trade.ec.europa.eu/doclib/docs/2014/april/tradoc�152446.pdf.


37-32

Security Council of the UN. Sanctions and embargoes areinstruments which are used more and more often by the EU inresponse to international challenges such as violations ofinternational law or human rights, or policies that do not re-spect the rule of law or democratic principles. The developmentin this area of law is very dynamic and subject to constantchange and are in�uenced by international politics anddiplomacy and thus need to be closely monitored by economicoperators. Recent examples are, in particular, the restrictivemeasures taken by the EU in respect of actions underminingor threatening the territorial integrity, sovereignty and inde-pendence of Ukraine.1

§ 37:32 Conclusion

EU export controls are comprised of international law obliga-tions of the EU and its Member States, EU guidelines andrules, and national Member States' export control legislation.Before entering into a transaction which falls into the scope ofexport controls such as exporting a good, in particular amilitary or a dual-use item, an exporter should make sure thatit complies with the EU rules as well as rules of the MemberState in which it is established and determine whether theexport is prohibited or an export authorization is required orwhether other restrictions apply. In particular, exporters mustalso be aware of EU and Member State embargoes. Thedevelopment in this area of law is very dynamic and subject toconstant change and needs to be closely monitored by economicoperators. As �nes and prison terms are possible as sanctionsfor violations of export control law, the establishment of an ef-fective ICP should help safeguard against export violations.Furthermore, companies should provide for e�ective contractmanagement, taking into account the speci�cities of exportcontrols in order to minimize potential risks.

[Section 37:31]1Cf. Regulation (EU) No 269/2014 of 17 March 2014, OJ 2014 L 78/6 as

amended; Regulation (EU) No 208/2014 of 5 March 2014, OJ 2014 L 66/1 asamended; see also on EU sanctions in the context of the Ukraine crisis thefollowing articles: Schwendinger, ExportManager 2/2014, p. 5; Schwendinger/Trennt, ExportManager 3/2014, p. 21; the articles can be accessed (in Ger-man) at: http://www.exportmanager-online.de/ (published by F.A.Z. Institute).



chapter 37 european union export controls · § 37:28 internal compliance program (icp) and...

Documents