A Study On The Extraterritorial Effect Of The US Economic Sanctions Law Against Russia

On August 2,2017,the U.S.president Donald Trump signed “Countering America’s Adversaries Through Sanction Act”(hereinafter referred to as “CAATSA”)into law.Title II of this Act,cited as the “Countering Russian Influence in Europe and Eurasia Act of 2017”,(hereinafter referred to as “CRIEEA”)stipulates the procedures,conditions,measures,termination as well as others with respect to U.S.economic sanctions against the Russian Federation.Such Act leads to the result that the U.S.can not only impose sanctions on Russia directly in accordance with its domestic law,but can also counter Russia indirectly by imposing secondary sanctions on the third states’ foreign persons or entities that have certain relationship with Russia.The secondary sanctions expand the jurisdiction of the U.S.domestic law,making the U.S.law reach to the third states extraterritorially.It is the expansion of the U.S.legislation jurisdiction that makes the U.S.laws have the extraterritorial effects.In fact,the U.S.has imposed sanctions on the third states’ parties that have economic and trade relationship with Russia,including Chinese persons and entities.Under the circumstance that the relations between the U.S.and Russia may get more and more worse and the economic cooperation between China and Russia tends to develop in a more wide and deep way,it is necessary to study on the law with respect to the U.S.economic sanctions on Russia,especially the issues in relation to the extraterritorial effect of it,for the purpose of avoiding or reducing the risk of being sanctioned by the secondary sanctions from the U.S.This thesis has made up of 4 chapters.The first chapter gives the overview of the sanctions on Russia by the U.S.and the relevant U.S.domestic legislative basis.First,under the classification of the “primary sanctions” and the “secondary sanctions”,the thesis has collected the status quo with respect to the U.S.’s sanctions on Russia,and limited the research scope to the extraterritorial effect of the U.S.sanction laws which have the stipulations of the“secondary sanctions”.Then,this thesis has collected the U.S.domestic sanction laws,including the legislations,and the executive orders issued by the president.The second chapter has focused on the extraterritorial effect of the U.S.sanction laws.This part has made it clear that the definition of the extraterritorial effect is referred to “the effect beyond the U.S.territory”,not “the effect beyond the jurisdiction”.Besides,this part has also made clear the relationship between the extraterritorial effect and the jurisdiction,and analyzed the legality of article 224,225,226,228,231,232,233 and 234 stipulated in Title II of CAASTA from the perspective of legislative jurisdiction.Under the second chapter,this thesis has drawn the conclusion that the stipulations in relation to the extraterritorial sanctions from Title II of CAASTA are not totally in compliance with international law according to the principles of the legislative jurisdiction.First of all,in accordance with article 221(6)of CRIEEA,the U.S.has resorted to nationality as a basis for asserting competence over the U.S.persons and entities including the foreign branches of such entities.Such kind of jurisdiction is in compliance with the international law.Second,when it comes to the principle of protective jurisdiction and the principle of passive personality,only when the target of crime is the U.S.,and the criminal object is the national security of the U.S.,can the U.S.exercise jurisdiction over foreign persons who are outside of the U.S.territory.Under the article 231 of CRIEEA,when the transaction between the third states’ individuals or entities and the Russian has constituted substantial threat to the U.S.’ s national interest,the U.S.is also able to impose sanctions on those who directly made such threat in accordance with the principle of protective jurisdiction.Otherwise,if the U.S.imposes sanctions on the third states’ nationals or entities that just has had normal trade or economic business with the Russian,it is not in compliance with international law.Third,when it comes to the principle of universality,under the article 234 of CRIEEA,only when Syria’s purpose of acquiring or developing nuclear weapons is to exercise the right of self-preservation can the U.S.impose sanctions on Syria in accordance with the article 234 of CRIEEA.Without such condition,it is difficult to legalize the sanctions imposed by the U.S.under this article.Fourth,in terms of the effect doctrine,this thesis has drawn the conclusion that it is possible to use the effect doctrine to make the extraterritorial jurisdiction stipulated in the article 228 of CRIEEA legal based on the interpretation of effect doctrine and the analysis of relevant cases.It is worth to mention that the precondition to use the effect doctrine by the U.S.is to negotiate with other state with respect to such state’s territoriality.Last,except the aforesaid stipulations,the sanctions imposed on those who just have had normal trade or economic business with Russia by the U.S.under the article 225,226,232 and 233 of CRIEEA are not in compliance with international law from the perspective of relevant theories and cases.In addition,such imposition under these articles has violated the principle of mutual non-interference in each other’s internal affairs.The third chapter has analyzed an international dispute,the so-called “Nord Stream 2” case arising from the secondary sanctions on the third states imposed by the U.S.and certain measures possible to be conducted by relevant countries.First,this chapter has discussed the reason why the U.S.tends to impose sanctions on such project,and the sanction law the U.S.might to invoke.Besides,this part has also discussed the issues with respect to the legality of such sanctions imposed by the U.S.Second,this chapter has made some suggestions on what actions a state can take to prevent and defend the extraterritorial effect of the U.S.sanction law.Under the third chapter,this thesis has drawn a conclusion that the U.S.may invoke article 232 of CRIEEA which stipulates sanctions with respect to the development of pipelines in the Russian Federation,to impose sanctions on the European entities involved in “Nord Stream 2” project.When it comes to the methods for a state to prevent and defend the extraterritorial effect of the U.S.sanction law,this thesis has proposed that a state may conduct negotiation and consultation with the U.S.to ease the conflict between such state and the U.S.Besides,a state may enact unilateral sanction act,blocking statutes or a court may order blocking decrees to prevent and defend the risk of being sanctioned by the U.S.In addition,a state may also submit the dispute to the Dispute Settlement Body of WTO to obtain the support from the Panel or Appellate Body and seek to conduct the retaliation.The fourth chapter has focused on how the U.S.laws with respect to the U.S.economic sanctions on Russia will cast influence on the Chinese entities,and what measures the Chinese entities can take to prevent or defend the extraterritorial extension of the U.S.law.First,this part has discussed the potential risks of being imposed secondary sanctions,which the Chinese entities may face.Then,this part has put forward some measures which the Chinese entities can take.Under the fourth chapter,this thesis has drawn the conclusion that under the circumstance that the relationship between the U.S.and Russia tends to get worse and worse,it is necessary for the Chinese entities to pay attention to the extraterritorial effect of the U.S.sanction act.If the Chinese entities’ international investments are related to Russian energy industry,financial area,or defense articles,such entities shall especially pay attention to the risk of being sanctioned in accordance with article226,231 or 232 of CRIEEA.The relevant entities shall take measures during the due diligence course,the contract draft course and the compliance establishment to prevent and defend the extraterritorial extension of the U.S.act.If being sanctioned by the U.S,such entities can make written submissions to the Office of Foreign Assets Control of the U.S.to seek administrative consideration of its designation removed or rescinded from the Specially Designated Nationals List.