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U.S. sanctions

The Magnitsky List: a trend-setter process in global human rights and compliance law?
Earlier this month, the U.S. government published a list of individuals who it believes were involved in the torture and murder of Sergei Magnitsky, a Russian lawyer who sought to expose high-level corruption in Russia. Jason Poblete examines the development and asks whether the law which gave rise to the publication of the list may prove to be a template for similar types of sanctions.

he United States recently published the first Magnitsky List of Russian individuals who it believes were involved in the brutal torture and death while in state custody of a Russian lawyer, as well as those committing gross human rights violations against other Russians. The persons identified are to be blocked from entering the U.S. In addition, they will be blocked from accessing U.S. financial markets and property and any other assets would be subject to seizure if they come under U.S. jurisdiction. The bipartisan bill that gave rise to this process was approved by Congress and signed into law by President Barack Obama in December 2012. The Magnitsky Rule of Law Accountability Act of 2012 is named after Sergei Magnitsky, a Russian lawyer who was illegally detained, brutally tortured, and died in prison because he exposed a multi-milliondollar scheme to defraud Russian taxpayers. His death has come to symbolize what can happen to individuals in Russia when they stand up to forces of corruption.1 The measure builds upon a long history of anti-corruption efforts by the United States and is a signal to Russia, and other foreign governments, that there

will be political and economic consequences for such activities.2 The law could also signal a trend of more specialized sanctions lists cropping up in the future, as members of both chambers of the U.S. Congress initially sought for the bill to go beyond sanctioning violations within the Russian Federation and for it to apply to gross human rights abuses worldwide. Background to the new law The Magnitsky case started with the expulsion from Russia of William Browder, a British American-born citizen. Browder is the co-founder of Hermitage Capital, a global investment advisory firm specializing in emerging markets. At the time of the incident, Hermitage Capital was one of the larger investment advisory firms in Russia. Magnitsky, who worked in Russia for an American law firm, was advising Hermitage Capital when Hermitage Capital disclosed to the media evidence of Russian corruption. A 37-year-old husband and father, Magnitsky was arrested on false charges and was held for one year in a Russian prison without any judicial or due process. He was investigated by the same law enforcement officials that

he had accused of stealing from the Hermitage Capital group of companies. The criminal conspiracy also resulted in, among other things, a $230,000,000 tax refund from the Russian Treasury. On the last day of his life, 6 July 2011, Magnitsky was beaten to death by eight prison guards. According to the report issued by Russias Human Rights Council, which investigated the incident, the paramedics sent to treat Magnitsky were deliberately kept outside of his cell for more than one hour. He died in jail. Those responsible for Magnitskys torture and death have not been arrested. The United States Congress characterized the Magnitsky matter as emblematic of a broader pattern of disregard for the numerous domestic and international human rights commitments of the Russian Federation and impunity for those who violate basic human rights and freedoms.3 A concerted response The incident helped galvanize the human rights caucus in the House and Senate and led a bipartisan group of legislators in both chambers to introduce a measure to impose

The Magnitsky Rule of Law Accountability Act of 2012 is named after Sergei Magnitsky (pictured, left), a Russian lawyer who was illegally detained, brutally tortured, and died in prison because he exposed a multi-million-dollar scheme to defraud Russian taxpayers.

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sanctions on persons that were responsible for or benefited financially from the detention, abuse, or death of Sergei Magnitsky, were involved in the criminal conspiracy uncovered by Sergei Magnitsky, or were responsible for extrajudicial killings, torture, or other gross violations of internationally recognized human rights committed against individuals seeking to expose illegal activity carried out by legislation that had been languishing in the Congress for several years. Following the Russian Federations accession into the World Trade Organization, increasing pressure from commercial interests led to a campaign to grant Russia permanent normal trade relations (PNTR) status with the United States. In order to do so, the Cold War-era Jackson-Vanik certification requirements of the Trade

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Action under the law The Magnitsky law directs the Secretary of State to publish a list of persons involved in the events leading to Magnitskys death as well as others involved in extrajudicial killings, torture, or other gross violations of international recognized human rights. It imposes a visa ban, freezes assets, and blocks access to U.S. financial markets. The Magnitsky List can be updated just about any time, as new information becomes available, and must generally be submitted in unclassified form; however, names can be added in a classified form if deemed vital to U.S. national security interests and consistent with congressional intent and purposes of the law. 6 7 The information used to generate the names can be from U.S. and non-U.S. sources. 8 The unclassified list will be available to the public and be published in the Federal Register. 9 The law expires in 2022. In order to be removed from the list, the President must certify to the Congress 15 days before removing a name that credible information exists that the person did not engage in the activity for which the person was added to the list or the person has been prosecuted appropriately for the activity. 10 The person can also be removed if he or she has credibly demonstrated a significant change in behavior, has paid an appropriate consequence for the activities in which the person has been engaged, and has credibly committed to not engage in activities that led to the listing in the first place. 11 In addition to revoking visas and blocking future entry into the U.S. of designated persons, the law also blocks access to U.S. financial markets and freezes assets. Pursuant to the International Emergency Economic Powers Act (IEEPA), the President has the authority to freeze and prohibit all transactions in property and interests in property of any person listed under the law if such property and interests in property are in the United States, come within the United States, or are or come in possession or control of a United States person. 12 On 12 April, the Treasury released the first list of designations under the Magnitsky Act totalling 18 names (although the State Department has said that it has in addition drawn up a classified list). If Congressional human

The Magnitsky List can be updated just about any time, as new information becomes available.

officials of the Government of the Russian Federation or to obtain, exercise, defend or promote internationally recognized human rights and freedoms anywhere in the world. 4 This human rights sanctions proposal, ironically, was eventually incorporated into, and helped secure passage of, U.S.-Russia trade

Act of 1974 had to be repealed. However, in light of increasing reports about the murder of independent journalists in Russia, targeting of civil society groups, the overall deterioration of human rights in Russia, and the lack of action in securing justice for Sergei Magnitsky, an alternative to Jackson-Vanik was needed. 5

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In addition to Magnitsky, See Sec. 402(a)(15) of P.L. 112-208 for a complete list of unresolved murders as well as the ongoing and harsh imprisonment of other Russians who have tied to expose government corruption. The Magnitsky Law provisions were included as part of a legislative proposal included in H.R. 6156 that was signed into law by President Barack Obama on 12 December 2012. H.R. 6156 was approved by the House of Representatives on 16 November 2012 by a vote of 365-43; the Senate approved it by a vote of 92-4 on 6 December 2012. P.L. 112-208, Sec. 402 (a)(12). S. 1039, Sergei Magnitsky Rule of Law Accountability Act of 2012, (Related Bills: H.R. 4405 and S. 3406; introduced in the Senate on 19 May 2011, available at http://www.gpo.gov/fdsys/pkg/CRPT-112srpt191/pdf/CRPT-112srpt191.pdf. Despite the successful passage of Russia PNTR, there was considerable opposition from various pockets of legislators in the House and Senate to the repeal of Jackson-Vanik certification requirements that have come to symbolize in Russia, and other countries, the importance of respect for human rights. These legislators, whose support was needed to secure passage of the Russia PNTR measure, were persuaded to vote for the bill only because the Magnitsky provisions were included. Many legislators speaking during debate on the legislative package underscored that were the two to be de-linked, they would not support granting Russia the status of a preferential trading partner. While not as strong as Jackson-Vanik from a foreign policy standpoint, it keeps the issue of human rights at the forefront of U.S.-Russian relations for at least ten more years. P.L. 112-208, Sec. 404 (b) & Sec. 404 (c)(1). P.L. 112-208, Sec. 404 (c)(2). P.L. 112-208, Sec. 404 (c)(3). P.L. 112-208, Sec. 404 (c)(4). P.L. 112-208, Sec. 404 (d)(1) and 404 (d)(2). P.L. 112-208, Sec. 404 (d)(3). P.L. 112-208, Sec. 406 (a) and 406 (b). Note: There are national security interest waivers for both the visa and property blocking provisions of the law. The list and new regulations will likely be published in several U.S. government websites including the Department of State as well as the Treasury Department. See http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-AssetsControl.aspx.

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rights activists, particular those legislators who were involved in the drafting of the Magnitsky law, believe that critical omissions exist, they can turn to the leaders, that is, the chairman and ranking member, of the foreign affairs committees of either the House or Senate to request from the President whether such a person meets the criteria for being added to the list. The required response from the President provides the Congress greater insight on the deliberations and range of factors being considered when implementing the Magnitsky law. In mid-April, the Treasury Department is expected to publish implementing regulations providing further guidance to financial institutions. 13 This information will be especially useful for corporations and financial institutions needing to update compliance policies and procedures. Shaping the future? While the Magnitsky law has caused a great deal of consternation inside of Russia that has led to, among other things, banning adoptions of Russian orphans by American citizens, it is popular in DC foreign policy circles and has started to generate interest in other counties who may adopt similar measures. From a regulatory compliance standpoint, it does not create significant new compliance hurdles for companies and other entities because the list simply needs to be added to existing screening processes. Could there be similar lists in the future? The political and foreign policy equities that gave rise to the Magnitsky List are unique. It is not easy to move legislative product through our system; however, if the correct legal and public policy elements are present, it can be done. The world is a great deal more interconnected these days. Partisanship and ideological disagreements seem to melt away when it comes to human rights issues. These and other factors are a powerful force in policy and law-making. As governments, NGOs, and civic-minded corporations seek solutions to matters such as human rights abuses, sex trafficking, child labour, and other

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challenges, measures such as the Magnitsky law could become more common.

Jason I. Poblete is an attorney at Poblete Tamargo LLP, a boutique federal regulatory law and public policy practice with offices in Washington, DC and Miami, Florida. The firm specializes in federal regulatory litigation and transaction law with a focus on national security and business law. Poblete worked several years in the U.S. Congress and was recognized as one of 50 of the most influential staffers on Capitol Hill. He is currently the Vice-Chairman of the National Security Committee of the American Bar Association Section of International Law (ABA International). You can learn more about the firms work at www.pobletetamargo.com.

This article is reprinted from the April 2013 issue of WorldECR, the journal of export controls and compliance. Visit www.worldecr.com for further details.

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