This post, written by Isa Mirza and Gwendolyn Jaramillo, was originally published as a client alert by the firm’s Trade Sanctions & Export Controls and Corporate Social Responsibility practices.
After months of closed-door discussions, Congress is near final passage of the negotiated National Defense Reauthorization Act (“NDAA”) for appropriating defense funds in fiscal year 2017. On December 2, the House of Representatives overwhelmingly passed the bill by a vote of 375-34. The bill is now scheduled for priority Senate action.
Tucked deep into the NDAA (Section 1261) are provisions that could provide the incoming Trump Administration and the next Congress with a new framework to use U.S. sanctions law in support of international human rights principles. This framework, known as the “Global Magnitsky Human Rights Accountability Act” is based upon a 2012 sanctions law that applied only to human rights abuses in Russia – the Sergei Magnitsky Rule of Law Accountability Act of 2012.
If enacted into law, the Global Magnitsky Act will allow the next Administration to apply human rights-based sanctions to individuals in any country in the world. The Act may be part of a paradigm shift in the way U.S. sanctions law is utilized. Unlike most U.S. sanctions regimes that target issues in specific countries by sanctioning entire governments or groups of individuals and entities, the Act would apply sanction to individuals anywhere in the world who have engaged in activities deemed to violate certain international human rights standards. The Act could offer an expanded scope to the Treasury Department’s Office of Foreign Assets Control (“OFAC”) in promoting U.S. policies globally, much as the 2015 sanctions on malicious cybersecurity undertakings expanded the group of activities, including drug trafficking and terrorism, that are global targets of OFAC sanctions.
Under the terms of the Act, the State Department’s Bureau of Democracy, Human Rights, and Labor (“DRL”) would be given authority to determine who is placed on the sanctions list, which will presumably be implemented by OFAC. In making these determinations, the Administration is required to consider “credible information obtained by other countries and nongovernmental organizations that monitor violations of human rights” as well as information provided by certain committees of Congress.
This statutory mechanism could make the Act a powerful tool for human rights proponents worldwide. Civil society will have a new channel to advocate for decisive U.S. action against foreign officials and associates who are engaged in corrupt activity or the willful, violent suppression of political opponents, peaceful protesters, and investigative journalists. And thanks to a provision that was nearly stripped out of the final bill during the negotiation process, activists will be able to utilize a human rights-dedicated branch of the State Department to help bend the arc of administrative policy towards greater human rights compliance.
Furthermore, the Act will provide Congress with closer oversight of the United States’ professed human rights commitments. In addition to NGOs and individual activists, the Act requires the President to consider information provided by the leadership of the committees of jurisdiction on human rights abuses by foreign nationals. The Act also states that the President must submit a classified or unclassified report to committee leadership on any of their requests to have sanctions imposed on a foreign national. The report must contain a statement on whether or not the President imposed or intends to impose sanctions on the requested individual and, if so, also contain a description of the sanctions.
Finally, the Act also requires the President to describe efforts taken by the Administration to encourage the governments of other countries to impose similar sanctions. The authority to impose sanctions under the Act is scheduled to expire in December 2022, unless reauthorized by Congress.
Sanctionable Activity and Sanctions
Under the Act, individuals may be subject to sanctions if they:
- Engage in or act on behalf of those engaged in extrajudicial killings, torture or other violations of internationally recognized human rights committed against those that seek to expose illegal government activity or defend and promote internationally recognized human rights and freedoms;
- Are government officials or senior associates of government officials engaging in significant corruption; or
- Provide material assistance to government officials or their senior associates that are engaging in significant corruption.
The sanctions include:
- Ineligibility to receive a visa to enter the U.S.;
- Revocation of an existing U.S. visa;
- Freezing of property interests subject to U.S. jurisdiction; or
- Prohibition on transactions subject to U.S. jurisdiction in which the sanctioned individual has a property interest.
A noteworthy carveout to the property freeze and transaction sanctions in the Act states that transactions involving the importation of goods into the United States may not be sanctioned. This is an unusual exception to the mechanics of an otherwise typical property-blocking tool. It may be extremely challenging to implement such an exception, given that financial institutions and most global companies utilize automated screening software to detect and block sanctioned parties. Creating a feasible exception for import transactions may prove to be quite a headache.
Implementation and Next Steps
The Obama Administration fiercely resisted implementing the original 2012 Magnitsky Act. Indeed, when Hillary Clinton was Secretary of State, the State Department fought hard to prevent the original 2012 Magnitsky Act from becoming law, in order not to jeopardize the planned “reset” of relations with Moscow, and to maintain flexibility in the Administration’s response to issues in Russia. In the present case, President Obama may not have much choice but to sign the Global Magnitsky Act into law. Because the Act is now part of the much larger NDAA, vetoing the Act would mean rejecting a must-pass measure that authorizes over $600 billion in defense appropriations and salaries for U.S. military personnel. Such a move would have little precedent. Perhaps more importantly, at 375 votes, the House’s support for the bill was well above the two-thirds supermajority threshold needed to override any veto attempt.
Despite the Act’s potentially broad scope as a tool to promote human rights, implementation is key. Even if the regulations permit and compel strong action, it is ultimately within the President’s discretion to impose sanctions, or not, even on individuals who may be widely condemned in the human rights community. History suggests that a Clinton Administration would likely have been reluctant to impose the sanctions list. It is difficult to predict a Trump Administration’s actions under the (unknown) next Secretary of State, but Trump’s interest in working more closely with Russian President Vladimir Putin, who was extremely offended by the passage of the original Magnitsky Act, may lead to challenges for strong implementation of the Act in the future.
Nonetheless, advancement and passage of the Act could in itself set a precedent that spearheads further legislative action and momentum outside the United States. Already, the U.K. Parliament is considering an amendment to an anti-money laundering bill that would provide a judicial pathway to freezing U.K. assets belonging to those profiting from gross human rights abuses in any country. Inspired by the Magnitsky Acts in the United States, the U.K. amendment has also attracted deep, multiparty and cross-stakeholder support, raising the likelihood that governments may face both endogenous (via lawmakers) and exogenous (via activists) forms of pushback should they choose not to implement the measures.
The fact that the Global Magnitsky Act was finalized using a special, negotiated process indicates it will move through Congress by a bipartisan, veto-proof supermajority margin with no changes. Having already sailed through the House, the Senate is expected to take up and easily pass the measure by Friday, December 9. President Obama would sign the bill into law shortly thereafter.