1 WorldECR www.worldecr.com

U.S. sanctions U.S. sanctions

The 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-million-

dollar 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 lawThe 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

Russia’s 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 Magnitsky’s

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 responseThe 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 List: a trend-setterprocess in global human rights andcompliance 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.

The Magnitsky Rule of Law Accountability Act of 2012 isnamed after Sergei Magnitsky (pictured, left), a Russianlawyer who was illegally detained, brutally tortured, anddied in prison because he exposed a multi-million-dollarscheme to defraud Russian taxpayers.

2 WorldECR www.worldecr.com

U.S. sanctions U.S. sanctions

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 inter-

nationally recognized human rights

committed against individuals seeking

to expose illegal activity carried out by

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

legislation that had been languishing in

the Congress for several years.

Following the Russian Federation’s

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

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

Action under the lawThe Magnitsky law directs the

Secretary of State to publish a list of

persons involved in the events leading

to Magnitsky’s 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

Links and notes1 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.2 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. 3 P.L. 112-208, Sec. 402 (a)(12). 4 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. 5 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. 6 P.L. 112-208, Sec. 404 (b) & Sec. 404 (c)(1).7 P.L. 112-208, Sec. 404 (c)(2).8 P.L. 112-208, Sec. 404 (c)(3).9 P.L. 112-208, Sec. 404 (c)(4).10 P.L. 112-208, Sec. 404 (d)(1) and 404 (d)(2). 11 P.L. 112-208, Sec. 404 (d)(3).12 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.13 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-Assets-

Control.aspx.

The Magnitsky List can beupdated just about any time, ‘asnew information becomesavailable’.

3 WorldECR www.worldecr.com

U.S. sanctions U.S. sanctions

challenges, measures such as the

Magnitsky law could become more

common.

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 disagree -

ments 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

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

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 firm’s 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.