In recent weeks, the EU, UK, and US have adopted sanctions against those allegedly involved in the military coup in Myanmar, along with those responsible for serious violations of human rights in overthrowing the democratically elected government or committing violence against protestors. The actions mark a sharp uptick in sanctions measures targeting Myanmar and suggest close coordination between the three jurisdictions.
Additionally, on March 25, the UK and US took coordinated action, going beyond the measures imposed by the EU, to impose sanctions on certain holding companies controlled by the Myanmar military, a development that may have significant implications for persons doing business in Myanmar.
On March 22, the EU Council adopted Council Decision (CFSP) 2021/482 and Council Regulation 2021/479, setting out new sanctions against 11 individuals responsible for the military coup in Myanmar, and the ensuing repression against peaceful demonstrators. Those targeted hold high ranking positions in the Myanmar Armed Forces (Tatmadaw) and in the Union Election Commission, which decided to cancel the results of the 2020 democratically held elections. Among the designated individuals are Min Aung Hlaing, commander-in-chief of the Myanmar military, as well as Myint Swe, who has been acting president since the military coup. These measures follow Council conclusions that strongly condemned the coup and warned the EU stood ready to issue restrictive measures.
To adopt these sanctions, the EU expanded the designation criteria established under the existing sanctions framework pursuant to Council Decision (CFSP) 2013/184 and Council Regulation 401/2013. The additional criteria allow for the application of targeted restrictive measures against:
(a) Natural persons from the Tatmadaw, the Myanmar Police Force, and the Border Guard Police responsible for serious human rights violations in Myanmar/Burma.
(b) Natural and legal persons, entities, or bodies whose actions, policies, or activities undermine democracy or the rule of law in Myanmar/Burma, or who engage in, or provide support for, actions that threaten the peace, security, or stability of Myanmar/Burma.
(c) Natural persons from the Tatmadaw, the Myanmar Police Force, and the Border Guard Police responsible for obstructing the provision of humanitarian assistance to civilians in need.
(d) Natural persons from the Tatmadaw, the Myanmar Police Force, and the Border Guard Police responsible for obstructing the conduct of independent investigations into alleged serious human rights violations or abuses.
(e) Legal persons, entities, or bodies owned or controlled by the Tatmadaw, or generating revenue for, providing support to or benefiting from the Tatmadaw.
(f) Natural or legal persons, entities or bodies associated with those referred to in points (a) to (e).
Companies operating in Myanmar should pay particular attention since the prohibition on providing funds or economic resources to the listed persons extends to any legal entities they own or control, directly or indirectly, regardless of whether or not such entity is listed. Moreover, the fact the EU may designate those providing support or benefiting from the Tatmadaw creates some additional risk to conducting business in Myanmar.
In addition, a new provision was inserted to ensure that Member State authorities may authorize the release of funds or economic resources necessary for humanitarian purposes, such as delivering or facilitating the delivery of assistance, including medical supplies and food, for the transfer of humanitarian workers and related assistance or evacuations from Myanmar.
These latest sanctions come in addition to pre-existing sanctions, which include an embargo on arms and equipment that can be used for internal repression, an export ban on dual-use goods for use by the military and border guard police, and export restrictions on equipment for monitoring communications that might be used for internal repression. The prior-sanctions also included the designation of 14 persons for atrocities against the Rohingya population. Combined with the new designations, this brings the total number of listed persons to 25.
The new sanctions against Myanmar align with the new Commission's Communication on "the EU's humanitarian action: new challenges, same principles," which addressed the interplay between sanctions policy and humanitarian aid. As a key action, the Commission suggested including serious international humanitarian law violations as grounds for listings in EU sanctions regimes whenever appropriate while ensuring that any potential negative impact on humanitarian activities is avoided.
On February 18, the UK government announced the designation of three individuals under The Burma (Sanctions) (EU Exit) Regulations 2019 (Burma Regulations). The sanctions are aimed at Burmese military officials with command responsibility for the Tatmadaw and Myanmar Police Force. Each of the designated persons allegedly is responsible for serious violations of human rights committed by the Tatmadaw and Myanmar Police Force following the military coup.
The UK measures impose asset freezes and travel bans against all of the designated individuals. The individuals targeted are:
- Soe Htut, Home Affairs Minister
- Than Hlaing, Deputy Home Affairs Minister
- Mya Tun Oo, Defense Minister
On February 25, the UK government imposed a second tranche of sanctions on six additional individuals under the Burma Regulations. The measures were aimed at the military members of the State Administration Council (SAC) for overseeing/directing human rights violations following the seizure of power. The individuals targeted are:
- Min Aung Hlaing, Commander-in-Chief of the Tatmadaw
- Aung Lin Dwe, Secretary of the SAC
- Ye Win Oo, Joint Secretary of the SAC
- Tin Aung San, Commander-in-Chief of the Burmese Navy and SAC member
- Maung Kyaw, Commander-in-Chief of Air Force and SAC member
- Moe Myint Tun, SAC member
The prohibition on dealing with the funds or economic resources of the nine designated individuals also extends to any legal entities they own or control, directly or indirectly, even if the particular entity is not itself listed by the UK as a designated person.
The test for "ownership or control" in this context is whether (1) the designated person, directly or indirectly, owns 50% or more of the shares or voting rights of the entity or has the right to appoint or remove a majority of the entity’s board of directors or (2) it is reasonable to expect the designated person would be able to ensure that the affairs of the entity are conducted in accordance with their wishes.
The press release accompanying the February 25 announcement also stated that the Department for International Trade "will lead on work to ensure that UK companies in Myanmar are not trading with military-owned businesses."
On March 25, in coordination with the US, the UK government made good on the foregoing commitment, announcing the designation of Myanmar Economic Holdings Ltd (MEHL) under The Global Human Rights Sanctions Regulations 2020. MEHL is a military conglomerate owned by parts of the Myanmar armed forces as well as current and former military officers. MEHL has been designated for its alleged involvement in serious human rights violations against the Rohingya, as well as its association with senior military figures. In particular, the notice of designation states that MEHL "directly contributed to a series of fundraising events, which provided financial support for the Tatmadaw personnel engaged in 'clearance operations' against the Rohingya."
The UK measures prohibit UK persons and any person within the UK from dealing with the funds or economic resources of – or making funds/economic resources available to, or for the benefit of, – MEHL. These measures also extend to any subsidiaries "owned or controlled" by MEHL.
In announcing this significant expansion of the UK's Myanmar sanctions, UK Foreign Secretary, Dominic Raab, identified the potentially significant impact the designation could have on the Myanmar military's coffers, stating that the designation of MEHL "target[s] the military's financial interests to help drain the sources of finance for their campaigns of repression against civilians."
On March 22, OFAC announced the designation of two Myanmar officials and two military units as Specially Designated Nationals and Blocked Persons (SDNs) for their involvement in the recent crackdown on protestors in that country. The designations were made pursuant to Executive Order (EO) 14014 (Blocking Property With Respect to the Situation in Burma), which was issued by President Biden on February 20. (See our prior blog post on EO 14014 here.) The property and interest in property of SDNs must be blocked when within the United States or the possession or control of a US person, and US persons are generally prohibited from dealing with SDNs. Entities owned 50% or more by one or more SDNs are also considered blocked. Notably, EO 14014 also permits the designation of persons determined to have "have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of" persons blocked pursuant to EO 14014. This type of so-called "secondary sanctions" measure can apply to situations involving non-US persons even where their conduct occurs largely or entirely outside the United States.
The designated persons include:
- Than Hlaing, Chief of the Burma Police Force and Deputy Home Affairs Minister
- Aung Soe, Bureau of Special Operations Commander
- The 33rd Light Infantry Division of the Burmese Army
- The 77th Light Infantry Division of the Burmese Army
In issuing the designations, OFAC Director Andrea Gacki stated, "The Burmese security forces' lethal violence against peaceful protesters must end. Treasury will continue to use the full range of our authorities to promote accountability for the actions of the Burmese military and police. We continue to stand with the people of Burma."
The designations follow a number of other US actions targeting Myanmar, including significant new export controls measures (see our prior blog post available here) and other previously announced SDN designations.
On March 25, the Biden administration ratcheted up its Myanmar-related sanctions further by announcing the designation of MEHL and MEC as SDNs under EO 14014. As with the individuals named above, property and interests in the property of MHEL and MEC are now blocked when under US jurisdiction, and US persons are prohibited from dealing with the companies unless licensed by OFAC.
Importantly, the blocking sanctions also apply to any entities owned 50% or more by the companies. Given the significant role played by MEHL and MEC in the Myanmar economy, the effect on the companies' holdings could have an appreciable impact on the commercial interests of the Myanmar military. Both entities were sanctioned under OFAC's Myanmar sanctions program until October 2016.
OFAC's announcement was accompanied by four general licenses (GLs):
- GL No. 1 – Official Business of the US Government
- GL No. 2 - Official Activities of Certain International Organizations and Other International Entities
- GL No. 3 – Certain Transactions in Support of Nongovernmental Organizations' Activities
- GL No. 4 – Authorizing the Win Down of Transactions Involving MEHL and MEC
GL No. 4 authorizes US persons to engage in activities and transactions that are ordinarily incident and necessary to wind down transactions with the companies (including any entities owned 50% or more by them) until June 22. As stated in the newly issued FAQ 883, this includes transactions involving the US financial system. Non-US persons that wind down transactions with MEHL and MEC during this period would not be exposed to designation risk, according to the FAQ.
As noted in our March 11 blog post, the US Commerce Department issued an amendment to the Export Administration Regulations (EAR) imposing tighter export controls on shipments to Myanmar and certain designated entities. The Bureau of Industry and Security (BIS) also added MEHL and MEC to the Entity List, meaning that both US and non-US persons may require a BIS license to export, re-export, or transfer (in-country) items to MEHL or MEC that are subject to the EAR.
The United States previously maintained more broad-based sanctions against Myanmar, but such measures were largely lifted at the end of the Obama administration in 2016. The Biden administration’s approach has been more targeted in nature, but sanctions targeting the country could continue to expand depending upon the trajectory of the situation in Myanmar.
What's Next and What Does This Mean for Companies Doing Business in Myanmar?
Companies doing business in Myanmar should carefully review their activities involving the country to ensure they comply with the newly announced sanctions, export controls, and other measures. In doing so, completing detailed and accurate due diligence will be important. The Myanmar military and military and security officials are deeply intertwined in Myanmar's economy and own a significant number of businesses in the country. As noted above, the EU, UK and US sanctions regimes can extend to entities owned or controlled by listed persons. Therefore, it will be particularly important for companies doing business in Myanmar to have a detailed understanding of the ownership and control structure of their business partners. Additionally, it will be important to assess whether the more stringent export controls restrictions affect any hardware, software, or technology being exported to Myanmar.
The recent actions also suggest an increased level of coordination between the EU, UK, and US, although there are important differences between the various sanctions regimes. Therefore, it is essential to understand each regime that may apply to a given person’s conduct involving Myanmar. As noted above, certain provisions, such as the secondary sanctions provision contained in EO 14014, can apply even where the conduct in question has no direct link to the jurisdiction promulgating the provision.
Based on statements from officials in the EU, UK, and US, it seems likely that additional measures will be announced over the coming weeks and months, particularly if the situation in Myanmar continues to deteriorate. Therefore, companies should assess the sanctions-related risk level of their business activities considering, among other things, whether their business partners or industries are likely to be the targets of escalated sanctions measures in the future, and assess what steps they can take to mitigate sanctions risk going forward.
EU Policy Advisor