An agreement has been reached on a Russia trade relations bill that contains the reauthorization of the Global Magnitsky human rights and corruption sanctions (Sec. 6) without any further amendments to the law. Nonetheless, the result is the expansion of Global Magnitsky designations. The Senate passed the bill, this morning, by a vote of 100-0. Given the differences in the bill, the House will now act to reconcile differences with the Senate version, and pass the text as-is this afternoon before leaving town.
In December 2016, following revelations of extensive worldwide corruption linked to the political oppression of dissidents, Congress passed and the President signed into law (as part of the FY17 National Defense Authorization Act) the Global Magnitsky Human Rights Accountability Act (GLOMAG). Named after a murdered Russian whistleblower, GLOMAG levies sanctions on human rights abusers and those engaged in public corruption globally. In December 2017, the Executive branch issued Executive Order (EO) 13818 implementing and expanding the GLOMAG sanctions.
The GLOMAG Act and EO 13818 contained significant differences. Under GLOMAG, the President is authorized but not required to impose sanctions with respect to any foreign person or entity the President determines, based on credible evidence, to be:
EO 13818 is more expansive. Where GLOMAG targets those that have committed “gross violations of internationally recognized human rights,” EO 13818 applies a lower standard of “serious human rights abuse,” and can be triggered by the finding of a singular instance of abuse rather than the need to demonstrate a pattern of abuse or violations. It is easier to apply the standard contained in the EO to both state and non-state actors. GLOMAG focuses on human rights advocates and whistleblowers and can be construed as creating a specific class of persons. EO 13818 is clear in its applicability to all victims regardless of the nature of the violation or the victim’s class.
EO 13818 can be used against the leader or official of an entity that has engaged in serious human rights abuse or corruption, while GLOMAG is limited to those “responsible” for such conduct. The EO can be used against any act of “corruption” while the law has the higher threshold of “significant” corruption. Finally, the EO is applicable to those that enable or provide support to human rights abusers or corrupt officials while the legislation is silent on enablement.
On March 17, 2022, the House of Representatives passed legislation rescinding preferred trading status for Russia and Belarus by a vote of 424-8. While underreported, Congress also reauthorized GLOMAG, extending the underlying GLOMAG statutory sanctions indefinitely and refining the law to the legislation in line with EO 13818, so that, if enacted, the law and EO will be consistent. A similar amendment was included in the House version of the FY2022 National Defense Authorization Act, but was dropped later during the legislative process. However, due to some concerns in the Senate with respect to the broad applicability of many of these terms, the extension of the law was not included; only the sunset has been repealed.
Upon enactment we expect an increase in human rights and corruption sanctions as the statutory underpinnings of the bill will remain in place and require an act of Congress to repeal. With the statutory underpinnings for the Administration’s sanctions regime secured, EO 13818/GLOMAG sanctions will likely be used with increased frequency.
Additionally, since the passage of the law and issuance of the EO, a number of other countries, including the European Union (EU), and the United Kingdom (UK) have developed their own regimes. A greater degree of cooperation is emerging between the US, EU, and UK on the use of human rights and corruption sanctions, as illustrated by the coordinated use of sanctions against Chinese officials in response to human rights abuses committed against the Uyghurs in China’s Xinjiang province.
It is also expected that supporters of GLOMAG in the House and Senate will continue to pursue additions to the law, so Congress will likely continue to closely scrutinize the Administration’s implementation and enforcement of the sanctions regime and any potential violations.
Banks and financial institutions should be aware of these trends and understand the political/reputational and sanctions risk associated with violations of GLOMAG sanctions regulations.