ABSTRACT
Principles of state sovereignty are mostly found in international customary law, being the 1648 Westphalia Treaties the clearest expression of it. Article 21 of the Treaty on the European Union (TFEU) represents one of the pillars of the European Union (EU) process of advancing its objectives of intergovernmental Common Foreign and Security Policy (CESP). The exit of the United Kingdom from the EU (Brexit) has challenged the EU’s strategy to preserve its integration through peace and democracy. The growing electoral support for far-right parties, populist governments and skepticism toward the future of the EU, shows a metastasizing polarization that is corroding the existence of the EU. This paper will briefly consider some of the causes that have led to the current crisis, specifically the inability of the EU to protect its sovereignty from the extra-territorial application of legislation adopted by the United States and other third countries.
EU: THE ROAD TO STRATEGIC SOVEREIGNITY
Proposals for a ‘united Europe’ merged at the end of the seventeenth century. In his writing, An Essay Towards the Present and Future Peace of Europe, W. Penn advocated for the creation of a European Parliament that would prevent wars between states and promote justice. Philosophers such Kant and Rousseau saw Europe as an expression of economic and political flourishing. However, only at the end of WWI, with the rise of international cooperation, states grew the idea of becoming an independent entity.[1] The 1929 Briand Memorandum proposed a European Federal Union, with the idea of fostering relations between states, a model of political community. From the Treaty of Paris, in 1951, which established the European Coal and Steel Community (ESCS), to today, the EU has seen the creation of a vast constitutional framework that has become part of a process of harmonization and mutual recognition to a general politic, economic, and monetary equilibrium among the Member States. Nonetheless, the U.S. spiraling into a foreign policy regime change, and unilateralism[2] has inevitably affected the EU. The EU has recently witnessed to multiple threats to its sovereignty.[3] Security threats, the globalization of economic activities, and tensions between the U.S. and both China and Russia, require the EU a commitment to reassert its destiny, without resorting to protectionism or reducing its role in international trade. The U.S. secondary sanctions imposed upon Iran, Syria, and Russia and their extraterritorial application, have weakened the EU, disrupting its economy during the last few months
- [1] Robert Schutze – European Constitutional Law, Second Edition
- [2] R. Kissak – Pursuing Effective Multilateralism: The European Union, International Organizations, and the Politics of Decision Making
- [3] https://ecfr.eu/europeanpower/european_sovereignty/
According to a flash estimate from Eurostat, the statistical office of the EU, inflation in the month of September 2022 went up to 10.0%, with energy having its highest annual rate in 40.8%.[1] Legislative tools such as Regulation (EC) No 2271/96 (also known as Blocking Statute), should remind Europe of its independency from external interferences. The EU’s vulnerabilities in the world of geopolitical competition have recently increased. With the U.S. retreating from the Iran nuclear deal, and the current economic sanctions the U.S. and its allies imposed on Russia, the EU has manifested its struggle to exercise sovereignty. Since the end of WWII, Europe has seen the U.S. as a fundamental ally to secure peace and prosperity. However, the U.S. increasing interference in the internal affairs of the EU, and their unwillingness to accept a multipolar world, are undermining the EU, leading to skepticism toward the future of the EU.[2] US extraterritorial laws are unique in their realm. The U.S. Foreign Corrupt Practices Act (FCPA) became law in 1977, giving U.S. courts extraterritorial jurisdiction over people and entities who were suspected of bribery of foreign public funds, even if the offences were committed outside of the U.S., including foreign nationals and companies.[3] In 1996 the EU enacted the European Blocking Statute with the aim of opposing the U.S. regulations of the Cuban Liberty and Democratic Solidarity Act, also known as the “Helms-Burton Act” and the Iran-Libya Sanctions Act, or the “D’Amato Act”. These had the purpose of furthering the U.S. foreign policy, by isolating countries through the imposition of secondary sanctions, in violations of any principle of sovereignty and non-intervention in domestic matters, and of any international trade agreement.[4] Regulations such as the Trading with the Enemy Act (1917) and the International Emergency Economic Powers Act (IEEPA) give the U.S. President broad extraterritorial power justified by national emergencies and the fight against terrorism.[5] Moreover, the 2018 Clarifying Lawful Overseas Use of Data Act (CLOUD Act) allows the U.S. government to significantly expand its enforcement jurisdiction, requiring data from service providers, even if stored outside of the U.S.[6] The “blocking statute’ was originally conceived with the aim of protecting EU operators whether individuals or companies, from the extra-territorial application of third country laws.[7] More specifically, Art. 5 of the blocking statute prohibits affected parties from complying with the relevant U.S. legislation, thus, contributing to the “harmonious development of world trade and progressively to remove restrictions on international trade by promoting, to the greatest extent possible, the free movement of capital between the Member States and third countries and to remove any restrictions on direct investment . . .”.[8]. However, in response to the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA), the aim of which was to control Iran’s nuclear program, the U.S. reimposed secondary sanctions against
- [1] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area
- [2] Anthony Dworkin – Strategic Sovereignty: How Europe Can Regain the Capacity to Act
- [3] In 2008, the German company Siemens was charged with bribery of foreign officials in Argentina, Bangladesh, China, Iraq, Mexico, Venezuela, and Vietnam, in violation of the FCPA and the SEC Act of 1934.
- [4] Smis, Stefaan, and Kim van der Borght. “The EU-US Compromise on the Helms-Burton and D’Amato Acts.” The American Journal of International Law, vol. 93, no. 1, 1999, pp. 227-36. JSTOR, https://doi.org/10.2307/2997968.
- [5] On May 1, 2015, the French Bank BNP Paribas, was sentenced for conspiring to violate the IEEPA and the TWEA act by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian and Cuban entities subject to U.S. economic sanctions.
- [6] Cloud Act Resources, justice.gov/dag/cloudact
- [7] “Extraterritoriality (Blocking Statute), finance.ec.europe.eu/eu-and-world/open-strategic-autonomy/extraterritoriality-blocking-statute_en
- [8] Case C-124/20, Bank Melli Iran v Telekom Deutschland GmbH case, Opinion of the Advocate General Hogan delivered on 12 May 2021, paragraph 37.
Iran. On August 7, 2018, the EU amended the annex to the blocking statute through Implementing Regulation (EU) 2018/1101. Furthermore, in January 2019, France, Germany, and Britain announced the creation of the Instrument in Support of Trade Exchanges (INSTEX), with the aim of keeping alive the JCPOA, in defiance of the U.S. sanctions. In Judgment of 21.12.2021 – Case C-124/20, Bank Melli Iran, four questions regarding the interpretation of the blocking statute were referred to the EU Court of Justice (CJEU). The judgment strengthens the efficacy of the blocking statute, making more difficult for EU entities and individuals described in annex eleven, to terminate their contracts with Specially Designated National and Blocked Persons List (SDN), or with non-SDNs that implicate U.S. sanctions laws. Nonetheless, as a protective measure, EU parties can include contractual language that would automatically terminate the contract whether relation with SDNs parties would subject them to U.S. or other sanctions.[1] Nevertheless, to today, the blocking statute has seen little enforcement and a very few judgments of EU member state courts[2]. The inability to claim independent authority by Member States courts, shows how Europe’s alliance with the U.S. is becoming more instrumental every day. Moreover, the U.S. withdrawal from the Iran nuclear deal and the re-imposition of secondary sanctions have harmed the EU interests in not being able to see the full implementation of the JCPOA. In addition, the current Russian invasion of Ukraine has shown the extent of Europe’s weakness, and how dependent Europe is on everyone: America for its military apparatus, Russia for its energy resources and China for its trade.[3] The EU should not risk being overwhelmed by the U.S. policy of unilateralism. It is time for the EU to regain its ability of economic and politic independence, coordinating an agenda that would strengthen European monetary and financial autonomy, and increase the role of euro as a strong international currency. Institutions like the European Stability Mechanism and the European Investment Bank or the European Bank for Reconstruction and Development should be pillars of the EU’s own financial autonomy. To minimize EU dependency from the U.S., it would also be relevant for the EU, to improve its own mechanism of economic sanctions, therefore, limiting any possible extraterritorial interference from the U.S. or other third countries. This will require Member States to build a strategic unity, casting out any existing process of fragmentation among the Member States. For instance, on November 8, 2016, France modernized its anti-corruption enforcement regime by adopting the Law on Transparency, known as Sapin II. It allows companies meeting certain thresholds to avoid criminal charges if suspected of having broken anti-corruption laws. The EU goal should not be protectionism or abandoning international relations with the U.S. and its allies, but to accelerate its process of energy efficiency and the acceleration of renewables sources[4], therefore, becoming a self-sustained entity.[5] The fragmented structure of the EU is putting its economic and political sovereignty at risk. The future and imminent risk is that Europe will be unable to develop its own autonomy, becoming the epicenter of a multipolar conflict between the U.S. and the China-Russia axis.
- [1] ECJ – Case-124/20 Bank Melli Iran
- [2] In June 2018, the French car manufactured Peugeot ceased its activities in Iran, wanting to avoid risk of US sanctions. In August 2018, the French company Total abandoned its project to develop activities in Iran over fears of US sanctions.
- [3] Tom McTague, What America’s Great Unwinding Would Mean for the World
- [4] The Fit for 55 Action Plan proposed by the EU Commission, has the purpose to implement emission reduction.
- [5] The War in Ukraine and Its Implications for the EU, eeas.europa.eu/eeas/war-ukraine-and-its-implications-eu_en
POST SCRIPTUM
It has been more than one year since I last updated this paper. During the last ten months, the whole world has been shaken by a series of catastrophic, yet predictable events. The ‘Rhetoric of Change’ has deeply spread into the Western world. The promises of restoring jobs, blooming the economy and bringing the manufacturing sector back in the United States, are now colliding with the bitter reality and the contradictions of a society that is waking up from years of political, cultural and economic obfuscation. The same working-class the President had promised to protect, has predictably been betrayed. The soybean crisis is only one among the many of the ineffective and counterproductive effects the trade war against China has caused. But the trade war’s impact extends beyond soybeans, affecting American farmers, consumers, and manufacturers through higher input costs, reduced access to markets, and lower aggregate real income. Despite a political campaign against international trade partners, and free trade agreements, the numbers are telling us a different story. The number of small businesses filing for bankruptcy is increasing. According to the U.S Treasury Department, the national debt has reached a new milestone, passing the $38 trillion. The same agencies responsible for fostering development and prosperity, dismantled. Large-scale layoffs in 2025 have been significant, with major companies across various sectors, particularly technology, retail, and energy, cutting tens of thousands of jobs in total. At the same time, the European Union has fallen into a spiral of dangerous events. The “Green Dream” has been abandoned, paving the way for an increasing process of militarization, and social program cuts. The three major European countries, Germany, France and Italy, are now facing enormous public pressure. Inflation is skyrocketing, and their economies are struggling. The unprecedented ‘Nexpiria case’ has weakened the already fragile relationship between China and the European Union. Meanwhile, unelected technocrats are approving billions of Euros in military spending to move to East Europe. Political divisions are widening; populist movements are spreading and gaining power; trade conflicts and the EU Bank are struggling to keep the whole system together. The lesson the European Union should have learnt from the 2009 financial crisis has been forgotten. Instead of investing its resources in the creation of a financial stronghold, where transparency and regulatory risk strategies would play a fundamental role in avoiding the risk of incurring into a new “Greek” crisis, the European Union has fallen back to the same mistakes: heavy borrowing, anti-immigration policies, and political resentment.
CONCLUSIONS
We are now moving toward a multipolar world. The global market is shifting its route back to where everything began, the Silk Road. The BRICS, a group of emerging economies that include Brazil, Russia, India, China and South Africa, as well as five new members, has the primary goal to promote economic cooperation and provide a united voice in international affairs. The United States and Europe should seek dialogue with the BRICS countries. This would unlock opportunities for foreign direct investments. And opportunities could lead to benefits like economic growth, job creation, technology transfer, and market diversification for the host country, while foreign companies could gain access to new markets, resources, and potential revenue growth.
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