New EU-Directive will ensure more Effective Enforcement of EU Sanctions and Impose Stricter Penalties for Sanctions Violations

Introduction

Despite the increasing number of adopted sanctions, targeting not only Russia and Russian entities, but also, Iran, North Korea, among other jurisdictions, the European Union (the “EU”) has taken note of frequent breaches of sanctions combined with incoherent enforcement at Member State-level. In some Member States, such as the Netherlands and Latvia, actors violating EU sanctions have been prosecuted. However, prosecutions and even initiated investigations have been absent in other Member States. The EU is therefore attempting to address the lack of enforcement and incoherent levels of criminal penalties, through harmonisation. Thus, the EU has recently adopted the Directive 2024/1226 on the definition of criminal offences and penalties for the violation of Union restrictive measures (“the Directive”). For further information regarding the sanctions as such see a previous post at the Delphi EU and Competition Blog. Below we describe the current Swedish legislation for breaches of sanctions and the expected amendments due to the Directive.

Current Swedish legislation for sanctions violations

The Swedish Act on Certain International Sanctions (Sw. lagen (1996:95) om vissa internationella sanktioner), which has been in force since the 90’s, with a predecessor from the 70’s, provides penalties for the violation of international sanctions. According to the legislation, natural persons can be held liable for breaches of international sanctions and consequently be sentenced to fines and imprisonment for up to four years. A few cases have been prosecuted under the existing Swedish legislation, however, no person or entity has so far been prosecuted for violating sanctions targeting Russia. In the National Board of Trade’s report from 2024 it is stated that few or no preliminary investigations have even been initiated in relation to the sanctions against Russia. Despite the absence of enforcement, violations against the imposed sanctions are likely to have occurred. While exports to Russia have decreased, exports to bordering countries have increased. Concurrently, exports to Russia from the bordering countries have increased significantly. This highlights the need for a more effective enforcement of EU sanctions.

The impact of the Directive on the current Swedish legislation

The Directive requires the Member States to implement rules on enforcement, including penalties of sanctions violations. Some of the central changes that will impact the Swedish legislation are the following:

• Liability for inciting, aiding, abetting and attempt. Currently, the Swedish Act on Certain International Sanctions only covers completed breaches. Hence, it is currently not possible to prosecute a breach of sanctions which was never completed but where there was only an attempt to act in contradiction to imposed sanctions. The Directive, however, includes liability for inciting, aiding, abetting, and attempt. This will most likely, impact the enforcement rate in Sweden and many other Member States as this significantly strengthens the national competent authorities’ mandate to intervene against sanctions violations and to initiate more investigations.
• Improved cooperation between the competent authorities. The Directive requires the Member States to designate a unit or body for ensuring coordination and cooperation between law enforcement authorities and the competent authorities for enforcing the sanctions. There are several competent authorities in Sweden, each having competence in a very specified area. The authorities dealing with sanctions range from the Swedish Economic Crime Authority to the Inspectorate of Strategic Products. It is necessary that the authorities cooperate in order to enable an efficient enforcement. Thus, the Directive includes rules on such cooperation. Furthermore, the Member States’ competent authorities shall cooperate cross-border as well, notably with the Commission, Europol, Eurojust, and the European Public Prosecutor’s Office.
• Covers both natural and legal persons. The Swedish Act on Certain International Sanctions only poses sanctions against natural persons. The Directive covers both natural and legal persons. Breaches of international sanctions committed by somebody who has a leading position in a legal person that has benefited from the breach can lead to liability for the legal person. Penalties for sanctions violations can include, for example, exclusion from public benefits, disqualification from the practice of business activities, or judicial winding-up. For natural persons, the Directive defines penalties including fines, withdrawal of permits and authorisations, and maximum terms of imprisonment of at least five years.

The Directive shall be transposed into national law before 20 May 2025. The transposition period is short. Sweden has initiated a government inquiry to ease the Swedish transposition. Additionally, the Swedish government has recently assigned a number of national authorities, with the Police Authority in charge, to create a cooperation unit (Sw. samverkansråd) for the purpose of strengthening the enforcement and compliance with international sanctions.

Expect Strong Enforcement

The transposition of the Directive will likely lead to an increase in enforcement by national authorities. Companies have already been required to adopt due diligence measures to ensure compliance with previously adopted sanctions packages. The Directive further emphasises the importance of compliance, as potential violations will significantly impact both individuals and legal entities. The goal is to combat war and preserve peace. Let us hope that harmonised and increased enforcement not only adds a burden on companies but also provides a significant push toward achieving this greater aim.