In April, the European Parliament and Council adopted a Directive on sanctions violations. The Directive aims to harmonise the definitions of criminal offences and penalties related to violating EU sanctions. The purpose is to ensure that violating sanctions is a punishable offence in all Member States and that the penal provisions are at least equivalent to the minimum level set for them.
22.10.2024
New Directive on sanctions offences to harmonise penalties for violating EU sanctions
Heidi Paalanen-Koev & Anna-Kaisa Remes
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The European Commission has noted significant variation between Member States in how they define what constitutes a violation of sanctions and what the penalties are for these violations. According to the Commission, these offences are not investigated and prosecuted with sufficient efficiency. The goal of the Directive is to ensure that all Member States can speak as one in matters related to sanctions, which became particularly topical after Russia launched its military attack on Ukraine.
Harmonising definitions and penalties across EU countries also facilitates the operations of multinational companies. Additionally, the new Directive makes cooperation easier and harmonises practices with those of the United States, where it is currently possible to impose a fine or a maximum of 20 years in prison for violating sanctions.
The Directive causes amendments to the Criminal Code of Finland
Due to the Directive, new offences will be added to the Criminal Code of Finland: sanctions offence, aggravated sanctions offence, negligent sanctions offence and sanctions violation. Member States must impose effective, proportionate and dissuasive criminal penalties and imprisonment must be included in the maximum penalty imposed for intentional violations. Furthermore, legal persons should be held liable for violating sanctions. The Directive determines the minimum and maximum amount for fines imposed on legal persons. In Finland, corporate criminal liability would be applied to sanctions offences, aggravated sanctions offences and negligent sanctions offences. For these offences, the maximum amount of corporate fine would be 5 per cent of the legal person’s turnover but no less than EUR 850,000 or more than EUR 40 million, which derogates from the general maximum amount of corporate fine.
Finland has taken a positive view of the objectives of the Directive and the Ministry of Justice of Finland has appointed a committee to assess and prepare the required legislative amendments. The proposed legislation is intended to enter into force in May 2025, at which time the Directive must be implemented at the latest.
The Directive increases penalties in many Member States
How does the new Directive impact the legislation of Member States? Does the level of national legislation already correspond to the Directive’s requirements or must countries make amendments?
In the countries we examined, legislation is mainly already in line with the Directive, but nearly all of the countries must make some kind of amendments. The most common needs for amendments concern increasing or specifying penalties as well as including mitigating and aggravating circumstances in legislation. In some countries, for example Italy and Luxembourg, sanctions laws are very new and therefore mainly in line with the new Directive. In some other countries, like Spain, regulation is fragmented and requires more amendments. Denmark has stated that it takes a positive view of the Directive but has nevertheless decided to opt out of applying it. Legislation in Denmark is currently mainly in line with the Directive, although penalties are not as severe.
The Directive reinforces the overall impact of sanctions
The Directive on sanctions offences is an important step towards a more unified and effective implementation of EU sanctions. By harmonising the definitions of offences and penalties the EU aims to ensure that sanctions violations are investigated and prosecuted more effectively, which will reinforce the overall impact of sanctions. Our experts will be happy to assist you if you have any questions about implementing sanctions or the Directive’s impacts.
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City of Rovaniemi – Former employees ordered to pay damages in an investment decision matter
We successfully acted for the City of Rovaniemi in a matter concerning offence in public office and damages claims in relation to a significant investment decision made by the city. The defendants were the city’s former municipal corporate officer, who was in an employment relationship, and a city treasurer, who was in a public-service employment relationship and acted as the supervisor of the municipal corporate officer. The criminal matter related to the City Board’s decision to invest EUR 2 million of the city’s funds in bonds offered by a newly established investment company in accordance with a decision prepared by the defendants. A significant part of the company’s operations involved quick loan business. The main legal question in the matter was whether the investment of public funds constitutes an exercise of public authority and whether regulation on offences in public office therefore becomes applicable even to a person in an employment relationship. The municipal corporate officer in an employment relationship was charged with aggravated abuse of public office based on her negligence in the preparation and presentation of the investment decision as well as based on a conflict of interest due to the fact that she had invested her own money in a company that received funding from the investment target presented to the City Board. The charges of an offence in public office against the city treasurer concerned his position as the supervisor and reporter of the city’s investment activities. He was also involved in the preparation and presentation of the City Board’s decision. The processing of the matter started in the District Court of Lapland in June 2022. In its judgment given in August 2022, the District Court stated, based among other things on our argumentation, that the investment of public funds constitutes an exercise of public authority and that regulation on offences in public office can therefore be applied to the municipal corporate officer. The District Court deemed that the conduct of the former municipal corporate officer fulfils the characteristics of abuse of public office and that the conduct of the former city treasurer fulfils the characteristics of violation of official duty with respect to the preparation of the investment decision, but the right to bring charges had become time-barred. Punishments could therefore not be imposed on the defendants, but the defendants were ordered to jointly and severally pay the city approximately EUR 114,000 in damages plus interest for late payment. The city treasurer’s share of the amount was 10%. The prosecutor accepted the judgment but the other parties appealed it to the Court of Appeal. Acting for the city, we pursued claims for both punishment and damages in the Court of Appeal. The Rovaniemi Court of Appeal processed the matter in November and December 2023. In its judgment given in June 2024, the Court of Appeal upheld the District Court’s judgment with respect to the abuse of public office and violation of official duty. The Court of Appeal deemed that the municipal corporate officer had failed in her duty to declare the conflict of interest. In addition, she had failed in her duty to ensure that the prepared decision was in compliance with the city’s investment guidelines and that it had been properly put out to tender. The Court of Appeal also found that the text of the investment proposal was insufficient and misleading and that the municipal corporate officer’s conduct was intentional. As regards the city treasurer, the Court of Appeal held that he had failed in his duty to ensure that the investment proposal to the City Board complied with the investment guidelines, that the presentation was not misleading and that risks were taken into account as required by the investment guidelines. With the judgement, the Court of Appeal took a clear position that abuse in public offices and when exercising public authority is not acceptable. The judgment is also significant as it declares that investing public funds constitutes an exercise of public authority and that the liability for acts in office therefore becomes applicable even to persons in employment relationships. In addition, a key question for the Court of Appeal to assess was defining the amount of economic damage in a matter related to investment activities. The Court of Appeal held based on our arguments that the conduct of the municipal corporate officer and the city treasurer had caused damage to the city. The Court of Appeal increased the amount of damages to EUR 210,000 with the city treasurer’s share limited to 10%. The amount was increased because the Court of Appeal deemed that the city had suffered damage not only in terms of the loss of capital but also in terms of the loss of estimated return on investment. The judgement is not final.
Case published 21.8.2024
Finnish industrial company – Decision to waive prosecution for an occupational safety and health offence
We assisted a major Finnish industrial company and two employees of its safety organisation in criminal proceedings concerning an occupational safety and health offence. The accident occurred at a common workplace where several other employers were also operating at the time of the incident. During the criminal investigation, the police suspected, among other things, two employees of the company of having committed an occupational safety and health offence. The police also investigated the company’s criminal liability. We examined the safety practices applied in the company and the common workplace, and the roles of the companies and individuals involved in the incident. We justifiably argued that our clients had acted diligently with respect to their duties. The prosecutor concluded that there were no grounds to prosecute our clients, so the prosecutor decided not to press charges against the company and its two employees.
Case published 6.8.2024
Finnish construction company – Decision to waive prosecution in an occupational safety and health offence matter
We represented a prominent Finnish construction company that was involved in an occupational safety and health offence matter. The company was the project supervisor and main contractor in a joint building site where a workplace accident occurred. The criminal investigation examined the personal criminal liability of the site manager employed by the company and the criminal liability of the company. We investigated and analysed the course of events, the actions of the parties concerned and the company’s occupational safety and health practices. In the final statement we argued that the company and site manager had complied with all occupational safety and health regulations. Based on our arguments, the prosecutor deemed that there were no likely causes to support the suspected offence, decided not to prosecute the employee of the company and waived the corporate fine claim against the company.
Case published 3.6.2024
Finnish forest industry company – Decision to waive prosecution for an occupational safety and health offence
We assisted a Finnish forest industry company as well as its management and supervisors in a criminal investigation concerning an occupational safety and health offence. Based on the arguments we presented in the final statement, the prosecutor decided not to prosecute the CEO and two employees of the company and waived the corporate fine claim against the company.
Case published 17.4.2024