COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 05.06.1998 
COM(1998) 347 final 
Proposal for a 
COUNCIL REGULATION (EC) 
concerning the reduction of certain economic and financial relations 
with the Federal Republic of Yugoslavia and the Republic of Serbia 
(presented by the Commission) 

EXPLANATORY MEMORANDUM 
The present proposal of the Commission for a reduction of certain economic relations 
with the Federal Republic of Yugoslavia, follows from the adoption by the Council of 
Common Positions 98/240/CFSP and 98/326/CFSP, dealing with the Kosovo 
situation, and the actions to be taken in this respect in order to obtain the fulfilment by 
the Governments of the Federal Republic of Yugoslavia and of Serbia of solving the 
Kosovo problem. 
Regulation (EC) No 926/98 of 27 April 1998 already prohibits the supply to the 
Federal Republic of Yugoslavia of equipment which might be used for internal 
repression or terrorism, the provision and/or use of government and/or other official 
financial support, insurance and/or guarantees in respect of new export credit for trade 
with or investment in the Republic of Serbia and the provision or use of government 
and/or other official financing for privatisation's in that Republic. 
For reasons of clear and transparent legislation the provisions of Regulation (EC) No 
926/98 are fully integrated in this proposal, which will enable the repeal of that 
Regulation (Articles 5,6,7 and 8). 
The other provisions in this proposal concern the freezing of the funds belonging to 
the Government of the Federal Republic of Yugoslavia and/or the Government of the 
Republic of Serbia. 
The definitions in Article 1 of the proposal provide clear delimitations of the 
governmental bodies and of the funds concerned by the new Regulation. 
Article 2 contains the provisions concerning the freezing of funds. 
Articles 3, 4, 9, 10 and 14 deal with exceptions (for instance for daily expenses of 
embassies of the Federal Republic of Yugoslavia or for transfer of private pensions ), 
and with a procedure for dealing with exceptions which can not yet be foreseen and 
for consultation on the application of the Regulation. 
In order to ensure full compliance with the Regulation the competent authorities of the 
Member States should dispose of the necessary powers (Article 12). 
The persons addressed by and the territorial scope of the Regulation are the same as 
those in Regulation (EC) No 926/98 (Article 15). 
~l 
Council Regulation (EC) No ..../98 
of.... 1998 
concerning the reduction of certain economic and financial relations 
with the Federal Republic of Yugoslavia and the Republic of Serbia 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, and in particular 
Articles 73g and 228a, 
Having regard to Common Positions 98/240/CFSP and 98/326/CFSP defined by the 
Council on the basis of Article J.2 of the Treaty on European Union on restrictive 
measures against the Federal Republic of Yugoslavia and the Republic of Serbia1, 
Having regard to the proposal from the Commission, 
Whereas the said Common Positions provide for restrictive measures against the 
Federal Republic of Yugoslavia and/or the Republic of Serbia, including action by 
the Community for the reduction of certain economic relations; 
Whereas certain of these measures fall under the scope of the Treaty establishing the 
European Community ; 
Whereas, therefore, and notably with a view to avoiding distortion of competition, 
Community legislation is necessary for the implementation of these measures, as far 
as the territory of the Community is concerned; whereas such territory is deemed to 
encompass, for the purposes of this Regulation, the territories of the Member States to 
which the Treaty establishing the European Community is applicable, under the 
conditions laid down in that Treaty; 
Whereas procedures should be provided to authorise certain activities, amend the list 
of specially designated persons contained in Annex 1 and the list of competent 
services/authorities contained in Annex 3, or to amend the list of equipment for 
internal repression or terrorism contained in Annex 2 to this Regulation; 
OJL 95, 27.3.98, p.l and OJ L 143, 14.5.1998, p.l 
Whereas competent authorities of the Member States should, where necessary, be 
empowered to ensure compliance with this Regulation; 
Whereas there is a need for Commission and Member States to inform each other of 
the measures taken under this Regulation and of other relevant information at their 
disposal in connection with this Regulation, without prejudice to existing 
obligations with regard to certain items concerned; 
Whereas for reasons of transparent legislation, this Regulation should encompass all 
the restrictive measures taken by the Community foreseen in the said Common 
Positions; whereas, therefore, Regulation (EC) No 926/982 can be repealed ; 
HAS ADOPTED THIS REGULATION : 
Article 1 
For the purpose of this Regulation: 
1. Government of the Federal Republic of Yugoslavia means: the Government of the 
Federal Republic of Yugoslavia, including the public administrations and agencies at 
the federal level, and the specially designated entities defined below; 
2. Government of the Republic of Serbia means: the Government of the Republic of 
Serbia, including the public administrations and agencies at the central government 
level in the Republic of Serbia, and the specially designated entities defined below; 
3. Specially designated entity means: any legal person owned or controlled by the 
Government of the Federal Republic of Yugoslavia and/or the Government of the 
Republic of Serbia and listed in Annex 1 to this Regulation; 
4. Designated person means: a natural person acting for, on behalf of or to the benefit 
of the Government of the Federal Republic of Yugoslavia and/or the Government of 
the Republic of Serbia; 
OJL 130, 1.5.1998, p. 1 
l*. 
5. Funds means: any financial asset or resource of whatever kind or origin, including 
but not limited to, cash, liquid assets, dividends, interests or other income on shares, 
bonds, debt obligations or any other securities, or amounts derived from an interest in 
or the sale or other disposal of, or any other dealing with, tangible and intangible 
assets and property rights; 
6. Freezing of funds means: preventing any change in volume, amount, location, 
ownership, possession, character, destination or other change that would enable the 
use of the funds concerned. 
Article 2 
1. All funds held outside the territory of the Federal Republic of Yugoslavia and 
belonging to the Government of the Federal Republic of Yugoslavia and/or to the 
Government of the Republic of Serbia shall be frozen. 
2. No funds shall be made available to either or both those Governments. 
3. Designated persons holding any funds belonging to the Government of the Federal 
Republic of Yugoslavia and/or the Government of the Republic of Serbia shall put 
those funds into a separate account with a bank or financial institution in order to 
enable the bank or institution to freeze those funds. 
Article 3 
Authorisations for the use of frozen funds of the Government of the Federal Republic 
of Yugoslavia and/or the government of the Republic of Serbia, or for making 
available new funds to these Governments may be given under the conditions of this 
Regulation. 
Article 4 
On the condition that the funds concerned are kept in separate accounts with banks or 
other financial institutions within the Community, Article 2 does not apply to funds 
exclusively used for the following purposes: 
r 
a. Usual business activities within the Community of specially designated entities 
established, incorporated or constituted under the law of the Member States not 
resulting, directly or indirectly, in a transfer of funds to the Government of the Federal 
Republic of Yugoslavia and/or the Government of the Republic of Serbia; 
b. Payment for current expenses, including salaries of local staff, of embassies, 
consular posts or diplomatic missions of the Government of the Federal Republic of 
Yugoslavia and/or the Government of the Republic of Serbia within the Community; 
c. Transfer of social security or pension payments from the Community to natural 
persons resident in the Federal Republic of Yugoslavia. 
d. The implementation of the Education Agreement of September 1996, signed by 
President Milosevic and the leader of the ethnic Albanian community Dr. Ibrahim 
Rugova; 
e. Payments through banks or financial institutions, directly or indirectly, to natural or 
legal persons in Serbia for the supply of goods or services by these persons to the 
Community, unless there exists a reasonable suspicion that the supply of goods or 
services has not taken place in fact or not at normal commercial conditions; 
f. Payments by other means, directly or indirectly, for the supply of goods or services 
by natural or legal persons in Serbia for the supply of goods or services by these 
persons to the Community, on the condition that conclusive evidence is given to the 
competent authorities of the Member States listed in Annex 3 that the supply of goods 
or services has taken place in fact and at normal commercial conditions. 
Article 5 
The supply or sale, directly or indirectly, to the Federal Republic of Yugoslavia of 
equipment intended for internal repression or terrorism such as that in Annex 2 shall 
be prohibited, except under the conditions established therein. The Annex shall not 
include items specially designed or modified for military use already subject to the 
arms embargo established on the basis of Common Positions 96/184/CFSP and 
98/240/CFSP. 
Article 6 
As foreseen in Article 3 of Common Position 98/240/CFSP, the following shall be 
prohibited : 
£ 
a) the provision and/or use of government and/or other official financial support, 
insurance and/or guarantees in respect of new export credit for trade or investment 
in the Republic of Serbia or in relation with renewal or extension of existing export 
credit, if the execution of the contract or transaction for which the export credit has 
been provided has not yet been started; 
b) the provision or use of government and/or other official financing for privatisations 
in the Republic of Serbia in respect of which no legally binding commitments have 
been undertaken so far. 
Article 7 
1. The participation, knowingly and intentionally in related activities, the object or 
effect of which is, directly or indirectly, to circumvent the provisions of Articles 2,3 
and 4, or to promote the transactions or activities referred to in Articles 5 and 6, shall 
be prohibited. 
2. Any natural or legal person must notify the Commission directly or through the 
competent authorities of the Member States listed in Annex 3 to this Regulation of 
any information coming to their knowledge, or known by them, which will enable it 
to determine if an entity should be added to or deleted from the list of specially 
designated entities in Annex 1. 
Article 8 
The Council shall adopt by qualified majority amendments to the list contained in 
Annex 2 on the basis of a proposal from the Commission in accordance with Article 5 
of this Regulation. 
Article 9 
For the implementation of this Regulation and in accordance with the provisions of 
Article 10 the Commission shall be empowered to: 
a. amend Annex 1 to this Regulation, containing the names and addresses of the 
specially designated entities; 
b. grant authorisations for Ihe use of frozen funds of the Government of the Federal 
Republic of Yugoslavia and/or the Government of the Republic of Serbia, or for 
making available new funds to these Governments; 
1-
c. to amend Annex 3 containing the names and addresses of the competent 
services/authorities or coordinating service/authority of the Commission and the 
Member States referred to in Articles 4,7 and 12; 
Article 10 
For the purposes of the implementation of Article 9, the Commission shall be assisted 
by the committee composed of the representatives of the Member States and chaired 
by the representative of the Commission, established under Council Regulation (EC) 
No. 2271/963, in accordance with the following provisions. 
The representative of the Commission shall submit to the committee a draft of the 
measures to be taken. The committee shall deliver its opinion on the draft within a 
time limit which the chairman may lay down according to the urgency of the matter. 
The opinion shall be delivered by the majority laid down in Article 148 (2) of the 
Treaty in the case of decisions which the Council is required to adopt on a proposal 
from the Commission. The voles of the representatives of the Member States within 
the committee shall be weighted in the manner set out in that Article. The chairman 
shall not vote. 
The Commission shall adopt the measures envisaged if they are in accordance with 
the opinion of the committee. 
If the measures envisaged are not in accordance with the opinion of the committee, or 
if no opinion is delivered, the Commission shall, without delay, submit to the Council 
a proposal relating to the measures to be taken. The Council shall act by a qualified 
majority. 
If, on the expiry of a period of one month from the date of referral to the Council, the 
Council has not acted, the proposed measures shall be adopted by the Commission. 
Article 11 
liach Member State shall determine the sanctions to be imposed where the provisions 
of this Regulation are infringed. Such sanctions must be effective, proportionate and 
dissuasive. 
3OJL309, 29.11.1996, p. 1 
Article 12 
Without prejudice to the EC rules of confidentiality, the competent authorities shall 
have the power to require banks , financial institutions and other bodies or persons to 
provide all relevant information necessary for ensuring compliance with this 
Regulation. 
Article 13 
The Commission and the Member States shall, insofar as they are not otherwise 
obliged to do so, inform each other of the measures taken under this Regulation and 
supply each other with other relevant information at their disposal in connection with 
this Regulation, such as breaches and enforcement problems, judgments handed down 
by national courts or decisions of relevant international fora. 
Article 14 
The committee referred to in Article 10 of this Regulation may examine any question 
concerning the application of this Regulation, which may be raised either by the 
chairman or by a representative of a Member State. 
Article 15 
This Regulation shall apply : 
- within the territory of the Community including its airspace, 
- on board any aircraft or any vessel under the jurisdiction of a Member State, 
- to any person elsewhere who is a national of a Member State, 
- to any body which is incorporated or constituted under the law of a Member State. 
Article 16 
Regulation (EC) No 926/98 is hereby repealed. 
Article 17 
This Regulation shall enter into force on the day of its publication in the Official 
Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly applicable in all Member 
States. 
For the Council 
The President 
Done at.... 
)o 
ANNEX 1 
List of specially designated entities referred to in Article 1 
)f 
ANNEX 2 
Equipment for internal repression or terrorism, envisaged by Article 5 
( the following list does not include items which have been specially designed or 
modified for military use and are covered by the arms embargo established on the 
basis of Common Positions 96/184/CFSP and 98/240/CFSP) 
- helmets providing ballistic protection, anti-riot helmets, anti-riot shields and 
ballistic shields and specially designed components therefor 
- specially designed fingerprint equipment 
- power controlled searchlights 
- construction equipment provided with ballistic protection 
- hunting knifes 
- specially designed production equipment to make shotguns 
- ammunition hand loading equipment 
- communications intercept devices 
- solid state optical detectors 
- image intensifier tube 
- telescopic weapon sights. 
- smooth bore weapons and related ammunition, other than those specially designed 
for military use, and specially designed compoments therefor, except : (a) signal 
pistols (b) air or cartridge powered guns designed as industrial tools or humane 
animal stunners. 
- simulators for training in the use of firearms and specially designed or modified 
components and accessories therefor. 
;JL 
- bombs and grenades, other than those specially designed for military use, and 
specially designed components therefor. 
- body armour, and specially designed components therefor. 
- all wheel drive utility vehicles capable of off road use that have been 
manufactured or fitted with ballistic protection, and profiled armour for such 
vehicles. 
- water cannon and specially designed or modified components therefor. 
- vehicles equipped with water cannon. 
- vehicles specially designed or modified to be electrified to repel boarders and 
components therefor specially designed or modified for that purpose. 
- acoustic devices represented by the manufacturer or supplier as suitable for riot-
control purposes, and specially designed components therefor. 
- leg-irons, gangchains, shackles and electric-shock belts, specially designed for 
restraining human beings except handcuffs for which the maximum overall 
dimension including chain does not exceed 240mm when locked. 
- portable devices designed or modified for the purpose or riot control or self-
protection by the administration of an incapacitating substance such as tear gas or 
pepper spray, and specially designed components therefor. 
- portable devices designed or modified for the purpose or riot control or self-
protection by the administration of an electric shock (including electric-shock 
batons, electric shock shields, stun guns and electric shock dart guns (tasers)) and 
components therefor specially designed or modified for that purpose. 
- electronic equipment capable of detecting concealed explosives and specially 
designed components therefor except : TV or x-ray inspection equipment. 
- electronic jamming equipment specially designed to prevent the detonation by 
radio remote control of improvised explosive devices and specially designed 
components therefor. 
/3 
- equipment and devices specially designed to initiate explosions by electrical or 
non-electrical means, including firing sets, detonators, igniters, boosters and 
detonating cord, and specially designed components therefor ; except : those 
specially designed for a specific commercial use consisting of the actuation or 
operation by explosive means of other equipment or devices the function of which 
is not the creation of explosions e. g., car air bag inflaters, electri-surge arresters of 
fire sprinkler actuators.4) 
- equipment and devices specially designed for explosive ordnance disposal; 
except : (1) bomb blankets ; (2) containers designed for holding objects known to 
be, or suspected of being improvised explosive devices. 
- linear cutting explosive charges 4) 
- explosives and related substances as follows 4): 
amatol ; 
nitrocellulose (containing more than 12.5% nitrogen) ; 
nitroglycol ; 
pentaerythritol tetranitrate (PETN) ; 
picryl chloride ; 
trinitrophenylmethylnitramine (tetryl) ; 
2, 4, 6-trinitrotoluene (TNT). 
- night vision and thermal imaging equipment and image intensifier or solid state 
sensors therefor. 
- software and technology related to all listed items. 
1 ) When they have obtained conclusive evidence that the end-use of the items is not internal repression 
or terrorism and under the conditons of Article 4 of this Regulation the competent authorities of the 
Member States may authorise the sale or supply of these items to the Federal Republic of Yugoslavia. 
)**• 
ANNEX 3 
List of competent authorities/services of the Commission and Member States 
as referred to in Article 12 
ir 

ISSN 0254-1475 
COM(98) 347 final 
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