Proposal for a COUNCIL REGULATION amending Council Regulation (EC) No 1294/1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia (FRY) [and repealing Regulations (EC) No 1295/98 and (EC) No 1607/98]

(presented by the Commission)

EXPLANATORY MEMORANDUM

(1) By means of Council Regulation (EC) No 1294/1999 of 15 June 1999, the Council confirmed and expanded the freezing of funds of certain Yugoslav funds, first imposed in June 1998, and imposed restrictions on investments in the Republic of Serbia.

(2) In its conclusions of 14 February 2000 the Council determined that, in order to exert maximum pressure on the Milosevic regime, there were sufficient grounds to invite the Commission to present detailed proposals on enhancing the effectiveness of the financial sanctions, closing any loopholes that may exist in the Regulation, ensuring that Community banks and companies are made aware of and understand their obligations and reviewing enforcement and application at more frequent intervals.

(3) The purpose of the attached proposal is to provide for the amendments to the Regulation necessary to implement the strengthening of the existing financial sanctions against the Federal Republic of Yugoslavia, as described in the Council's conclusions.

(4) The proposal is for a stricter regime as regards companies, undertakings, institutions or entities included in the definitions of the Government of the Federal Republic of Yugoslavia and the Republic of Serbia. In this regard, it is proposed that the definitions of these governments should be presented in a clearer way, in particular as regards the inclusion of all socially-owned companies, that silent approval of transactions with such parties should be abolished, and that anybody obtaining information with respect to such parties should have a statutory duty to share that information with the authorities.

(5) In order to close the existing loopholes, it is considered necessary to impose a statutory reporting requirement in respect of payments that are exempt from the prohibitions to use frozen funds and to make funds available to those included in the definitions of the targeted governments.

(6) As regards increasing the awareness of the Regulation and more systematic reviewing of its application, most of the measures that need to be taken are of a non-legislative nature. However, in order to provide a proper forum for review of the application of the Regulation, it is proposed that the role of the existing management committee be increased in this regard.

Proposal for a COUNCIL REGULATION amending Council Regulation (EC) No 1294/1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia (FRY) [and repealing Regulations (EC) No 1295/98 and (EC) No 1607/98]

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 60 and 301 thereof,

Having regard to Common Positions 98/326/CFSP of 7 May 1998 defined by the Council on the basis of Article J.2 of the Treaty on European Union, concerning the freezing of funds held abroad by the Governments of the Federal Republic of Yugoslavia (FRY) and the Republic of Serbia [1], and Common Position 98/374/CFSP of 8 June 1998 defined by the Council on the basis of Article J.2 of the Treaty on European Union concerning the prohibition of new investment in Serbia [2], as well as to Common Position 1999/318/CFSP of 10 May 1999 adopted by the Council on the basis of Article 15 of the Treaty on European Union, concerning additional restrictive measures against the Federal Republic of Yugoslavia (FRY), [3]

[1] OJ L 143, 14.5.98, p. 1

[2] OJ L 165, 10.6.1998, p. 1

[3] OJ L 123, 13. 5. 1999, p. 1.

Having regard to the proposal from the Commission,

Whereas:

(1) The Council adopted Regulation (EC) No 1294/1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia (FRY) [4]

[4] OJ L 153, 19.6.1999, p. 63

(2) The Council has agreed to maintain its overall policy framework of applying maximum pressure on Milosevic through the strengthening of the sanctions targeted at the regime, without penalising the Serb people;

(3) Under these circumstances the effectiveness of the existing financial sanctions should be enhanced, inter alia, by closing any loopholes that may exist and improving the enforcement:

(4) At the same time the sanctions regime should be adapted with a view to reducing the negative impact on the interests of the Community without diminishing the impact on the targeted natural and legal persons;

HAS ADOPTED THIS REGULATION:

Article 1

Council Regulation (EC) No 1294/1999 shall be amended as follows:

1. Paragraphs 1 and 2 of Article 1 shall be replaced by the following:

"1. Government of the FRY means

- the Government of the Federal Republic of Yugoslavia at any level, its agencies, bodies or organs;

- any company, undertaking, institution, including any financial institution, and entity owned or controlled by that Government;

- any socially-owned entity organised in the Federal Republic of Yugoslavia

- any successor to such companies, undertakings, institutions and entities as of 26 April 1999

- any subsidiary or branch, wherever located, of such companies, undertakings, institutions and entities; and

- any person acting or purporting to act for or on behalf of any of the foregoing.

2. Government of the Republic of Serbia means

- the Government of the Republic of Serbia at any level, its agencies, bodies or organs;

- any company, undertaking, institution, including any financial institution, and entity owned or controlled by that Government;

- any socially-owned entity organised in the Republic of Serbia;

- any successor to such companies, undertakings, institutions and entities as of 26 April 1999;

- any subsidiary or branch, wherever located, of such companies, undertakings, institutions and entities; and

- any person acting or purporting to act for or on behalf of any of the foregoing."

2. Article 2 shall be replaced by the following:

"Article 2

1. Any person listed in Annex I to this Regulation shall be deemed to be a person acting or purporting to act for or on behalf of the Government of the FRY or the Government of the Republic of Serbia.

2. Companies, undertakings, institutions or entities listed in Annex II to this Regulation shall be deemed to be owned or controlled by the Government of the FRY of the Government of the Republic of Serbia.

Annex II concerns only companies, undertakings, institutions or entities located, registered or incorporated outside the territory of the Federal Republic of Yugoslavia.

3. All companies, undertakings, institutions or entities located, registered or incorporated in the Federal Republic of Yugoslavia shall be deemed to be socially-owned or owned or controlled by the Government of the FRY or the Government of the Republic of Serbia.

4. Nothing in this Article shall discharge any natural or legal person from its obligations to exercise due diligence in respect of acting in conformity with the provisions of this Regulation."

3. Article 6 shall be replaced by the following:

"Article 6

Without prejudice to the Community rules concerning confidentiality and to the provisions of Article 284 of the Treaty, banks, other financial institutions, insurance companies, and other bodies and persons shall provide immediately, on request or not, to the competent authorities of the Member States in charge of monitoring and/or enforcing the provisions of this Regulation and the Commission any information which may facilitate compliance with this Regulation, notably accounts and amounts frozen in accordance with Article 3 and transactions executed under the provisions of Article 7 of and 8." The competent authorities of the Member States and/or the Commission shall be empowered to verify these reports."

4. Paragraphs 1 and 2 of Article 8 shall be replaced by the following:

"1. In accordance with the provisions of Article 9, the Commission shall be empowered:

(a) to amend Annexes I and II;

(b) to grant individual or general authorisations

(i) to unfreeze funds, or make funds available for the benefit of the Government of the FRY or the Government of the Republic of Serbia; or

(ii) to acquire or extend a participation in, ownership of or control over real estate, a company, undertaking, institution or entity referred to in Article 4,

if not granting such authorisations would cause damage to the interests of the Community.

(c) to establish a list of companies, undertakings, institutions or entities within the Federal Republic of Yugoslavia that are neither socially owned, nor owned or controlled by the Government of the FRY or the Government of Serbia.

(d) issue, on a case-by-case basis and on request by an interested party, confirmations that a company, undertaking, institution or entity within the Federal Republic of Yugoslavia is neither socially owned, nor owned or controlled by the Government of the FRY or the Government of Serbia.

2. Any request by a legal or natural person for an authorisation referred to in paragraph 1 (b), for a confirmation referred to in paragraph 1 (d), for an amendment of Annexes I or II or for being listed as not socially owned, or owned or controlled by the Government of the FRY or the Government of Serbia, shall be made through the competent authorities of the Member States.

The competent authorities of the Member States shall verify, to the fullest extent possible, the information provided by the persons making a request."

5. Article 10 shall be replaced by the following:

"Article 10

The Committee referred to in Article 9 shall examine all questions concerning the application of this Regulation, which may be raised either by the chairman or by a representative of a Member State."

Article 2

This Regulation shall enter into force on the day following that 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.

Done at Brussels,

For the Council

The President