Proposal for a Council Regulation amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions on economic and financial relations with Iraq
Date: 2003-10-08
Institutions: European Commission
Subjects: EU relations, Iraq, economic relations, economic sanctions, international finance, public property, repatriation of capital

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 8.10.2003
COM(2003) 584 final

Proposal for a

COUNCIL REGULATION

amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions
on economic and financial relations with Iraq

(presented by the Commission)

EXPLANATORY MEMORANDUM

(1) 

(2) 

(3) 

Further to the adoption of Regulation (EC) No 1210/2003 concerning certain specific
restrictions  on  economic  and  financial  relations  with  Iraq,  which  implements
Resolution 1483(2003) of the UN Security Council of 22 May 2003, Member States in
Council stated that they consider that the Regulation was on one point more restrictive
than  required  by  the  Resolution  and  on  another  not  logical.  The  Council  is  in  the
process  of  preparing  a  Common  Position  based  on  Article  15  of  the  Treaty  on
European Union, in order to pave the way for a valid amendment of Regulation (EC)
No 1210/2003.

The amendments concern the extent to which funds and economic resources of public
entities  in  Iraq,  if  located  outside  Iraq,  have  to  be  frozen,  and  an  exemption  from
freezing  for  funds  and  economic  resources  which  are  the  subject  of  a  prior  lien  or
judgement,  so  as  to  allow  their  use  to  satisfy  the  claims  secured  by  such  lien  or  the
claims declared valid and enforceable in such judgement.

These  amendments  relate  to  the  interpretation  of  Resolution  1483(2003).  For  that
reason, they should apply with retroactive effect to the date on which Regulation (EC)
No 1210/2003 entered into force.

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Proposal for a

COUNCIL REGULATION

amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions
on economic and financial relations with Iraq

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  Position  2003/495/CFSP  on  Iraq 1,  as  amended  by  Common
Position 2003/.../CFSP .... 2

Having regard to the proposal from the Commission3,

Whereas:

(1) 

(2) 

(3) 

(4) 

Further  to  Resolution  1483(2003)  of  the  UN  Security  Council  of  22  May  2003,  the
Council  has  adopted  Regulation  (EC)  No  1210/2003  concerning  certain  specific
restrictions  on  economic  and  financial  relations  with  Iraq 4,  which,  inter  alia,  makes
provision  for  freezing  measures  targeting  the  former  Government  of  Iraq.  These
freezing measures entered into force on 9 July 2003.

A review of the texts has led to the conclusion that the Resolution does not require that
the  freezing  measures  be  applied  to  funds  and  economic  resources  of  ministries  and
other public entities that were not located outside Iraq on 22 May 2003, but left  Iraq
after that date.

In view of this, the ban on making funds and economic resources available to public
entities  in  Iraq,  which  impairs  the  functioning  of  such  entities  and  unnecessarily
hampers the reconstruction of Iraq, should be reconsidered. As a result the clarification
that  export-related  incoming  payments  made  through  public  banks  listed  in  the
relevant annex, should not be frozen, becomes redundant.

Resolution 1483(2003) presents  the freezing  of funds and  economic resources  as  the
first step in a process leading to the transfer thereof to the Development Fund for Iraq.
It also exempts funds and economic resources being the subject of a lien or judgement
established or rendered prior to 22 May 2003 from that process. Applying the freezing
measures is, therefore, not suitable, if the funds and economic resources concerned are
explicitly exempt from the requirement to cause their transfer to that Fund.

1

2

3

4

OJ L 169, 8.7.2003, p. 72.
OJ L ...
OJ C , , p. .
OJ L 169, 8.7.2003, p. 6.

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(5) 

It is noted  that  the  absence of  a  freezing requirement  should be without prejudice  to
the  applicability  of  the  normal  rules  on  recognition  and  enforcement  of  arbitral  and
foreign  judgements.  Moreover,  no  exemption  should  be  granted  in  respect  of  any
judgement  rendered  in  breach  of  Regulation  (EC)  No  3541/92  prohibiting  the
satisfying of Iraqi claims with regard to contracts and transactions the performance of
which  was  affected  by  United  Nations  Security  Council  Resolution  661  (1990)  and
related resolutions 5.

(6) 

Since  these  amendments  relate  to  the  interpretation  of  Resolution  1483(2003),  it  is
appropriate to  give  them  retroactive effect  to the  date on  which  Regulation  (EC)  No
1210/2003 entered into force,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 1210/2003 is amended as follows:

(1)

Article 4 shall be replaced by the following:

"Article 4

1.  All  funds  and  economic  resources  of  the  previous  Government  of  Iraq,  or  of  any  of  the
public bodies, corporations, including companies established under private law in which  the
public  authorities  have  a  majority  stake,  and  agencies  of  that  Republic,  identified  by  the
Sanctions Committee and listed in Annex III, shall be frozen, if they were located outside Iraq
on 22 May 2003.

All  funds  and  economic  resources  belonging  to,  or  owned  or  held  by  the  following

2.
persons, identified by the Sanctions Committee and listed in Annex IV, shall be frozen:

(a) former President Saddam Hussein;

(b) senior officials of his regime;

(c) immediate members of their families; or

(d) legal persons, bodies or entities owned or controlled directly or indirectly by the
persons referred to in subparagraphs (a), (b) and (c) or by any natural or legal person
acting on their behalf or at their direction.

No  funds  shall  be  made  available,  directly  or  indirectly,  to,  or  for  the  benefit  of,  a

3.
natural or legal person, body or entity listed in Annex IV.

4.
No  economic  resources  shall  be  made  available,  directly  or  indirectly,  to,  or  for  the
benefit of, a natural or legal person, body or  entity  listed  in  Annex  IV,  so  as  to  enable  that
person, group or entity to obtain funds, goods or services."

5

OJ L 337, 10.12.1992, p. 1.

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(2)

Article 5 shall be replaced by the following:

"Article 5

The crediting of frozen accounts shall be allowed on the condition that any additions shall be
frozen."

(3)

Article 6 shall be replaced by the following:

"Article 6

1.
By way of derogation from Article 4, the competent authorities of the Member States,
as listed in Annex V, may authorise the use of frozen funds or economic resources, if all of
the following conditions are met:

(a)
the funds or economic resources are the subject of a judicial, administrative or
arbitral  lien  established  prior  to  22  May  2003  or  of  a  judicial,  administrative  or
arbitral judgement rendered prior to that date,

the  funds  or  economic  resources  will  be  used  exclusively  to  satisfy  claims
(b)
secured by such a lien or recognised as valid in such a judgement, within the limits
set  by  applicable  laws  and  regulations  governing  the  rights  of  persons  having  such
claims,

(c)
satisfying  the  claim  is  not  in  breach  of  Regulation  (EC)  No  3541/92
prohibiting the satisfying of Iraqi claims with regard to contracts and transactions the
performance of which  was  affected  by  United  Nations  Security  Council Resolution
661 (1990) and related resolutions, and

recognising  the  lien  or  judgement  is  not  contrary  to  public  policy  in  the

(d)
Member State concerned.

2.
In  all  other  circumstances,  funds,  economic  resources  and  proceeds  of  economic
resources frozen pursuant to Article 4 shall only be unfrozen for the purpose of their transfer
to the Development Fund for Iraq held by the Central Bank of Iraq, under the conditions set
out in UNSC Resolution 1483 (2003)."

(4)

The title of Annex V is replaced by the following:

"List of competent authorities referred to in Articles 6, 7 and 8".

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This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the
Official Journal of the European Union. It shall apply from 9 July 2003.

Article 2

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council
The President

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