Sanctions, ownership and a humanitarian partner
The EU delegation in a partner country manages a €25m health programme. A local NGO partner, Salam Health, is 40% owned by a holding company whose chair was listed under the EU Global Human Rights Sanctions Regime six months ago. The chair resigned from the holding's board after listing but retains 30% of the shares. The NGO provides primary care in a region controlled by an armed group. The delegation's programme manager wants to continue payments because the NGO is the only provider. A member state embassy asks the delegation to 'freeze everything' to avoid reputational risk. The EEAS legal adviser notes that humanitarian exemptions exist but require careful documentation.
1. What legal and policy tests should the delegation apply before deciding on payments?
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1. Is the listed person connected to the NGO? The chair is not a direct owner of Salam Health, but owns 30% of the holding that owns 40% of the NGO. The delegation must assess ownership and control, not only direct listing. A 30% stake is not automatically control, but it may confer significant influence, especially with board or veto rights. The resignation from the board reduces, but does not eliminate, the risk.
2. Does the asset freeze apply? An asset freeze prohibits making funds or economic resources available, directly or indirectly, to a listed person. Payments to the NGO are not automatically prohibited, but the delegation must ensure no benefit flows to the listed person.
3. Is there an exemption or authorisation? Humanitarian exemptions or derogations may apply, depending on the regime. They require a competent authority decision and documentation: purpose, beneficiaries, safeguards, monitoring.
4. Is the activity humanitarian and impartial? The NGO operates in a territory controlled by an armed group. The delegation must apply 'do no harm', conflict-sensitivity and diversion risk analysis.
Conclusion: 'Freeze everything' is disproportionate and may harm beneficiaries; 'continue as before' is negligent. The delegation should pause new payments, complete the ownership/control analysis, seek legal advice and, if needed, an authorisation, and design payment routes that do not benefit the listed person.
2. How should the delegation reconcile restrictive measures with humanitarian principles and the member state's reputational concern?
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Restrictive measures are not intended to punish civilians. The delegation's mandate includes both sanctions compliance and humanitarian access. Reconciliation requires:
- Distinguish actor from activity: the listed person is not the NGO. The question is whether funds or economic resources reach the listed person.
- Proportionality: a blanket freeze would stop primary care for a vulnerable population. That is a foreseeable harm and may be contrary to humanitarian principles.
- Documented mitigation: ring-fence the programme; require the NGO to show that the holding receives no programme funds or benefit; strengthen monitoring and audit; use third-party verification.
- Transparency: inform the member state embassy of the legal analysis and mitigation. Reputational risk is managed by evidence, not by paralysis.
If mitigation cannot be achieved, the delegation should consider an alternative delivery arrangement while protecting continuity of care. The decision should be recorded with reasons, legal basis and review date.
3. What practical steps and decision record should the delegation put in place?
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Immediate steps:
- Suspend new payments for up to 30 days while the analysis is completed; protect essential medicines already in the pipeline if legally permissible.
- Obtain the holding's ownership chart, board minutes, shareholder agreement and any veto rights.
- Request the NGO's policy on sanctions screening and its segregation of funds.
- Consult the EEAS legal adviser and the competent national authority on any exemption or authorisation.
- Assess diversion risk in the armed-group-controlled area and adapt monitoring.
Decision record: legal test applied; facts on ownership and control; conclusion on benefit; exemption/authorisation relied on; mitigation measures; residual risk; review date; communication to the member state embassy.
Principle: the delegation should be able to explain why it continued, paused or restructured, and show that humanitarian impact was weighed. A written record protects both the programme and the staff.