How Luxembourg research aims to make EU sanctions more efficient

What if grand corruption could be tackled through the use of economic sanctions? Iryna Bogdanova, a postdoctoral researcher in international law at the University of Luxembourg, explains how such measures can help a global effort but cannot not be the only tool policymakers should rely on.

“Kleptotrace” is a project co-financed by the European Union which aims to address transnational high-level corruption and sanctions circumvention. A consortium of research teams are working towards best practices and policy recommendations, and Bogdanova and Silvia Allegrezza make up the Luxembourg team.

Corruption can take many forms, from embezzlement to trading in influence. It is the severity of the actions that creates a distinction between two types of corruption.

As the Kleptotrace handbook outlines, “high-level corruption is distinguished from petty corruption by the abuse of power by high-level officials for the benefit of a few, often involving large sums of money and substantial detrimental impacts on society.” This type of corruption goes under different names, from high-level to significant, to political, to grand corruption, and no matter its appellation, it can have serious consequences on society. That’s why the EU created Kleptotrace.

“Each participant is responsible for a certain number of tasks. The University of Luxembourg is responsible for the working package which analyses the use of economic sanctions by the EU,” Bogdanova explained. 

The main contribution of the Luxembourg team was putting together two reports, along with recommendations, destined to be used by the EU for a potential new EU sanctions regime against significant acts of corruption.

For the first report, the researchers prepared “a very detailed analysis of the European Union sanctions against the background of international and European law,” the researcher said. They focused on uncovering any areas of law where EU restrictive measures could be seen as “not properly designed or even violating some legal rules,” she added. This report summarised the constraints legal frameworks may pose on using economic sanctions.

Economic sanctions against corruption

There has been a steady and significant increase in the use of economic sanctions since the ‘90s, according to Bogdanova. There is already a number of countries that have an existing framework for economic sanctions against acts of significant corruption. The first country to enact such measures was the United States, followed by Canada, the UK and Australia, and the researchers have analysed those systems in their second report.

Iryna Bogdanova, postdoctoral researcher in international law at the University of Luxembourg © Photo credit: Fotoatelier Wolfgang Koch

There has been a steady and significant increase in the use of economic sanctions since the ‘90s, according to Bogdanova. There is already a number of countries that have an existing framework for economic sanctions against acts of significant corruption. The first country to enact such measures was the United States, followed by Canada, the UK and Australia, and the researchers have analysed those systems in their second report.

Recently, there has been a “significant spike in sanctions in response to the Russian invasion of Ukraine” from various states, Bogdanova said. One specific push towards the use of sanctions has been the need to take non-military action. “Scholars say that sanctions are a middle ground between military instruments and simple diplomatic statements,” Bogdanova said. Another clear objective in situations of war is also to deplete the economic resources of the sanctioned state, she added.

The recent tendency to impose sanctions against corruption is what prompted further research into this topic. “In our second report, we focused on implementation and enforcement of economic sanctions in the EU and the more recent idea of using economic sanctions to target corrupted government officials abroad,” Bogdanova said.

The researchers first examined the existing general framework of implementing and enforcing EU sanctions as it is “very complex and involves many different actors at different levels,” she said. This comprises actors who are involved at EU level, member states, and also in private businesses. Then, the team looked at recent initiatives to improve the system and also put forward a number of recommendations to improve the mechanisms.

Coordinate better

“We specified that it would be beneficial for the EU to more actively engage with its allies when [it] introduces sanctions together with a group of cooperating states and also to enhance its cooperation with other third states,” she explained. While the EU already tries to coordinate action, this should be further strengthened. This has been proven by the case of sanctions against Russia, where “third countries that have not introduced sanctions are often involved in different sanction circumvention schemes,” the researcher warned

The next recommendation relates to there being many different agencies within EU states that deal with economic sanctions at a national level. “There are more than 160 different agencies in the 27 member states that are responsible for enforcement of sanctions, so there should be improved cooperation between those different agencies, including an enhanced exchange of information,” she said. This issue is often linked to different laws governing the exchange of information in different countries or understaffed agencies, and not necessarily local unwillingness to cooperate.

Another very crucial point that could potentially improve EU sanctions’ effectiveness is increased engagement with the private sector. “[A]t the end of the day, sanctions bite if the private sector is appropriately enforcing these measures,” she said On this point, the researcher also notes the necessity to tend to the needs of SMEs as their research made clear that those do not have the same level of resources as larger businesses when it comes to understanding and implementing economic sanctions.

In this regard, the research team has praised some positive examples to combat such issues. Some member states have introduced awareness campaigns and provide workshops for businesses to educate them on what the red flags are and how to deal with different situations.

However, Bogdanova draws attention to the fact that sanctions only have a limited role when it comes to the fight against corruption, but this should not lead to the conclusion that sanctions are not effective.

Corruption is a very complex issue and a wide array of instruments exist to deal with it. “[A] lot of other measures should be taken if we want to take the fight against corruption seriously. Sanctions might be a good addition to the other tools used to tackle significant corruption, but their scope is fairly limited,” Bogdanova concluded.