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| Carter Burwell |
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| Satish Kini |
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| David O'Neil |
In addition to empowering the executive to promulgate sanctions, Congress has recently taken a more active role by mandating sanctions in its own right — thereby asserting itself in what is traditionally an area of presidential authority and adding complexity to the sanctions landscape.
One of the most notable examples of this trend is Congress' permanent reauthorization of the Global Magnitsky Human Rights Accountability Act, which was signed into law on April 8. The Global Magnitsky Act is a major sanctions authority that Congress first passed in 2016 to target individuals and entities involved in human rights abuses and corruption.[1]
By reauthorizing the Magnitsky Act and making its regime permanent, Congress reaffirmed its commitment to maintaining a muscular role in the implementation of economic sanctions.
Sanctions are typically a function of executive power by virtue of the International Emergency Economic Powers Act.[2] Through IEEPA, Congress granted the president authority to declare a national emergency in response to a national security threat based at least in part outside the U.S. and to proscribe economic activity with certain individuals and entities.
Once the president declares such an emergency, the U.S. Department of the Treasury, through its Office of Foreign Assets Control, imposes sanctions against designated individuals or entities, typically in close coordination with the U.S. Department of State, the U.S. Department of Justice and other members of the National Security Council.
Therefore, while the executive may act unilaterally and without the need for approval from Congress, it does so only as a result of congressional delegation.
Over the last few decades, Congress has been intermittently involved with sanctions. For example, it was instrumental in imposing sanctions on Iran in the 1980s and 1990s. But that focus subsequently waned, and Congress has often allowed the executive to take center stage in the sanctions arena.
In recent years, however, and particularly as sanctions have become the foreign policy tool of choice, Congress has begun to assert its own constitutional authority "to regulate commerce with foreign nations."[3] The reauthorization of the Magnitsky Act is emblematic of recent actions that collectively illustrate Congress' reassertion of its own sanctions' authority.
In 2012, Congress passed the original Magnitsky Act with overwhelming bipartisan support. At first intended to punish the Russian government officials who were involved in the imprisonment and death of the Ukrainian-born Russian lawyer and adviser Sergei Magnitsky, Congress greatly expanded those provisions in 2016 by enacting the Global Magnitsky Act, which expanded the original statute and authorized the executive to sanction persons involved in human rights abuses and corruption.
Since then, successive administrations have used the statute and a later implementing executive order to sanction numerous individuals and entities all around the world.
In 2017, and in response to the perception that the president had failed to use sanctions to address specific national security threats, Congress passed the Countering America's Adversaries Through Sanctions Act, or CAATSA, with veto-proof majorities in both the House and the Senate.[4]
CAATSA contained separate provisions targeting Russia, Iran and North Korea; many of the Russia-specific sanctions were mandatory, requiring the executive to implement sanctions against U.S. individuals engaged in prohibited economic activity with Russian entities and against non-U.S. individuals who violate U.S. sanctions.
In CAATSA, Congress also codified preexisting executive branch-issued sanctions against Russia, and established a congressional review process to modify or change those sanctions. In effect, Congress inserted itself directly into the sanctions framework and ensured that it would have a significant role in any attempts to relieve that framework.
Congress passed both the original Magnitsky Act and CAATSA over the objections of the Obama and Trump administrations, respectively — illustrating Congress' refusal to acquiesce to the Executive when it comes to sanctions.
Other examples of sanctions-related laws passed by Congress include the Caesar Syria Civilian Protection Act,[5] the Uyghur Human Rights Policy Act,[6] and the Hong Kong Autonomy Act.[7] All three imposed sanctions in response to foreign policy crises, ranging from human rights abuses to national security concerns.
Congress' April action on the Global Magnitsky Act was part of a larger package of legislation designed to punish Russia for its invasion of Ukraine. Congress took the expiration of the original law as an opportunity to put further pressure on Russia, an effort that has nearly unanimous support on Capitol Hill.
Congress' reassertion of sanctions authority stems, at least in part, from the realization that ceding sanctions authority largely to the executive leaves congressional policy priorities at the mercy of the president. Rather than allowing the executive to act — or not act — unilaterally, this activity reflects a new, more assertive role for Congress within the broader national security space.
Therefore, the reauthorization of the Magnitsky Act illustrates two interlocking points. First, Congress views sanctions as an essential response to serious foreign policy crises. Second, Congress' assertion of sanctions authority will continue — particularly because, in an era in which many domestic legislative priorities are highly divisive, it is easier to impose sanctions against non-U.S. persons that are at odds with American policy priorities.
By permanently extending sanctions originally created to prod the executive into action, reauthorization of the Magnitsky Act demonstrates that Congress seeks to remain a forceful actor in the sanctions space in the years to come.
As with many areas of national policy, the true impact of congressional sanctions activity will depend on the details and their implementation by career professionals at the Treasury.
For example, Congress could pass legislation blocking access to U.S. financial markets — as it did with CAATSA by prohibiting U.S. financial institutions from engaging with entities indirectly providing financial services to North Korea. Or Congress could create new discretionary authority for the executive to sanction certain categories of bad actors — as it did with the Magnitsky Act.
And Congress is now much more actively involved in the review of sanctions decisions by the president, whether in the form of individualized projects like the Nord Stream 2 pipeline in Europe, broader efforts like the delisting of certain sanctioned Russian companies and individuals, or the wholesale rebalancing of countrywide sanctions in connection with a nuclear agreement with Iran.
Congress is also finding that it can use its oversight and investigation powers to monitor the compliance of U.S. companies and financial institutions with sanctions regimes.
Recent activity by the U.S. House of Representatives demonstrates that a wide range of actions are open to Congress here, including requesting that financial institutions hand over information related to their compliance with sanctions regimes,[8] seeking information from industry groups about the state of compliance activities in specific sectors,[9] and summoning executives for testimony.
In order to be fully prepared for new sanctions and their corresponding impacts on global financial markets, it is important to recognize that Congress is now a fully established actor in this field.
Although the Treasury will always remain preeminent in choosing the targets and dialing in the focus of economic sanctions, the executive no longer operates alone.
Moreover, Congress frequently passes sanctions-related statutes on a bipartisan, sometimes unanimous, basis. The reauthorization of the Magnitsky Act is only one recent example of this trend.
Such measures escape the partisan conflict that often hampers congressional action, rendering sanctions an attractive option for members of Congress eager to transform their policy initiatives into U.S. government action.
As long as Congress continues to create new mandatory sanctions and endow the executive with the power to impose others, financial institutions, multinational companies and even international nongovernment organizations must be mindful of congressional action in this area and be prepared for the effects of those measures.
Given the global reach of U.S. sanctions, corporate counsel must begin with an honest and thorough risk assessment of the full scope of a corporation's current and prospective business relationships, including its international supply chain.
If that analysis reveals the company may be subject to a sanctions regime implemented by Congress or the executive, in-house counsel should arrange for outside sanctions-compliance assessments and, if necessary, expand and implement compliance procedures and platforms.
Other front-end diligence includes structuring transactions to comply with sanctions regimes and reviewing interactions with counterparties who might be targeted by sanctions.
If the corporation later becomes the potential subject of a sanctions-related inquiry or investigation, familiarity with the technocratic elements of sanctions enforcement, including the licensing process, and the more fluid dynamics of Capitol Hill will be important.
Focusing on both front-end diligence and strategic responses to regulator scrutiny will put corporate leadership in the best position to navigate the changing currents of sanctions and the resurgent role of Congress in this space.
Carter Burwell is counsel, and Satish Kini and David O'Neil are partners, at Debevoise & Plimpton LLP.
Associate Eric Halliday also contributed to the article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Ellyn Ferguson, Senate Unanimously Passes Russia Trade, Embargo Bills and House Clears Them, Roll Call (Apr. 7, 2022, 12:09 PM), https://rollcall.com/2022/04/07/senate-unanimously-passes-russia-trade-embargo-bills-house-vote-set-to-follow/.
[2] Pub. L. No. 95-223, 91 Stat. 1625 (1977).
[3] U.S. Const. Art. 1, § 8, cl. 3.
[4] Pub. L. No. 115-44, 131 Stat. 886 (2017).
[5] Pub. L. No. 116-92, 133 Stat. 2291 (2019).
[6] Pub. L. No. 116-145, 134 Stat. 648 (2020).
[7] Pub. L. No. 116-149, 134 Stat. 663 (2020).
[8] Chairs Maloney and Lynch Launch Inquiry into Credit Suisse's Compliance with Sanctions on Russian Oligarchs, H. Comm. on Oversight & Reform (Mar. 28, 2022), https://oversight.house.gov/news/press-releases/chairs-maloney-and-lynch-launch-inquiry-into-credit-suisse-s-compliance-with.
[9] Chairwoman Waters Sends Letter to the Financial and Commercial Industry Over Russian Disinvestment, H. Comm. on Financial Servs. (Mar. 24, 2022), https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=409219#:~:text=Today%2C%20Congresswoman%20Maxine%20Waters%20(D,America's%20financial%20institutions%20and%20businesses.
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