Germany takes three and a half years to enforce UN sanctions against North Korea

Published: 26 October 2021 Author: Stefan Talmon

The Democratic People’s Republic of Korea (the DPRK or North Korea) and the German Democratic Republic (GDR) maintained excellent relations which was evidenced by the fact that the two countries provided each other with large plots of land in their capitals for their embassies. Thus, since the 1960s the DPRK occupied a 6,000 square metre area in the heart of East Berlin close to the Brandenburg Gate with two large buildings. At the best of times, the embassy premises housed some 130 North Korean diplomats, administrative and technical staff, and their family members. Following German reunification and the demise of the GDR on 3 October 1990, the DPRK Embassy in the now eastern part of the reunified Berlin was turned into the Office for the Protection of the Interests of the DPRK, with the People’s Republic of China acting as protecting power. The premises again became the North Korean embassy when the Federal Republic of Germany and the DPRK established diplomatic relations on 1 March 2001. Reflecting the different quality of relations between the two countries, the embassy was now staffed by only five diplomats with their family members. With plenty of space, the DPRK embassy started in 2004 to sub-let rooms and parking spaces at its site in order to generate hard currency income. In 2007, the embassy leased the former consulate building on its premises at Glinkastraße 5-7, 10117 Berlin, to German company EGI GmbH (EGI) which converted the property into the “City Hostel Berlin” – a budget hostel with some 450 beds in about 100 rooms. The hostel, which offered dormitory beds from 17 euros/night, was popular with young budget travellers because of its central location close to major tourist sites in the city. EGI made substantial investments in the property and in February 2016 signed a 15-year lease agreement with the DPRK embassy, under which it paid the embassy a monthly rent of 38,000 euros.

On 9 September 2016, on the anniversary of the country’s founding, North Korea conducted its fifth and largest nuclear test in violation of several UN Security Council resolutions. As a consequence, the Council tightened sanctions against the country. On 30 November 2016, the Council unanimously adopted resolution 2321 (2016), which read in the relevant part:

“The Security Council, […]

Acting under Chapter VII of the Charter of the United Nations, and taking measures under its Article 41, […]

18. Decides that all Member States shall prohibit the DPRK from using real property that it owns or leases in their territory for any purpose other than diplomatic or consular activities.

36. Calls upon all Member States to report to the Security Council within 90 days of the adoption of this resolution, and thereafter upon request by the Committee, on concrete measures they have taken in order to implement effectively the provisions of this resolution.”

The resolution was aimed at preventing the DPRK from using its embassies and consulates to generate foreign currency in order to fund its nuclear programme and purchase of luxury goods for its leadership. Besides Berlin, the DPRK had leased rooms or buildings within the premises of its diplomatic missions in Bucharest, Islamabad, Sofia, and Warsaw to local private businesses.

Decisions of the UN Security Council are binding only on States. In order to be legally effective for individuals and companies like EGI, they must be transformed or incorporated into domestic law. In member States of the European Union (EU), such as Germany, this is done through EU legislation. It took the EU three months to incorporate Security Council resolution 2321 (2016) into EU law. On 27 February 2017, the Council of the EU adopted Decision (CFSP) 2017/345 and Regulation (EU) 2017/330 concerning restrictive measures against the DPRK. The latter was legally binding for governments of EU member States as well as individuals and companies within the EU. Regulation (EU) 2017/330 provided a new Article 4e to be inserted in existing Regulation (EC) 329/2007:

“1.   It shall be prohibited to: […]

(b) lease real property, directly or indirectly, from persons, entities or bodies of the Government of North Korea; or

(c) engage in any activity linked to the use of real property, that persons, entities or bodies of the Government of North Korea own, lease or are otherwise entitled to use, except for the provision of goods and services which:

(i) are essential for the functioning of diplomatic missions or consular posts, pursuant to the 1961 and 1963 Vienna Conventions; and

(ii) cannot be used to generate income or profit directly or indirectly for the Government of North Korea.

2.   For the purposes of this Article ‘real property’ means land, buildings and parts thereof which are located outside the territory of North Korea.”

The Regulation entered into force on 1 March 2017.

In its belated report to the UN Security Council on the implementation of resolution 2321 (2016), Germany wrote in a note verbale to the chair of the North Korea sanctions committee on 3 April 2017:

“Germany and the other member States of the European Union have jointly implemented the restrictive measures against the Democratic People’s Republic of Korea imposed by the Security Council in its resolution 2321 (2016), by taking the following common measures:

[…]

  • Council Decision (CFSP) 2017/345 of 27 February 2017 […] amending Decision (CFSP) 2016/849, which sets out the commitment of the European Union to implementing all the measures contained in resolution 2321 (2016) and provides the basis for accompanying measures specific to the European Union, but within the scope of the resolution, notably the following: […]

– Prohibition on the use by the Democratic People’s Republic of Korea of real property that it owns or leases for any purpose other than diplomatic or consular activities and on the leasing from the Democratic People’s Republic of Korea of real property situated outside its territory […]

  • Council Regulation (EU) No. 2017/330 of 27 February 2017 amending Regulation (EC) No. 329/2007 concerning restrictive measures against the Democratic People’s Republic of Korea, which gives effect to the measures provided in Council Decision (CFSP) 2017/345. […] The Council regulations mentioned above are binding in their entirety and directly applicable in all member States of the European Union.”

The report was, however, silent on the questions of how and by whom the regulation would be implemented in Germany. Regulation (EU) 2017/330 did not provide for any enforcement measures or sanctions in case of non-compliance. Both the prescription of penalties and the enforcement of the regulation lay within the competence of the member States. The applicable EU law provided that “Member States shall lay down the rules on penalties applicable to infringements of this Regulation and shall take all measures necessary to ensure that they are implemented. The penalties provided for shall be effective, proportionate and dissuasive.” As with most other EU law, the regulation was to be enforced by the competent authorities of the member States.

On 6 April 2017, a spokesperson for the Federal Foreign Office replied to the question of whether the operation of the City Hostel Berlin violated UN Security Council resolution 2321 (2016):

“We are monitoring possible violations of the UN Security Council’s sanctions regime very closely and, together with our partners, ensure strict compliance with the sanctions against North Korea.”

At that moment, however, Germany had not yet taken any action to comply with Regulation (EU) 2017/330 and enact penalties to be imposed against the operators of the City Hostel Berlin in case of non-compliance with the regulation. It was only on 27 April 2017 – that is, five months after the adoption of Security Council resolution 2321 (2016) and two months after the passing of the relevant EU regulation – that the Federal Government enacted the Eighth Ordinance Amending the Foreign Trade and Payments Ordinance, which made it an administrative offence, intentionally or negligently, to lease or rent real estate from persons, entities or bodies of the Government of North Korea in violation of Regulation (EC) 329/2007. It then took another week for the amendment to enter into force. It was thus only from 4 May 2017 onwards that the German authorities could legally impose penalties against companies such as EGI violating UN Security Council resolution 2321 (2016).

In May 2017, the Federal Foreign Office was determined to close the City Hostel Berlin and to dry out the sources of funding for North Korea’s nuclear weapons programme. On 9 May 2017, the State Secretary of the Federal Foreign Office, Markus Ederer, was reported as saying:

“The nonstop nuclear threats from the North Korean government worry us greatly. We have to turn up the pressure in order to get North Korea back at the negotiating table. It means that, more than anything, we have to consistently enforce the sanctions imposed by the United Nations and the European Union.”

The next day, the spokesperson for the Federal Foreign Office commented on UN Security Council resolution 2321 (2016) during the regular government press conference, saying:

“This resolution of the United Nations Security Council stipulates that North Korean missions abroad may only pursue diplomatic and consular activities and therefore any kind of commercial activity on the premises of the embassy or in relation to the embassy is prohibited.

The activities of the North Korean embassy, including the well-known City Hostel Berlin […] clearly fulfil the requirements that they are not diplomatic and consular activities of a North Korean mission abroad.

There is an applicable regulation of the European Union which, in our legal view, is directly applicable law and which incorporates the resolution of the UN Security Council into European and thus also into German law. This is the legal basis for taking the next steps now; namely, to prohibit the economic activities in connection with this City Hostel. […]

It is therefore important that the financial sources available to the North Korean regime in Germany are shut down as quickly as possible. We are now doing this using the necessary means and methods – of course, paying due regard to the requirements of the rule of law.”

Despite the Federal Foreign Office’s determination to close the City Hostel Berlin, it was to take another three years before the Hostel finally ceased operations. The attempts to close the Hostel provide a good example of the challenges facing a country governed by the rule of law when implementing UN sanctions.

The German authorities pursued four avenues to implement resolution 2321 (2016): they requested the DPRK embassy to abide by the resolution; notified the operator of its obligation to close the hostel; imposed an administrative fine on the operator to induce it to close the hostel; and, finally, issued a prohibition of use and closure notice.

Requesting the DPRK embassy to abide by paragraph 18 of resolution 2321 (2016)

On 16 March 2017, the Federal Foreign Office sent a note verbale to the DPRK embassy in Berlin, urging it to abide by paragraph 18 of resolution 2321 (2016). The embassy responded on 21 March 2017 by denying the validity and legitimacy of resolution 2321 (2016) and all acts based upon it. In the following months, the Federal Foreign Office repeatedly called upon the embassy to cease using its property for non-diplomatic purposes.

Due to diplomatic pressure, on 10 August 2017, the embassy sent a letter to EGI terminating the lease agreement and requesting it to vacate the property by 31 August 2017. The operators of Berlin City Hostel, however, rejected the unilateral termination of the agreement claiming that it had no basis in German contract law; all permits for the operation of the hostel had been issued by the Berlin City authorities. EGI wrote in a statement that the “embassy was forced to issue a termination notice due to the German Foreign Ministry’s pressure, but it [was] based on no legal facts and was accordingly refuted by our lawyers.” On its Facebook page the company wrote that the hostel “will definitely not be closed”.

After the termination notice had been sent, a U.S. State Department official told the Foreign Affairs Committee of the U.S. House of Representative that countries had tightened restrictions on the DPRK’s ability to use its diplomatic missions to generate revenue and that, for example, Germany was “shutting down a hostel located on DPRK embassy grounds in Berlin.” The German Federal Foreign Office was also hopeful that the City Hostel Berlin would be closed in due course. On 7 October 2017, a Foreign office official told the media:

“The office continuously called upon the North Korean embassy to cease all violations of U.N. and EU sanctions. The North Korean embassy now terminated the rental agreement. This is a further step to put an end to this practice.”

While terminating the rental agreement may have been “a further step”, it was definitely not the last one in closing the hostel.

As EGI did not cease operations, the Federal Foreign Office, once again, put pressure on the DPRK embassy to take the next step and institute proceedings before the local courts to get the company evicted from its property. On 28 February 2018, the embassy finally brought a case in the Berlin Regional Court against EGI, claiming that the rental agreement had been terminated and petitioning the court for an eviction order. However, the papers were not served by the court on EGI because North Korea did not pay the advance on court fees. On 14 August 2019, a spokesperson for the Foreign Office gave an update on the embassy’s application for an eviction order, saying that the Federal Government hoped that the advance would be paid “soon”. On 10 September 2019, the Secretary of State at the Federal Foreign Office, Andreas Michaelis, wrote in response to a parliamentary question:

“The implementation of the sanctions imposed by the United Nations and the European Union is a core concern of the Federal Government. The Federal Government has regularly taken up the subject of the ‘City Hostel Berlin’ with representatives of the Democratic People’s Republic of Korea (DPRK) in Berlin and Pyongyang. The DPRK has informed the Federal Government that, as a result, it has filed an application for an eviction order against the operator of the ‘City Hostel Berlin’ which has not yet been served due to the non-payment of the advance on court fees. The Federal Government is urging the DPRK to pay the advance of court fees.”

It took another eight weeks before the DPRK embassy announced in a note verbale to the Federal Foreign Office that it had paid the advance on court fees on 1 November 2019. In the end, the case for eviction was never heard because the authorities managed to close the hostel through another route.

Notifying the operator of its obligation to close the hostel

Shortly after urging the DPRK embassy to abide by resolution 2321 (2016), the Federal Foreign Office also sent a letter to the operating company of the hostel informing it of its obligations under Regulation (EC) 329/2007. The company was not prepared to cease its lucrative business. It had made substantial investments in the property and only the previous year had secured a 15-year lease. It thus vowed to defend itself “with all available means”. The operator also claimed that it had stopped transferring rent payments to the bank account of the DPRK embassy. This argument was later rejected by the Higher Administrative Court of Berlin-Brandenburg, which found that, according to general life experience, it was unrealistic that the DPRK embassy waived income of 38,000 euros per month for a period of more than three years while the company using its property generated financial income of much higher magnitude. The Court rather assumed that rent was paid in cash as had been done occasionally prior to 2017. The operators were not able show, either by way of a waiver declaration or an affidavit, that North Korea had in fact legally waived its claim to rental payments. As the operator did not voluntarily close the hostel, other routes to implement Security Council resolution 2321 (2016) had to be tried.

Imposing an administrative fine on the operator in order to include it to close the hostel

With the amendment to the Foreign Trade and Payments Ordinance on 27 April 2017, anyone who intentionally or negligently leased or rented real estate from persons, entities, or bodies of the Government of North Korea in violation of Regulation (EC) 329/2007 committed an administrative offence. Administrative offences are sanctioned by an administrative fine notice issued by the main customs office in the district where the perpetrator has its seat. On 6 November 2017, the Berlin Central Customs Office formally opened administrative fine proceedings against EGI GmbH and its director, Sükriye E., because of the operation of the City Hostel Berlin in a property of the DPRK embassy. In May 2018, the Central Customs Office finally issued an administrative fining notice imposing a fine of 5,000 euros on the director of the EGI and 107,000 euros on the company for violating Regulation (EC) 329/2007. However, within two weeks EGI and its director filed an objection to the fining notice with the Berlin Tiergarten District Court. This move prevented the enforcement of the fining notice for the time being.

On 29 March 2019, the Court rendered a verdict of not guilty because it could not be proven whether and, if so, how, the persons concerned paid rent to the North Korean embassy. The problem here was that the Foreign Trade and Payments Ordinance made only the “leasing” or “renting” of real estate an administrative offence: under German law both required the payment of the agreed rent. The Ordinance did not cover use or activity linked to use.

The Ordinance’s scope of application was thus much more limited than Security Council resolution 2321 (2016) and Regulation (EC) 329/2007. The resolution prohibited the use of real property. The Panel of Experts monitoring the implementation of the UN sanctions against North Korea noted that “continued use of property of the Democratic People’s Republic of Korea for purposes prohibited by the resolution constitutes a violation, whether or not the relevant embassies of the Democratic People’s Republic of Korea are compensated for use of the leased space.” Regulation (EC) 329/2007 also had a wider ambit, prohibiting “any activity linked to the use of real property” of the Government of North Korea. Imprecise drafting was thus responsible for the German authorities being unable to impose penalties to enforce the sanctions against North Korea. This explains why the Berlin Central Customs Office refrained from lodging a complaint against the judgment on a point of law.

Issuing the operator with a prohibition of use and closure notice under general police law

Another avenue to enforce UN Security Council sanctions that had never been used before was general police law. On 18 May 2018, the Berlin police authorities informed EGI that they were initiating proceedings against the company under the general clause of the Berlin Security and Order Act for violating Regulation (EU) 2017/1509, the instrument replacing Regulation (EC) 329/2007. The operating company, however, did not respond. It took the Berlin police authorities another six months before, on 22 November 2018, they issued EGI’s lawyers with a formal notice ordering the company “to refrain by 31 December 2018, at the latest, from any activity related to the use of the property at Glinkastraße 5-7, 10117 Berlin, insofar as it is owned by persons, organizations, or institutions of the Government of the Democratic People’s Republic of Korea (DPRK; also: North Korea).” The notice continued: “By using the property Glinkastraße 5-7, 10117 Berlin for the City Hostel, your client is engaged in an activity that is related to the use of a property belonging to the DPRK.”

On 17 December 2018, EGI submitted an administrative objection against the notice. The Berlin police authorities dismissed the objection on 21 March 2019 and the decision was served on EGI a week later. EGI, however, did not back down. On 29 April 2019, the company lodged an appeal against the prohibition of use and closure notice with the Administrative Court in Berlin claiming, inter alia, that the notice was illegal because the Berlin police authorities were not competent, and they were lacking a legal basis to act because the requirements of the EU regulation were not fulfilled. The appeal meant that for the time being the notice could not be enforced.

It took the Berlin Administrative Court eleven months to hear the case. The Federal Foreign Office sent observers to the oral hearing. On 28 January 2020, the Court finally dismissed the action and confirmed the prohibition of use and closure notice. The five-judge panel found that the operation of the hostel in a property owned by the DPRK violated Article 20(1)(c) of Regulation (EU) 2017/1509. EGI, however, applied to the Higher Administrative Court of Berlin-Brandenburg for permission to appeal the judgment of the Administrative Court.

On 25 February 2020, the Berlin police authorities ordered the immediate execution of the prohibition of use and closure notice. This was considered necessary because the continuing violation of international and EU sanctions would set a negative precedent and was damaging to the foreign policy standing of Germany. At the same time, the authorities threatened to forcibly close the hostel if the operators had not done so within two weeks of delivery of the order. The order was delivered in person to the City Hostel Berlin on 5 March 2020. Ten days later, however, EGI applied again to the Higher Administrative Court – this time for interim measures of protection against immediate execution of the prohibition of use and closure notice. As a result, the Court requested the authorities not to take any measures of execution until a final judgment on the prohibition of use and closure notice had been rendered.

In the meantime, the outbreak of the coronavirus in Germany also affected the operation of the City Hostel Berlin. On 17 March 2020, the government of the federal state of Berlin enacted the Coronavirus Containment Ordinance, which provided that hotels and other providers were no longer allowed to offer accommodation for tourists. On 20 March 2020, the Berlin City authorities, accompanied by police, visited City Hostel Berlin in order to enforce the ordinance. No enforcement measures were taken, as the operator agreed to close the hostel “voluntarily”. When the authorities returned five days later, however, the hostel was still operating. On 30 March 2020, another order to close based on the Coronavirus Containment Ordinance was delivered to the hostel. It was only at the beginning of May 2020 that the operators put up a sign saying, “The hostel is closed”.

On 24 April 2020, the Higher Administrative Court rejected EGI’s application for interim measures of protection, holding that Germany’s foreign policy interests in the implementation of UN Security Council sanctions outweighed the private interests of the applicant. About a month later, on 20 May 2020, the same court also refused permission to appeal the judgment of the Berlin Administrative Court. The Court held that, according to the general clause of the Berlin police law, the police authorities and the police can take the necessary measures to avert an individual threat to public safety and order. In German administrative law, the term “public safety and order” includes all applicable law. Regulation (EU) 2017/1509, which implemented the UN sanctions against North Korea in the EU, was part of the applicable law. Any violation of that regulation could thus be considered a threat to public safety and order allowing the authorities to intervene and close the hostel.

City Hostel Berlin finally closed on 29 May 2020 when the business was deregistered.

The case is a good example that the enforcement of UN sanctions in countries governed by the rule of law may be tortuous and laborious. The German authorities could not simply close the hostel. Each of their notices and orders was subject to judicial review and the mills of justice were grinding slowly – and the wheels of administration were not turning any faster. Matters were complicated by the fact that the penalties for infringement of the EU regulation in the Foreign Trade and Payments Ordinance were inadequate as they were limited to renting or leasing property and did not cover activities related to the use of property. In any case, even if the Ordinance had covered the present case, the imposition of fines as such could not have stopped the operation of the hostel. Depending on the commercial circumstances, EGI could have decided to continue its illegal operation and pay.

It was reported that the implementation of the sanctions was initially delayed because the Federal Ministry of Justice had doubts about the legality of forcing tenants to prematurely terminate existing rental agreements. Its initial interpretation had been that the sanctions could only apply to future, not ongoing, operations. While this may have been a reason for the initial delay in implementing the sanctions, the main reason seems to have been that nobody felt responsible to implement the sanctions. The Federal Foreign Office had a strong foreign policy interest in having the sanctions swiftly implemented but had no competency to either impose fines or order the closure of the hostel under administrative law. The police authorities which were competent to act did not consider themselves to be responsible for the implementation of UN sanctions, which they considered a question of international politics.

Regardless of the reasons for the slow implementation of the sanctions, the City Hostel Berlin became a major embarrassment, especially after Germany assumed the chair of the UN Security Council’s North Korea sanctions committee on 1 January 2019. While Germany’s Permanent Representative to the United Nations in New York, Ambassador Christoph Heusgen, as chair of the sanctions committee, wrote to UN member States urging them to implement the sanctions resolutions of the Security Council against North Korea, Germany had not done its own homework. This prompted the U.S. ambassador to Germany, Richard Grenell, to state:

“Our goal is to get this hotel, this youth hostel to shut down because it is inappropriate for the North Koreans to collect money in Berlin when there are sanctions on the regime via the U.N. It’s not acceptable just to raise your hand at the U.N. and say we are on board with sanctions, but you then have to leave the U.N. chamber, you have to go back to your capitals and you have to implement the sanctions that you vote for.”

And in a tweet on 28 January 2020, he added:

“US Embassy Berlin has been hard at work getting this hotel shut down. It seems like a no-brainer to us. North Korea is under UN sanctions and the Germans are the Chair of the UN enforcement committee.”

Category: Coercive measures short of the use of force

 

 

Prof. Dr. Stefan Talmon LL.M. M.A

Stefan Talmon is Professor of Public Law, Public International Law and European Union Law, and Director at the Institute of Public International Law at the University of Bonn. He is also a Supernumerary Fellow of St. Anne’s College, Oxford, and practices as a Barrister from Twenty Essex, London. He is the editor of GPIL.

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