Business as usual? : Third-country business and legal effects of sanctions on international trade

Abstract: This thesis explores the legal implications of sanctions on third country companies trading or operating with a sanctioned target state. Considering previous research – primarily from the disciplines of international business, international commercial law and economics – into international business under conditions of sanctions, we analyze the interplay of different sanctions and how they affect third country business. Based on our findings, we propose a model for third country trade in relation to sanctions and sanctioned markets. We conclude that, depending on how they are applied and implemented, sanctions and countersanctions can have contradictory and counterintuitive effects. Under conditions of sanctions, third countries can shield international business from increased political risk and uncertainty, and offer access to otherwise unavailable resources and advantages in sanctioned markets. However, even as third-country companies may be beyond the reach of extraterritorial sanctions, they must still grapple with a number of other effects of sanctions regimes. Such effects include significantly increasing transaction costs due to legal uncertainty, disruptions to supply chains, and being possibly locked out of sanctioning-state markets given noncompliance with sanctions. Depending on target country countermeasures, sanctions regimes may contribute to creating a situation in which third country company activities in a sanctioned state are effectively subsidized at the cost of companies adhering to the regulations of sanctioning bodies. These findings raise important questions for future research into international trade and commercial law.