Economic Sanctions as an Instrument of Foreign Investment Control

Treating economic sanctions as an instrument of investment control is somewhat novel. Even if investment control has not been traditionally the objective of the use of economic sanctions, this contribution intends to demonstrate that economic sanctions can have a role in controlling investments. First, certain economic sanctions, called investment sanctions in a strict sense, directly limit the flow of investments towards and/or from the target state or persons. Such investment sanctions have a variety of forms (general bans of investments, sector-specific investments bans, ban on purchasing and selling securities) that make them suitable to be used as a means of investment control. Second, the legislature can include considerations related to the application of and compliance with economic sanctions into the formal investment screening procedure, as the US example demonstrates. The use of economic sanctions in investment control is subject to certain economic, political and legal limits. Even so, it seems that they are not only comparable to traditional investment screening mechanisms, but they can constitute an effective element of the regulatory framework of controlling investments.