S. 1039

“To impose sanctions on persons responsible for the detention, abuse, or death of Sergei Magnitsky, for the conspiracy to defraud the Russian Federation of taxes on corporate profits through fraudulent transactions and lawsuits against Hermitage, and for other gross violations of human rights in the Russian Federation, and for other purposes.”

The preamble to the “Sergei Magnitsky Rule of Law Accountability Act of 2011

“…and for other purposes.”

As Russia is going to officially join the WTO this summer, discussion is underway in U.S. Congress on what to do with the Jackson-Vanik amendment (JVA), the notorious relic of the Cold War that keeps depriving Russia of the permanent normal trade relations (PNTR) status as a punishment for restricting Jewish emigration in the 70s.  The Obama administration wants the amendment to be lifted arguing that with Russia in the WTO, not granting it the PNTR status will hurt interests of American businesses.  While agreeing with the White House that the amendment should go, the Republicans in Congress refuse to just repeal the amendment; they insist that something else should be put in place to hold Moscow accountable for what they habitually call “human-right abuses.”

As a replacement, the so-called Magnitsky bill is proposed, a piece of legislation bearing the name of Sergei Magnitsky, a corruption whistleblower who died in Russian police custody in 2009.  The bill introduced by Sen. Ben Cardin (D-MD) last May would impose a U.S. visa ban on Russian officials implicated in the Magnitsky death; it would also freeze their financial assets in the U.S.  The administration, however, considers the bill “redundant” on the ground that last summer, the State Department already composed a list of 60 individuals related to the Magnitsky case whose entry in the U.S. would be prohibited.  Instead, the White House called for the creation of a “civil society fund” (worth of $50 million) that would underwrite promoting democracy in Russia.

“Redundancy” is a euphemistic explanation of why the Obama administration doesn’t want the Magnitsky bill being adopted.  The real reason is that S. 1039 is simply a bad piece of legislation.  Last summer, the administration provided an extensive “administration comments” highlighting multiple shortcomings of the bill.  The most salient points were as follows:

  1. Previous U.S. visa bans and asset freezes have targeted the perpetrators of genocide or mass killings; this bill is different because it involves persons implicated in the death of one individual.  At the same time, the threshold for placing names to the “Magnitsky list” is ambiguous and would set a bad precedent for how the United States deals with human rights cases around the world;
  2. The legislation contains a broad catch-all provisions that could potentially apply to any individual who is responsible for “other gross violations of human rights;”
  3. The legislation imposes harsh quasi-judicial requirements on the State Department that are outside of its normal mandate; the DOS is simply not equipped to meet them.  In particular, they include hearings that would have to be conducted by visa officers to determine whether the allegations made against an applicant are credible;
  4. Section 212(a)(3)(E) of the Immigration and Nationality Act already bars admission to the United States to aliens who have engaged in torture and extrajudicial killing.  The bill’s visa restrictions are therefore unnecessary;
  5. The bill is overly burdensome in that it requires an audit and report to the Treasury Secretary by all U.S. financial institutions regarding assets belonging to sanctioned persons;
  6. The bill does not include a provision for appeal — a normal part of due process — for a sanctioned person who is the subject of an asset freeze.

Finally, it was said that “an initial inter-agency review of about 60 targets proposed in connection with the bill shows that there is insufficient information to meet the high evidentiary standard required to establish the responsibility of specific individuals for the harm alleged in the bill relating to Magnitsky…which is a serious issue in particular with respect to economic sanctions that are vulnerable to legal challenge.”  (Emphasis is mine – EI)

In other words, while claiming that he cares about improving rule of law in the Russian Federation, Sen. Cardin had created a bill whose provisions disrespect the law of his own country, the United States of America.

This obviously doesn’t concern numerous supporters of S. 1039 around the world – including members of the “liberal opposition” in Russia – many of whom are unlikely to have even read the bill.  They need S. 1039 exactly for the same purpose they cherished the archaic JVA: to put pressure on Russia, to have a “legal” ground for non-stop meddling in its domestic affairs.  Remember: “and for other purposes?”

President Obama is smart enough to understand that creating of a “civil society fund” won’t be sufficient to overcome the congressional resistance to repealing the JVA; some “replacement” to the amendment seems to be inevitable to strike a deal.  Besides, while the administration is sincerely troubled with the implementation of S. 1039 in its current form, it doesn’t appear to have any ideological problem with the bill in general.  Appearing before Senate Foreign Relation Committee on Feb. 28, 2012, Secretary of State Hillary Clinton called again for lifting the JVA, but stressed the “need to send a clear, unmistakable message to Russia that we care deeply about rule of law in Russia.”  Addressing directly Sen. Cardin, Clinton offered him to work together with the White House to achieve both goals, to which Cardin replied: “I look forward to working with you.  I do think we can do both.”

The simplest interpretation of this exchange would be that in the coming months, the White House will be pressing Cardin to modify the bill to make it palatable to the administration.  With a new version of S. 1039 in hand, President Obama will try again to force the Republicans in Congress to repeal the JVA.  If they refuse, Obama will portrait them as hostile to the interests of American business – and make it a November election issue.

About Eugene Ivanov

Eugene Ivanov is a PMI-certified Innovation Management Consultant who helps organizations increase the efficiency of their internal and external innovation programs.
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15 Responses to S. 1039

  1. Dear Eugene,

    Here I speak with some authority as a former lawyer, which is that what I find troubling about this whole Magnitsky affair is that far from supporting the rule of law in Russia the kind of legislation proposed actually undermines it. Firstly, as you absolutely rightly say, the legislation is deeply flawed even by reference to US law and the US constitution. Secondly, and more pertinently, it makes a host of assumptions about the Magnitsky case that have yet to be proved as fact. By way of example it seems that Magnitsky was not a lawyer after all as is commonly said. Also I have always been troubled by the assumption that Magnitsky was a bona fide whistleblower when it has seemed to me at least possible that his sensational revelations might simply have been a ploy to confuse and discredit the investigators of the fraud he was supposedly himself involved in. I admit that in making the latter point I may be doing Magnitsky an injustice but it is important to say that the investigations are far from complete and have not so far come to any definite conclusions and are still underway so to treat suspicion however strong as fact seems to me at this point simply unwarranted and in legal terms grossly prejudicial.

    I should say that I have been expressing concerns about the remarkable readiness of many people to believe Browder’s and Magnitsky’s claim for some time so I was interested to see a few days ago that a Russian investigator is now also calling into question the reality of the claims of fraud by others that Magnitsky has made. By the way the purpose of Magnitsky’s posthumous trial, which has been unjustly ridiculed in the west (there are many precedents for it in other jurisdictions) is surely (or hopefully) to cast light on this matter and to settle the question of who was telling the truth once and for all.

    I would add that the same point applies with even greater force to the facts surrounding Magnitsky’s death. A host of allegations have been made some of them very lurid and disturbing and some of which have been supported by Medvedev’s Human Rights Council. However it is important to remember that the circumstances of Magnitsky’s death are presently under criminal investigation with a strong probability that several people are going to be prosecuted on criminal charges. For a foreign parliament that by definition cannot be in possession of the full facts, has no jurisdiction over the accused and is not a court, to pass a law that effectively already prejudges these people as guilty before any of them have been tried before a court and been given an opportunity to put their case seems to me to be disturbing to say the least. Frankly I can only describe as gross prejudicial of the defendants’ rights and an extreme case of violation of the presumption of innocence.

    I accept that many people have no doubt well founded doubts about the impartiality or effectiveness of the Russian courts or of their ability to deliver justice. Still it does seem extraordinary and frankly even shocking to me that a whole criminal process should be prejudged before it has even properly taken place. It also again bears repeating that those accused in the Magnitsky case, whether of the fraud he is supposed to have exposed or in connection with his death, have human rights also, which also ought to be respected.

    At this point I feel I must say that the habit of prejudging and second guessing Russian criminal cases does not seem to me to have had a very happy history. I don’t know whether you have read the full original judgment of the European Court of Human Rights in the Khodorkovsky case as opposed to the sometimes misleading press summaries (if not I can provide it if you wish) but I can tell you as someone who has brought cases to that Court that in its judgment the European Court of Human Rights came as close as it could to saying that Khodorkovsky is guilty. The Politkovskaya case also seems to be evolving in what from the western point of view must appear to be an unexpected direction, quite different from that suggested by much of the original western political and media commentary. That may by the way be one reason why the Wikipedia entry on Politkovskaya’s assassination has ignored more recent developments in the case whilst the Wikipedia entry on Politkovskaya herself glosses them over in a single two line sentence.

    Anyway the point I am trying to make is that if the purpose of the proposed Magnitsky law is to support the rule of law in Russia as Hillary Clinton says then its effect will actually be the opposite and it will instead undermine it. How are Russian Courts expected to decide sensitive cases if the US Congress and the US government tells them from a distance what their judgments should be?

    If western governments have concerns about the rule of law in Russia and about the Magnitsky case then it seems to me reasonable that they should request that the Russian authorities keep them regularly informed of the progress of the Magnitsky related investigations especially as the man who Magnitsky worked for, Browder, is a British citizen who represents many western investors. If the Russian authorities refused cooperation or if at the end of the day it appeared that the Russian authorities were intent on burying the case in a way that suggested a cover up or if the proceedings degenerated into an obvious travesty or a farce then, western governments would at that point be entitled to raise concerns. We are nowhere near that point at the moment so a Magnitsky law from any and every point of view makes no sense at all. Both Obama and Hillary Clinton are lawyers and so must be many members of the Congress and it bewilders me that they appear to be so blind to this fact.

  2. Dear Eugene,

    I forgot to say that I was very impressed both by this article and the previous one.

  3. My only comment is that if the US goes through with the Magnitsky Act, Russia replies with some kind of analogous Guantanamo Act.

    The people there are for the most part indefinitely detained with no trial and there is strong evidence that some have been killed through torture.

    Let there be reciprocity in “improving rule of law” in other people’s countries.

    • Eugene says:

      Actually, there were already attempts in Moscow to create a list of Americans involved into the Victor Boot case — and other similar cases of Russians captured in third countries and then brought to the US.

      Obviously, all Moscow needs here is a political will; there is no shortage of “cases” 🙂

  4. Eugene says:

    Dear Alexander,

    Thank you very much for your nice words and thoughtful comments. You’re right: Magnitsky wasn’t a lawyer, he was a tax accountant. I’m not well familiar with his case — I didn’t pay much attention back in 2009, and now, there is too much info from “both sides.” 🙂 Regardless of what is being told about him, his case obviously demonstrated the worst of Russian judicial and penitentiary systems. The fact that his case was followed by the investigators whom he accused in wrongdoing speaks for itself.

    And yet, the way the case took a shape of a “celebrity trial” speaks for itself too. Partly, this can be explained by Browder’s involvement. It’s one thing if one of your employees dies in prison fighting for your interests — his family may request compensation. It’s completely different story if this employee is a victim of bloodthirsty regime. All of sudden, Browder becomes a victim himself.

    (I don’t want to make any unwarranted accusations, but I would be very surprised if no contribution to Cardin’s 2012 election campaign were made by Browder. Not directly, of course, given that he’s a British citizen. He might have dual British-US citizenship, though.)

    I now feel that if the Magnitsky case didn’t exist, it should have been created — exactly for the purpose of “punishing” Russia. It might well be that the decision of the European Court of Human Rights on Khodorkovsky — that he’s more guilty than not — had prevented making such a case out of the latter.

    We shall see how the S. 1039 story evolves. I made a testable prediction and now can be held “accountable”:)

    Best Regards,

  5. Alex says:

    Hi, Eugene

    While it is hard (for me) to argue with the right of eg. US as a sovereign country to decide whom they will let in and whom they will not (or equally, whose assets the Government will expropriate now and whose – permit to accumulate for a while longer), every time I read in the preamble to S 1039 IS “..for the conspiracy to defraud the Russian Federation of taxes on corporate profits .. ” , I’ve got an uneasy feeling that this was written by the Russian Government, concerned with the lack of funds due to massive corporate tax evasion… The next obvious step would be to ask the Russians to submit their tax reports to IRS.. 🙂


  6. Eugene says:

    Hi Alex,

    Yes, I like this part too. if Sen. Cardin has any shortcomings as a politician, modesty obviously is not one of them.


    • Alex says:

      The modesty of the US Senators, elected in the exemplary democratic process, should closely approximate the nation’s average .. (and so would the Senators’ other virtues – including their IQ) ..


  7. donnyess says:

    “Instead, the White House called for the creation of a “civil society fund” (worth of $50 million) that would underwrite promoting democracy in Russia.”

    Worked out great in Cuba right?


    • Eugene says:

      No, it didn’t. But you have to take into account that any fund has overhead, large part of which goes to paying salaries to fund managers. And if you don’t have such a fund, what your managers are supposed to do? Start looking for another job?

      That means that having no democracy in Russia results in lower unemployment in the U.S.


  8. Alex says:

    The Russians should made it a law that any foreign agency that wishes to contribute to democracy promotion inside Russia, can legally do it only through a single centralized agency – which, upon receiving the foreign funds, will disbursement them according to the instructions. (yes, Eugene, it was your reply to the comment @donnyess which made me think of that 🙂


  9. Eugene says:

    Can you imagine how popular work at such an agency would be? Any suggestions on the size of “otkat?” 🙂

    Well, one of the Russian NGOs funded by the American money is dealing with hazing in the army. The Russian don’t speak much about it — and I can understand why: it’s a shame that there is no Russian money for such activity. It’s only Golos you’re always hearing about.


    • Alex says:

      I am sure the Управление Делами Президента would know the correct market rates and procedure and btw will make sure that there is more than one “otkat” . This will be a unique chance where the established system can be made to serve the country 🙂

      See you in the next post

      PS. the anti-bulling NGO should be allowed to run “tax free” , although I am a bit worried that the Americans suddenly became concerned not only with the Russian Government tax collection but now also want to improve the Russian army … Looks like a pattern 🙂

  10. Pingback: S. 1039 (and H.R. 4405) |

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