Will an EU court ruling embolden timber traders to sneak illegal timber in from Myanmar?

A new ruling by the EU Court of Justice (CJEU) may partially undo earlier criminal convictions for importing teak from Myanmar in defiance of a previous EU sanctions regime.

In April 2021, Hamburg Regional Court’s convicted WOB Timber and Stefan Bührich for imports of Myanmar teak contrary to the previous EU sanctions regime implemented against Myanmar.

That court found WOB Timber had evaded EU sanctions on 31 separate shipments of timber worth millions of euros from 2008-11, when the previous military junta – the State Peace and Development Council – and the timber sector, including the State-owned Myanmar Timber Enterprise (MTE), were sanctioned by the EU.

The ruling related to a previous sanctions regime (Council Regulation (EC) No 194/2008), implemented in 2008 as a form of restrictive measure against the Myanmar military for thwarting the process of national reconciliation, respect for human rights and democracy. This sanctions regulation prohibited the import of teak exported from or originating in Myanmar, but was repealed in 2013.

‘Good morning, this is the wood police’ – how German news platform Bild reported the raid

The Hamburg court ordered the company to pay a fine of €3.3 million and sentenced director Stephan Bührich to a 21-month suspended prison sentence and a fine of €200,000, warning that further cases would result in even harsher penalties.

EIA welcomed the decision of the Hamburg Regional Court in 2021 as it signalled a zero tolerance policy to other traders wishing to circumvent sanctions in pursuit of illicit gains while destroying precious forests.

However, the case did not end here. The decision was appealed and ultimately referred to the CJEU. The argument on appeal was that because WOB Timber’s supplier was based in Taiwan, the Myanmar-origin teak that was processed in Taiwan could no longer be considered as teak of Myanmar origin and was therefore not covered by the sanctions regulation.

Specifically, the three questions referred by the German Bundesgerichtshof (Federal Court of Justice) were:

• whether the origin of Burmese teak could be changed to originate in a third country (in this case, Taiwan) instead of Myanmar if a certain level of processing occurred in a third country
• if “exported from Myanmar” covered direct exports from Myanmar to the EU only and not indirect shipments via third countries (in this case, via Taiwan)
• whether customs authorities are bound by a certificate of origin that determines an origin based on processing, issued by a country where the processing took place (in this case, Taiwan).

In a blow to Myanmar’s forests, the CJEU ruled on 5 September 2024 that teak taken from Myanmar and processed into sawn wood in Taiwan conferred Taiwanese origin.

In contrast, teak logs that underwent “debranching and debarking” or were sawn into “wooden cuboids” did not undergo sufficient processing to change the teak’s Myanmar origin.

Myanmar teak seized in the Netherlands for being in breach of EU law

The court also ruled that sanctions only covered goods “imported into the European Union directly from Burma/Myanmar”, although it also determined that in cases of serious doubt, Member States’ customs authorities are not prevented from requiring supplementary evidence when presented with origin certificates. This means a customs authority is not bound by a certificate of origin issued by a third country (in this case, Taiwan) when determining whether to investigate potential sanctions infringements.

The EU Timber Regulation (EUTR), soon to be repealed and replaced by the EU Deforestation Regulation (EUDR), obliges EU operators to declare the country of harvest for their timber imports as part of efforts to help tackle illegal harvesting and the fight against illegal deforestation.

EIA believes the CJEU ruling on changes to origin based on levels of timber processing in a third country goes against the spirit of both the EUTR and EUDR.

It is yet to be seen how the German court will apply the CJEU ruling, although the result could see the sawn teak shipments imported from Taiwan removed from the conviction which could in turn lead to a reduction in the sentencing by the Hamburg court.

Should this lead to a reduction in the sentencing of Stefan Bührich and the fine issued to WOB Timber, it could set a damaging precedent for future prosecutions of suspected sanctions evasion.

EU sanctions against Myanmar were implemented once again in response to the 2021 coup. This EU sanctions regime (Council Regulation (EU) 401/2013) imposes similar asset-freeze measures to those of the previous regime. This meant that when MTE was placed on the sanctions list, EU operators were prohibited from making funds or economic resources available to it and any goods that belong to or are owned by MTE are frozen.

MTE has been on the current sanctions list since 21 June 2021 and there should be no direct or indirect transactions with it after this date, meaning teak from Myanmar is prohibited from entering the EU.

Myanmar Timber Enterprise log depot (c) EIA

EIA Forests Campaigner Kate Klikis said: “Could this CJEU ruling lead to more traders arguing that their timber exports from Myanmar were processed into sawn timber in third countries before they were imported into the EU? Potentially.

“How this judgment may affect the way Myanmar teak is traded to the EU will continue to be closely monitored by EIA.

“But this ruling should not be used as an excuse for customs agents to allow teak into the EU from third countries without full scrutiny. The ruling states that customs authorities are not bound by certificates of origin when determining whether to conduct investigations into sanctions violations. This is highly relevant for instances where teak is imported into the EU with fraudulent origin papers used to disguise the true Myanmar origin of the timber and in an attempt to circumvent sanctions prosecution.”

In April this year, EU Directive 2024/1226 was adopted, which established harmonised rules for criminal offences and penalties for EU sanctions violations. Member States have until 20 May 2025 to implement the new minimum rules for violations of EU sanctions, including penalties for intentional violations and attempts at circumvention.

This marks an important step taken by the EU to ensure uniformity in enforcement and penalty standards across Member States for sanctions infringements.