Cambodia and the Misuse of the Global Magnitsky Act

By Camille Bismonte

In late September, the United States invoked the Global Magnitsky Act (GMA) to apply sanctions against Union Development Group (UDG), a Chinese-owned business entity operating in Cambodia. These sanctions allege that UDG has engaged in corruption and environmental harm. The U.S. government also charges that UDG is helping build a Chinese military facility in Dara Sakor, a coastal town strategically located on the Gulf of Thailand. However, by centering geostrategic concerns as their primary motivating factor rather than corruption, these sanctions may violate the spirit of the GMA, and therefore, may have been inappropriately applied.

The original Magnitsky Act was enacted in 2012 in honor of Sergei Magnitsky, an accountant who was tortured and killed for exposing corruption among high-level Russian government officials. The Magnitsky Act imposed sanctions on those individuals believed to be involved in his murder, freezing their U.S. assets and banning them from entering the United States. Four years later, Congress broadened the principles of the law to apply globally by passing the Global Magnitsky Human Rights Accountability Act, which allows the government to place targeted sanctions on individuals responsible for committing human rights violations or acts of significant corruption anywhere around the world. The GMA has become an indispensable part of the U.S. diplomatic toolbox to combat corruption and human rights abuses globally.

The U.S. government asserts that UDG falsely registered itself as a Cambodian entity to receive rights to land in Botum Sakor National Park. Once it had attained those land rights, UDG then switched its registration status to that of a Chinese-owned entity. Aspects of the construction in the area have raised concerns that the site is intended for use by the Chinese military. In particular, the airstrip in Dara Sakor is much longer than necessary for civilian use. The airfield has prompted statements of concern from Pentagon officials, who have said, “Any steps by the Cambodian government to invite a foreign military presence…would disturb peace and stability in Southeast Asia.” These concerns have only been amplified following the destruction of U.S.-built facilities at nearby Ream Naval Base.

According to the U.S. State Department press release announcing the sanctions, UDG’s actions demonstrate how the Chinese Communist Party corrupts officials to advance its strategic interests and secure illicit financial gains in the region. The press release also highlighted concerns with China’s expanding power projection in the area, arguing that UDG’s development project could be used to host PRC military assets,” which “could threaten Indo-Pacific stability.”  This focus on Chinese military presence suggests that the decision to sanction UDG was driven by geopolitical interests related to China rather than human rights violations or the company’s corrupt activities.

Activists in Cambodia, along with regional experts and lawmakers, have called for sanctions against Cambodia for its rampant corruption and long history of human rights abuses. A bipartisan group of U.S. lawmakers on November 16 called for an effort to address worsening human rights abuses in Cambodia, including the wrongful arrest of political and environmental activists and journalists. Specifically, the letter urged the Department of State and the Department of Treasury to “impose targeted sanctions under the Global Magnitsky Act…against the senior leadership of the [Cambodian People’s Party] CPP, including top leadership of the police and gendarmes.” In fact, in the same GMA designation as UDG, the U.S. government also sanctioned General Kun Kim for using military intimidation and corruption in order to clear land for Dara Sakor’s development. There are several other examples of the GMA being applied to Cambodia in the past.

Following the imposition of the sanction, critics argued that UDG is one of many companies in Cambodia engaged in corrupt practices and that other firms should face similar blacklisting if the GMA’s criteria were being applied equally. Other companies accused of corruption include Prince Real Estate and Yue Tai Group, amongst the myriad entities working to develop the coastal city of Sihanoukville in Cambodia. But by selectively sanctioning UDG and ignoring other entities engaged in human rights abuses and corruption, the United States has only reinforced the narrative that  the sanctions are being used to blunt China’s strategic gains in the region, which is not their statutory intent.

Sanctions are measured by their ability to encourage good behavior and disincentivize bad behavior, like corruption. But the UDG sanctions seem doomed to fail on this count. Since they are about blocking Chinese strategic access to Cambodia, it seems unlikely that UDG could undertake any changes in behavior that would cause them to be lifted. So there is no incentive for UDG to behave in a more transparent or less corrupt manner. And the sanctions seem unlikely to disrupt growing Cambodia-China military cooperation. They were implemented shortly after the first U.S.-built facility was torn down at Ream in early September and did nothing to discourage the CPP from demolishing a second U.S.-built facility in early November.

What these sanctions have done, however, is weaken an important human rights and anti-corruption tool in an ill-fated attempt to block strategic gains by China.

Camille Bismonte is a research intern with the Southeast Asia Program at the Center for Strategic and International Studies.