The ‘capital’ and ‘current’ account dimensions of financial sanctions

Abstract Financial sanctions have emerged as a central tool of contemporary economic statecraft, yet their treatment under international economic law remains fragmented and conceptually underdeveloped. This article analyses financial sanctions through the prism of the distinction between current account transactions and capital account movements, a foundational but underexplored divide in international monetary, trade, and investment law. It examines how this dichotomy structures the allocation of jurisdiction and substantive obligations under the International Monetary Fund Articles of Agreement, the General Agreement on Tariffs and Trade (GATT) and General Agreement on Trade in Services (GATS), as well as international investment agreements. We demonstrate that while international economic law affords comparatively strong protection to current payments and transfers, it leaves significant discretion with respect to restrictions on capital movements, which has implications for the governance of financial sanctions. Building on a taxonomy of financial sanctions, the article maps different sanctioning techniques onto the relevant legal regimes and shows how broad national and international security exceptions substantially limit scrutiny by international organizations and tribunals. We thus show that the interaction between the current–capital account divide and the expansive security carve-out contributes to a permissive and politically deferential legal environment, underscoring the need for a more coherent and robust international economic governance framework.