Out-Law News 2 min. read

Brexit: UK sanctions different to their EU counterparts


Organisations cannot assume that sanctions imposed by the UK in regulations enacted under the 2018 Sanctions and Money Laundering Act (SAMLA) are identical to their EU predecessors, an expert in sanctions and export controls has warned as the end of the Brexit transition period approaches.

SAMLA was enacted to provide a legal framework for the government in the UK to impose, update and lift sanctions autonomously after the end of the Brexit transition period on 31 December 2020. Until then, EU-imposed sanctions continue to be applicable in the UK through EU law.

Tom Stocker

Partner

Companies involved in the energy sector in particular must pay close attention to the changes

Tom Stocker

Partner

Companies involved in the energy sector in particular must pay close attention to the changes

Tom Stocker of Pinsent Masons, the law firm behind Out-Law, said: "The Foreign, Commonwealth and Development Office, which determines international sanctions policy in the UK, has already published regulations for over 30 sanctions regimes in preparation for the end of the transition period. Whilst those regulations broadly mirror those imposed by the EU, delivering substantially the same policy effects as the existing regimes, organisations cannot assume that they are identical. In some cases, there are key differences which may have a significant impact on future relations and the ability to conduct business lawfully."

"Accordingly it is vital that careful consideration is given to the relevant new UK legislation to ensure that proposed activities are still compliant," he said. 

Stocker said that changes of emphasis and a broadening of definitions can increase the burden of due diligence, and highlighted that licences will be required for certain activities where that was not the position under the EU legislation. 

For example, organisations providing brokering services are currently caught by both the UK and EU sanctions regimes The definition of 'brokering services' in regulations made under SAMLA is wider than the under EU regime– where it is essentially limited to: buying or selling; or the negotiation or arrangement of transactions for purchase, sale or supply of goods, technology or financial or technical services from a third country to another third country. Some UK regulations, including those relating to Russia and Syria, include "the provision of any assistance that in any way promotes or facilitates the arrangement". Stocker said that this is far broader and has the potential to catch a wider range of services, including legal and other advisory services. He said that prior to providing such services, businesses will need to assess whether they will need a licence first.

There are also new and expanded prohibitions in relation to some sanctions regimes under the UK regulations, most notably those that apply to Russia and Syria in relation to energy related products and crude oil/petroleum related products respectively. For example, under the Russia (Sanctions) (EU Exit) Regulations 2019 (the UK Russia regulations) the provision of "financial services" and "funds" in relation to a wide range of activities relating to "energy related goods" is prohibited, including the export of or direct or indirect supply or delivery of energy related goods; directly or indirectly making such goods available; or the direct or indirect provision of technical assistance in relation to them.  Moreover, the prohibitions relate to the provision to "a person connected with Russia", "for use in Russia" or "to Russia". Associated brokering services are also prohibited.

This prohibition is much wider than under current EU sanctions and would, for example, include the indirect provision of funding in relation to "technical assistance relating to energy-related goods", as well as the provision of legal advice in relation to such an arrangement. 

The UK Russian regulations extend to any "person connected with Russia" which includes individuals ordinarily resident in or located in Russia, and businesses incorporated or constituted under Russian law or domiciled in Russia. That covers a far wider range of individuals and businesses than under current EU sanctions and includes the provision of certain services to Russian companies for operations outside of Russia. 

The prohibitions will not apply where a licence has been obtained. 

"Companies involved in the energy sector in particular must pay close attention to the changes SAMLA may have on their operations and ensure that licences are obtained timeously," Stocker said. "It is a criminal offence to proceed without a licence where one is required."

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Russia's invasion of Ukraine in February 2022 shocked the world and had immediate economic and political consequences. We track and analyse the implications of the situation as it develops.
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