In February 2024, the UK Government set out its sanctions strategy in a paper called “Deter, Disrupt and Demonstrate – UK sanctions in a contested world.”
The strategy explains the way in which the UK has transformed its use of sanctions in recent years; in particular, to help advance foreign and security priorities around the world. As part of the G7 and the UN Security Council, the UK plays a leading role in reinforcing international sanctions to defend internationally accepted norms.
The strategy sets out the ways in which the Government seeks to make UK sanctions more effective and to ensure that UK sanctions continue to adapt in light of evolving threats and challenges.
As at April 2024, the UK has 36 live sanctions regimes. The strategy paper is, therefore, useful for providing an overview of the UK approach to sanctions regimes, particularly in highlighting that the UK Government, and indeed the UK courts, will seek to ensure that sanctions, whether domestic or international, will be implemented and enforced in a legitimate and targeted manner.
Background
Following Russia’s invasion of Ukraine, the UK has deployed sanctions at an unprecedented scale. However, the context remains dynamic and the challenge has been to prevent sanctioned entities and individuals from evading or circumventing sanctions by seeking to obscure or hide their assets.
Post-Brexit, the UK enacted domestic sanctions regulations and created new independent powers for when and how to use sanctions, whilst continuing to collaborate closely with the EU and also complying with its international obligations in relation to UN sanctions.
The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) gives the UK autonomous powers to impose, implement, enforce and lift sanctions. SAMLA allows for the implementation of a wide range of measures relating to finance, trade, transport or immigration.
Measures such as travel bans and asset freezes can be targeted at specific individuals and entities through the process of designation (whereby they are added to the UK Sanctions List and HM Treasury’s Consolidated List). Other sanctions measures restrict activity in particular sectors or work by blocking access to resources, including through arms embargoes.
The Government also has new powers to disqualify a designated person from acting as a UK company director and to take steps to stop UK technology being used to fuel conflict.
Core considerations
Sanctions are not used lightly by the UK Government in the sense that they will not be deployed where they may have limited or no impact. They are part of a wider strategy, including diplomatic and law enforcement, to uphold international rules and norms. UK sanctions are always consistent with international law. Where possible, the UK seeks to coordinate its sanctions approach and activity with its allies to maximise collective impact. This is particular evident from the UK co-ordinated approach with the G7 Coalition countries when implementing the Oil Price Cap.
UK sanctions are intended to be targeted. The Government aims to minimise any unintended consequences from sanctions and have provisions to enable legitimate activity. As appropriate, licences can be issued to permit certain activities that would otherwise be in breach of sanctions. By way of example, General Licences were issued under the UK Russia Sanctions Regime, including to ensure delivery of humanitarian assistance to Ukraine and to help facilitate the shipment of Russian food and fertiliser around the world.
On 27 February 2024, the UK Office of Financial Sanctions Implementation (OFSI) updated its licensing process and policies in order to enhance the clarity and transparency of its financial sanctions licensing process. Among other things, the revised guidance sets out the application process for obtaining a license and explains the new Designated Individuals Licensing Principles. The aim is to make it easier for applicants to better understand what they need to do in order to obtain a license. However, the OFSI retains the discretion to depart from the Licensing Principles where it considers it appropriate to do so.
The Government is also bringing forward legislation, when Parliamentary time allows, to introduce a tailored humanitarian exception across the UK’s financial sanctions regimes. Among other things, this would allow appropriate payments to be made in areas where sanctioned individuals operate or govern.
Private sector contribution
The Government believes that the private sector is critical to making sanctions work and that businesses must understand when and how to comply with sanctions without unnecessarily hampering their legitimate activity. Industry input and reporting requirements also contribute to the Government’s anti-circumvention efforts, including tracking and tackling efforts to evade sanctions.
The Government has regular dialogues with industry representatives and will continue to engage with businesses across all sectors of the economy affected by sanctions.
Robust sanctions system
The UK focus is on due process. SAMLA provides for legal challenge and review. Designated individuals or entities may request key relevant information, request a ministerial review or bring a challenge in court.
Furthermore, English Court judgments to date have established important legal precedents and have helpfully clarified how the courts will approach the legal tests set out in sanctions regulations and related legislation. This in turn informs the Government when it enacts new or amended sanctions legislation. The court decisions reflect that a measured approach is being taken to sanctions enforcement.
Designations of individuals or entities as sanctioned will be kept under review to adapt to new developments and changing circumstances. The Government will not maintain designations where they are no longer appropriate, nor will it keep in place sanctions where they are no longer needed.
Enhanced sanctions enforcement
The UK Government’s Economic Deterrence Initiative, announced in March 2023, includes an emphasis on sanctions enforcement and implementation. Some examples of how the Initiative will strengthen the effectiveness of sanctions are as follows:
- Establishment of the new Office of Trade Sanctions Implementation, which will work with partners across government and in industry to help ensure that businesses understand trade sanctions, and that they are properly implemented and enforced.
- Reinforcement of the Office of Financial Sanctions Implementation, particularly through enhanced capability to implement novel financial sanctions, including the Oil Price Cap.
- Additional support for HM Revenue and Customs to investigate and prosecute the most serious sanctions breaches, including expanded intelligence and data functions.
- Specialist capability within the Joint Maritime Security Centre and the National Crime Agency, increasing the UK’s ability to detect and respond to breaches of maritime and transport related sanctions.
- Work to expand the range of penalties that can be imposed for breaches of sanctions measures, to give sanctions additional teeth.
Comment
Given that international sanctions are likely to remain in place for the foreseeable future against a number of regimes, it is helpful to have an insight into the UK Government’s sanctions strategy going forward.
It has also been helpful to have a number of recent English Court decisions dealing with both substantive and procedural issues arising out of sanctions legislation. In particular, the Supreme Court is due to hear the appeal in Boris Mints & Ors -v- PJSC National Bank Trust & Anor [2023] EWCA Civ 1132 which, among other things, dealt with the scope and meaning of “ownership” and “control” in the context of UK sanctions regulations.
Finally, on 5 March 2024, OFSI published an updated revised guidance on UK financial sanctions aimed at the maritime sector. We have discussed this guidance in a separate article.
For further information, please contact:
Siiri Duddington, Partner, Hill Dickinson
siiri.duddington@hilldickinson.com
