Sanctions and Brexit: Changes Coming to UK Sanctions Laws – Deal or No Deal

Sanctions and Brexit: Changes Coming to UK Sanctions Laws – Deal or No Deal

The first in a new series of sanctions guides from BCL partner John Binns. Check back soon for more or follow us on Linkedin to stay updated.

Will Brexit Make a Difference?

The UK’s decision to leave the EU was the trigger, among other things, for a new set of sanctions laws, comprising the Sanctions and Money Laundering Act 2018 (SAMLA) and various regulations made under it. Businesses that already take active steps to comply with sanctions should notice little immediate difference; indeed, that was one of SAMLA’s principal aims. But under the surface there are a number of provisions that could make a significant difference. Some, though not all, of these depend on whether the UK leaves the EU subject to the terms of the withdrawal agreement now being debated by Parliament (popularly referred to as the ‘deal’), or not (‘no deal’).


The Impact of a ‘Deal’

In the event of a ‘deal’, sanctions regulations will be among the many EU rules that the UK will continue to follow until the end of a transition period (currently envisaged to last until the end of next year, though it could then be extended), but that it will play no part in helping to make. The UK’s policy role in making EU sanctions has traditionally been very significant, so its departure may well make a difference to how active and effective EU sanctions regimes are in future. But however they turn out to perform, it is clear that the UK will continue to have to follow them while the transition period applies.


Continuity Arrangements for ‘No Deal’

In the event of ‘no deal’, the majority of EU sanctions designations will be carried over and take effect in one of two ways. The first is under a set of regulations made under SAMLA to replace (for the UK’s purposes) the existing EU regimes, the majority of which have already been made. The second is under a complex combination of provisions: the EU Withdrawal Act, which converts the EU regulations into domestic law as at the moment of exit; the existing (pre-SAMLA) UK regulations, which will continue to support them; and transitional powers in SAMLA itself, by which ministers can track and duplicate the EU lists until November next year.


New Opportunities for Challenge

Significantly however, the responsibility for deciding who belongs on a sanctions list and how will (in the event of ‘no deal’, or after the end of the transition period) transfer instantly to UK ministers, which will open up a new ground of challenge for designated persons. SAMLA itself envisages a system of requests to ministers to revoke or vary a designation, after which (if the minister refuses) a challenge can be brought in court. But in addition to that, the regulations themselves (as secondary legislation) may also be open to challenge – if, for instance, the basis for imposing sanctions at all, or for specifying an activity that could trigger a designation, can be shown to be unlawful or irrational.


New Opportunities for Sanctions

Of course, in the event of ‘no deal’ (or at the end of the transition period) the UK will also have the opportunity to make its own decisions about sanctions regimes in future: although it could follow all of the EU’s regimes in full, it could choose to diverge from them in any way it wished. That could for instance mean that it follows a policy more aligned with the US, or attempted to plot a path between the EU and US regimes.


‘Magnitsky Sanctions’

In any event (even, in fact, if the UK does not exit the EU at all), SAMLA creates a brand new basis for imposing sanctions, popularly associated with the Russian lawyer Sergei Magnitsky: to combat ‘gross violations of human rights’. The UK government has said that it intends to proceed with a Magnitsky sanctions regime, and made clear its view that to do so would not be incompatible with continuing to operate within the EU system; in other words, it could be done even within the transition period contemplated by the ‘deal’.


The Prospects for Divergence

The overall picture, then, is one with numerous prospects for divergence, either on a small scale (for the people currently on a EU list who the UK decides or is forced to remove from theirs) or a larger one (if and when the UK begins to chart its own course in this space). For many businesses that will mean increasing complexity, as they add independent UK sanctions to their list of compliance requirements. But the nature and the speed of the changes to come are, for the time being, unknown.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.

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