By Daniel Martin
February 5, 2022
The UK moved to an independent sanctions policy when the “transition period” ended on December 31, 2020. Since leaving the EU, UK politicians have argued that the UK now is more agile, with real autonomy to decide how best to use sanctions.
So how has the UK used these new powers? An assessment of four issues shows the extent that the UK is “going it alone.”
Autonomous Sanctions Regimes
By having autonomous sanctions regimes, the UK can move forward without needing to wait for a collective agreement. This may enable the UK to take the lead.
The most visible development has been two autonomous sanctions regimes, namely the Global Human Rights (launched on July 6, 2020) and Global Anti-Corruption (launched on April 26, 2021) sanctions regimes. Together, both are intended to enable the UK to hold to account those involved in serious human rights violations or abuses and combat serious corruption around the world, preventing funds from being used to fund conflict, terrorism or organized crime.
As of February 2, 2022, there were 108 designations under these two regimes, relating to 102 individuals and six entities
While autonomous sanctions regimes enable the UK to move forward without having to wait for a collective agreement, the UK does still need to build consensus and encourage other sanctions authorities to impose their own measures to ensure that sanctions are effective.
If further sanctions are imposed against Russia because of developments on the Ukrainian border, we will see the extent the UK will exercise its autonomy. Indications point to the UK adopting wider designation criteria, which would give it scope to list individuals or entities that do not meet the criteria applied by the EU. Time will tell whether the UK widens its scope.
Decisions on imposing sanctions involve an economic calculus, a need to ensure the benefit of the sanctions does not outweigh the cost to the country imposing the measures, namely the UK, in changing behavior. As EU member states have different attitudes and exposure to Russia, it may be difficult for the EU to reach a consensus. The UK could proceed more quickly.
The UK may also form a different view from the EU on which restrictions to impose and use its autonomy to target activities and sectors of the Russian economy that are not the subject of EU sanctions. Or the UK might decide not to impose measures while the EU does. Any such divergences will increase the challenges likely to face businesses exposed to Russia.
Annual Review and Report
The second development is a step toward greater accountability and scrutiny of the effectiveness of sanctions programs introduced as part of the Sanctions and Anti-Money Laundering Act 2018. SAMLA is the primary sanctions legislation of the UK and sets out its framework for country-specific and thematic sanctions.
SAMLA requires each set of UK sanctions regulations to be reviewed annually to assess whether they are still fit for purpose, and for a report to be submitted to Parliament. This is an important check and fetter on UK sanctions to help ensure that sanctions remain necessary and reasonable.
On January 13, 2021, the UK published its first Annual Sanctions Report with detailed annexes. These provide answers for each sanctions program to the following questions:
- Do the sanctions meet one or more of the conditions in SAMLA?
- Are there good reasons for pursuing the relevant purposes?
- Are sanctions a reasonable course of action for these purposes?
The humanitarian impact is considered for each program.
The creation of a framework to monitor the effectiveness of sanctions programs is a welcome development. If this brings real accountability, it will be a clear benefit of having an independent sanctions policy.
The third development is that the UK recast some of the existing EU sanctions to bring them more in line with English law. While some changes have limited effect, there are some important developments.
For example, SAMLA contains a definition of “financial services” that now includes insurance and related services, so UK insurers are subject to restrictions that do not apply to EU insurers.
The UK sanctions also include more detailed provisions setting out the circumstances in which a person will be said to own or control an entity. This may help determine the scope and extent of the asset freeze when a sanctioned individual has diverse interests in a range of corporations.
It is important not to over-emphasize the differences between the language and concepts used by the UK and the EU. While particular differences can be highly relevant to certain organizations and scenarios, the restrictions are similar.
EU sanctions leave enforcement to individual EU member states. Even before December 31, 2020, there were indications that the UK’s approach to enforcement was closer to the US’s than some EU member states’.
In particular, the UK has adopted US measures that arguably make it easier to enforce sanctions breaches, with deferred prosecution agreements and civil monetary penalties making it easier for regulators to reach the standard of proof.
We expect the UK will continue to look carefully at US developments in sanctions enforcement, and that UK enforcement and the size of the fines imposed will grow more quickly than in the EU.
Is the UK now “going it alone”? Not really. While there are differences between the UK and the EU approach – and these are likely to have a significant impact on some organizations – the similarities far exceed the differences.
There will be instances in which the UK is ahead of and behind the EU – this may be further exemplified in any future package of measures relating to Russia. What needs to be balanced is the UK’s broad alignment with other sanctions authorities for the measures to be effective and the UK not to be left out on a limb.
Indeed, the Annual Sanctions Report states expressly that “the UK is using its new independent sanctions policy to take on a distinctive leadership role as a credible, effective and collaborative sanctions partner.… The UK will continue to seek opportunities for international cooperation, including with the EU, the US, Canada and Australia, to ensure sanctions are implemented and enforced collectively wherever possible.”
Daniel Martin is Partner and Head of the Global Regulatory Practice at international law firm HFW, a member of the ACSS Editorial Taskforce, and a board member of the ACSS London Chapter.