Part 2: Trade and Other Sanctions
An overview of the UK’s Russian Sanction Regime
The Russia (Sanctions) (EU Exit) Regulations 2019 came into force on 31 December 2020 to replace the previous EU sanctions regime relating to Russia’s actions in the Ukraine. This instrument is made under the Sanctions and Anti-Money Laundering Act 2018 to encourage Russia to cease actions which destabilise Ukraine or undermine or threaten the territorial integrity, sovereignty, or independence of Ukraine.
Upon Russia’s invasion of Ukraine on 24 February 2022, the UK introduced the amended legislation, the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022. Since then, 16 additional amendments have been made to the regulations on financial, trade, and other sanctions. The most recent legislation came into force on Friday, 16 December 2022 as the Russia (Sanctions) (EU Exit) (Amendment) (No.17) Regulations 2022. This article therefore aims to summarise the various measures of restriction under the Regulations.
The territorial extent of the Regulations covers the entirety of the UK (i.e., any person – either natural or legal person) in the UK and its territorial sea), as well as to conduct by UK persons where that conduct is wholly or partly outside the UK. In terms of measures, the Regulations outline different types of sanctions in the areas of financial, trade, aircraft, shipping, and immigration. Several exceptions to each of the sanction categories are provided under Part 7 of the Regulations. No exemption however is provided for small businesses, given the possible circumvention or evasion of the sanctions.
The Regulations impose trade prohibitions relating to the export of certain goods to or for use in Russia or in non-government controlled Ukrainian territory. In other words, the prohibition may still apply even if the immediate destination is not Russia or non-government controlled Ukrainian territory. Therefore, UK traders should check both the ultimate end use of goods should there be any indications that the items may be used in Russia or in non-government controlled Ukrainian territory.
Similarly, the Regulations also prohibit imports of certain goods that are consigned from or originated in Russia, or imports originated in non-government controlled Ukrainian territory. This means that even if the immediate place of consignment of the imports was not Russia or a non-government controlled Ukrainian territory, the prohibition may still apply.
Further prohibitions apply to making available certain goods and technology for use in Russia or to a person connected with Russia or acquiring certain goods or technology originating in Russia or located in Russia or from a person connected with Russia. Similarly, the acts of transferring certain technology or provision of technical assistance in relation to goods covered by an export prohibition (i) to persons “connected with Russia” or (ii) for use in Russia.
The list of goods and services subject to trade prohibition are provided in Part 4, as well as Schedules 2A-D and Schedules 3A-J of the Regulations. Specifically, trade prohibitions on goods cover goods and technology in the military, defence and security, dual-use goods, critical-industry, quantum computing and advanced materials, aviation, and space, maritime, and oil refining, etc. The Regulations also prohibited trade in specific categories of goods such as energy-related goods, infrastructure-related goods, G7 dependency and further goods, luxury goods, coal and coal products, oil and oil products, gold, etc.
For services, the Regulation prohibit direct and indirect provision of certain services (i) to persons “connected with Russia” or (ii) for use in Russia. These include auditing services, brokering services, insurance and reinsurance services, energy-related services, infrastructure-related services, tourism-related services, internet services, other professional and business services (accounting, advertising, architectural, auditing, business and management consulting, engineering, IT consultancy and design, and public relations services). Additionally, the direct or indirect provision of technical assistance, armed personnel, financial services of dun, or broking services is prohibited where such provision enables or facilitates the conduct of military activities carried on or proposed to be carried on by the Russian military or any other military end-user who is a person connected with Russia.
The Regulations prohibit the entry of Russian ships, and other ships specified by the Secretary of State, from entering ports in the United Kingdom. They further prohibit the registration of ships owned, controlled, chartered, or operated by designated persons or persons connected with Russia on the UK Ship Register. These sanctions do not apply to ships originating from or destined for Russian ports or ships carrying cargo to or from Russia are not within scope of the transport sanctions unless they fall within scope of the above-identified case. These Regulations also do not apply to ships with Russian crews or masters unless they are a designated person.
For aircraft, the Regulation prohibit the registration of an aircraft that is owned or operated by a designated person or chartered by a designated person. In addition, the Regulations prohibit a Russian aircraft which is owned, chartered, or operated by persons connected with Russia or designated persons from overflying the United Kingdom or landing in the United Kingdom.
Movement of natural persons
Regarding immigration, the Regulations impose a travel ban on designated persons, who will be refused to enter or remain in the UK, including for transit purposes. Those who are subject to a travel ban under the Regulations and are currently in the UK, will have their permission to stay in the UK cancelled.
Consequences of breach of sanctions prohibitions
Breaches of sanctions are considered serious criminal offences which may result in imprisonment and/or monetary fines.
Breaches of the trade sanctions prohibitions carry a maximum sentence on indictment of 10 years’ imprisonment or a fine (or both), while breaches of the trade licensing provisions carry a maximum sentence on indictment of 2 years’ imprisonment or a fine (or both).
Breaches of the transport sanctions carries a maximum sentence of 7 years’ imprisonment or a fine (or both).
Furthermore, the Regulations also provide for reporting obligations and obligations to provide information related to finance, trade, and internet services activities. The failure of which may constitute an offence and may subject to a court order requiring that person, within a specified period, to comply with the request from the relevant authorities.
What businesses should be mindful of?
As the Regulations comprise long lists of regulated activities and exceptions, businesses should check whether their business activities, including financial activities and trading of goods, technology, or services may fall under the regulated categories. Under certain circumstances, licences can be obtained from relevant authorities, as provided for under the Regulations.
To ensure compliance with the Regulations, UK businesses should have in place a sanctions compliance plan, including risk assessments across a broad scope of business functions, internal control procedures, as well as regular training for employees. For dealing with partners and suppliers, a strong due diligence process, including know-your-counterparty (KYC) policy and supply chain monitoring system are necessary. Lastly, businesses whose operations fall under the scope of the regulated categories should obtain licences if eligible and follow the reporting and information requirements.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about specific circumstances.
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