UK Sanctions

UK Sanctions

Until the end of 2020, the United Kingdom was subject to sanctions regimes imposed by the European Union. Subsequent to Brexit, and in particular the ending of the “transition period” on 31 December 2020, the UK government created its own legislative framework to apply sanctions within the UK.

This framework can be found in the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) and related regulations, as well as more recently in the Economic Crime (Transparency and Enforcement) Act 2022 (“ECTEA”).

Although the UK sanctions regime is autonomous, and thereby does not need to track the EU’s sanctions regime, given the frequent overlap in foreign policy objectives in reality there is often a significant degree of correlation. SAMLA also provides for the application of sanctions in accordance with UN sanctions.

The adoption of an autonomous sanctions regime has also had important consequences for those wishing to challenge a UK designation. Whereas previously a challenge would have been brought at the EU level, with success securing de-listing EU-wide (including the UK), designated persons must now bring a challenge at the UK level with separate proceedings in the EU (assuming the person is also EU-listed).

1.  Relevant sanctions framework

SAMLA gives Cabinet ministers the power to apply various types of sanctions to individuals, corporate entities and specified nations via the enactment of regulations. The relevant minister is permitted to make sanctions regulations for any of the following reasons:

• To comply with an obligation imposed by the UN
• To comply with any other international obligation, for example obligations derived from treaties and international law
• To achieve a discretionary purpose which must fall within any of the following goals:
  • Preventing terrorism
  • Protecting national security
  • Furthering international peace and security
  • Furthering foreign policy objectives
  • Promoting the end of armed conflicts and protecting civilians in conflict zones
  • Promoting respect for human rights
  • Promoting compliance with international humanitarian law
  • Preventing the proliferation of weapons and materials of mass destruction
  • Promoting democracy, the rule of law and good governance

SAMLA also provides the legislative framework governing the processes for implementing sanctions regulations.

Types of sanctions

SAMLA provides for the following forms of sanctions to be enacted by the government:

• Financial sanctions – for example, freezing assets or preventing financial services from being available to designated persons
• Immigration sanctions – an individual would not be permitted to enter or remain in the UK provided this would not violate obligations derived from human rights
• Trade sanctions – for example, preventing the export or import of certain goods for designated individuals or nations
• Aircraft sanctions – for example, detaining or controlling the movement of aircraft which are owned by designated individuals or originate from designated countries
• Shipping sanctions – for example, detaining or controlling the movement of ships which are owned by designated individuals or originate from designated countries

Potential criminal liability

Breaching the applicable prohibitions, directly or indirectly, or helping a designated person to circumvent the effects of sanctions can be a criminal offence and criminal liability can attach to both individuals and entities, and thereby the officers of such entities.

Sanctions regimes

The number and nature of sanctions regulations enacted by the UK government is changing all of the time in response to the government’s policy objectives. To date it has enacted various sanctions regimes covering matters from the respect for human rights and democratic principles in Burundi (The Burundi (Sanctions) Regulations 2021) to the prevention of corruption globally (The Global Anti-Corruption Sanctions Regulations 2021). Each individual regime provides the relevant minister with the power to impose sanctions upon identified persons, entities and/or nations.

Territorial extent and application

SAMLA and subordinate regulations are enforceable against any person or entity within the UK and the UK’s territorial waters. They are also enforceable against any UK person or entity wherever in the world they may be. This means that the government could pursue enforcement against breaches of UK sanctions which occur outside the UK but involve a UK “nexus”. Examples could include a UK company working overseas, a transaction which involves a UK-based clearing service, or a foreign subsidiary of a UK company.

2.  Designation procedures

When a minister makes, varies or revokes a designation, they are under an obligation to take reasonable steps to inform the subject of the designation.

The standard procedure

Under the standard designation procedure, a minister can only designate a person if the minister has reasonable grounds to suspect that the person is an involved person. This means they must have reasonable grounds to suspect that the person they wish to designate is either:

• Involved in an activity specified in the regulation; or
• Owned or controlled by an involved person; or
• Acting on behalf of an involved person; or
• Associated with an involved person

It was previously expressly required by SAMLA that a designation must also be considered appropriate to achieve the objective of the regulation. While this requirement has been removed from SAMLA by ECTEA, in accordance with public law principles the government is still required to act proportionately in taking designation decisions. In principle the obligation remains therefore.

The urgent procedure

ECTEA also introduced the urgent designation procedure, which permits a minister to designate a person for a limited period of time if both of the following conditions are met:

• The person is sanctioned in the US, EU, Canada, Australia or another jurisdiction as specified by the appropriate minister in subordinate regulations
• It is in the public interest to make a designation under the urgent procedure

If both of the above conditions are met, the minister may designate the person for 56 days. After this period of time has elapsed, the minister must consider whether any of the conditions for designation under the standard procedure are now met or whether the grounds for designation under the urgent procedure continue to be met. If the conditions for designation under the standard procedure are met, the minister can sanction the person indefinitely. If the conditions for designation under the urgent procedure continue to be met (but not for the standard procedure), the person may be sanctioned for a further 56 days. After this period has elapsed, the designation must be revoked unless the conditions for designation under the standard procedure are met. A designation, whether under the urgent or standard procedure, is subject to review requirements as discussed below, under heading 4 Challenging a designation.

Designation by description

SAMLA also permits ministers to designate persons by description rather than by using traditional identifying information (name, date of birth, etc.). If they choose to designate a person by description under the standard procedure then they must show that:

• The description of persons specified is such that a reasonable person would know whether that person fell within it
• Any person falling within the description would necessarily be an involved person or belong to an involved organisation

If the minister wishes to designate a person by description under the urgent procedure then they must show that:

• The description of persons specified is such that a reasonable person would know whether that person fell within it
• The described persons are sanctioned in the US, EU, Canada, Australia or another jurisdiction as specified by the appropriate minister in subordinate regulations
• It is in the public interest that persons of the specified description are designated under the urgent procedure

3.  Licencing requirements

It is possible to obtain a licence from HM Treasury which permits someone to act contrary to prohibitions imposed by sanctions for specific purposes. As the specific purposes are determined by the subordinate regulations which enact the individual sanctions regimes they can vary depending on the regime. However, licences are generally available for the following purposes:

• To meet basic needs
• To pay for legal services
• To pay fees for the maintenance of frozen accounts
• To enable payment of extraordinary expenses
• To satisfy pre-existing judicial decisions
• To enable humanitarian assistance

In order to obtain a licence it is necessary to apply to the Office of Financial Sanctions Implementation (“OFSI”). OFSI provides a standard form which must be submitted detailing all the information which is relevant to the request. Licences will specify what kind of conduct is authorised and can contain conditions.

OFSI also issues general licences, which can apply to a particular transaction or type of service within the context of one or more sanctions regimes. General licences are designed to grant prior permission to carry out activity that would otherwise be prohibited by sanctions.

4.  Challenging a designation

Ministerial Review

Designated persons have the right to request that the appropriate minister varies or revokes the designation. The Minister must revoke a designation if they consider that the relevant conditions for designation (by name or description under the standard or urgent procedures as discussed above) are no longer met.

The procedure for requests to the appropriate minister to review a designation is determined by the regulations governing the specific sanctions regime. However, the two common requirements for the review procedure as set out in SAMLA are that:

• The decision on request for review is made as soon as is reasonably practicable after receipt of the information required to make the decision
• The person who made the request must be informed of the decision and the reasons for it (except where releasing detailed reasons would endanger national security, international relations, or the prevention and detection of serious crime)

If a person is named by the UN and has consequently been designated by the UK in compliance with its obligations, that person may request that the Secretary of State endeavour to secure the removal of the person’s name from the relevant UN list.

Once a person has requested a ministerial review, if the outcome of the review is that the designation is maintained, that person cannot request another review unless there has been a substantial change to their circumstances that would warrant another review of the designation.

While previously the government was obliged to carry out periodic reviews of designations, this requirement was removed by ECTEA.

Court reviews

It is possible to apply to the High Court (or in Scotland to the Court of Session) to set aside decisions of the appropriate minister following an unsuccessful ministerial review. This instigates a procedure prescribed by statute (SAMLA) which is analogous to judicial review of the minister’s decision.

The court has the power to set aside the minister’s decision or to provide relief if the principles of judicial review permit the court to do so in the given circumstances. Where a court review is successful in varying or revoking a designation, the court can also award damages if it is satisfied that the decision was made in bad faith. Previously a damages claim could also be brought where the designation decision was made negligently; however, this provision was removed by ECTEA. Damages where bad faith is established have subsequently been capped at £10,000.

Legal costs can generally be recovered in court proceedings at the court’s discretion, and it can generally be expected that a costs award will follow a successful challenge.

Contributors: Charles Enderby Smith (partner) and Guy Martin (consultant).

The material in this Guide is for general information only and does not constitute legal advice.    The content of this page is accurate as of  January 2023.