Introduction
Since February 2022, sanctions have taken on a pivotal role in the UK and its allies’ response to the invasion of Ukraine, with an unprecedented number of targeted sanctions being levied against individuals and entities. Nearly three years on, the war continues and the UK’s designations have become increasingly wide in scope.
Since the Oil Price Cap (“OPC”) was first introduced by the UK and its coalition partners in 2022[1], the UK’s Foreign, Commonwealth & Development Office (“FCDO”) has increasingly focused on the Russian oil trade and the role of the ‘shadow fleet’ in enabling that trade to continue in contravention of the OPC and trade sanctions more broadly. As recently as 10 January 2025 we have seen this priority reinforced with the press release accompanying designations of Russian oil giants PJSC Surgutneftegas and Gazprom Neft referencing the UK’s “relentless pressure on the shadow fleet that Russia uses to transport Russian oil”.[2]
This focus has resulted in, among other measures, the designation of shipping companies in third-party countries as a result of their alleged involvement in the Russian oil trade, despite those companies having no obligation to comply with the UK sanctions which prohibit such action. On one view this action demonstrates, on a practical level, an extra-territorial reach of those sanctions arguably extending beyond what was intended in the UK’s primary legislation from which the UK’s thematic and geographical sanctions regimes are derived – the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”).
By their nature, sanctions regimes necessarily target those in territories outside of the United Kingdom. Designations made under the Russia (Sanctions) (EU Exit) Regulations 2019 (the “Russia Regulations”), for example, will, while not binding those in Russia, inevitably target individuals and entities based in Russia. However, targeting individuals and companies under a regime in third-party countries which are not the specific focus of that regime is less straightforward. Third-party countries have no obligation to comply with the UK’s sanctions regimes, and so such designations represent both a delicate geopolitical exercise and an arguable creep of the UK’s sanctions’ extra-territorial scope.
Extra-territorial application of UK sanctions
Extra-territorial jurisdiction permits a regime to extend its legal power beyond its territorial boundaries. The territorial application of the UK’s sanctions regimes is set out at section 21 of SAMLA. That section prescribes the following limitations:
Prohibitions or requirements may be imposed…in relation to:
- conduct in the United Kingdom or in the territorial sea by any person;
- conduct elsewhere, but only if the conduct is by a United Kingdom person.[3]
By virtue of this wording, SAMLA expressly curbs the application of the UK’s sanctions regimes to conduct which occurs within the UK’s territory, or conduct which occurs anywhere else if it is carried out by a United Kingdom person (such a person being subsequently defined). SAMLA does not, therefore, provide for an extension to cover conduct by non-UK persons which occurs outside of the United Kingdom.
Despite this, there have been over ten designations under the UK’s Russian sanctions regime of entities incorporated in Dubai. Of these, eight were designated on the basis that they are an “involved person” under the Russia Regulations because they allegedly are, or were previously, “obtaining a benefit or supporting the Government of Russia by carrying on business in a sector of strategic significance to the Government of Russia, namely the Russian energy sector”. The Foreign, Commonwealth & Development Office’s (“FCDO”) press releases which accompany these designations, for instance that of Paramount Energy & Commodities DMCC on 8 November 2023, often make it clear that the purpose is to crack down on “oil networks” that the FCDO perceives to be “propping up Russia’s war economy”.[4]
As at the time of writing, the most recent designation of a Dubai entity on this basis is that of 2Rivers DMCC on 17 December 2024, with the accompanying press release stating that “these new measures will further drain Putin’s war chest, by clamping down on the oil revenues he so desperately needs to fuel his illegal war and put those who enable Russia’s oil exports on notice.”[5] The same press release highlighted that the “UK has now sanctioned over 100 ships for transporting Russian energy, including 93 oil tankers, more than any other nation”.
The balancing act
The UK must carefully consider the geopolitical ramifications and bilateral risk when sanctioning individuals and entities in third-party countries such as Dubai. Although sanctions are in theory intended to be temporary and reversible, this is often not the case in practice. Moreover, sanctions have a devastating impact on both individuals and entities, placing them in a Kafkaesque situation whereby they are suddenly and without any prior notification subjected to highly draconian measures, having been provided with little or no information about why they have been sanctioned, or the evidence to justify such action. Once a company has been designated, it can be incredibly difficult to have that position reversed, or even to obtain interim relief from the measures, as seen in the case of Fractal Marine DMCC which had its application refused by the High Court in March 2024, despite it claiming that it would be forced into liquidation unless the measures were lifted.
Subjecting targets to such harsh treatment, without a clear jurisdictional basis, is therefore a serious step to take and could have significant implications for the UK’s relationships with the third-party countries in question and in the global community more generally.
The temptation is perhaps easy to understand in circumstances where the UK is keen to maintain the efficacy of the OPC and its trade sanctions more broadly. Where the UK is unable to prosecute non-compliance with the OPC, for example due to the extra-territorial limitations set out above, it arguably has little recourse other than to designate if it is to bolster the efficacy of its policy in inhibiting Putin’s war efforts in the context of what is, after all, a multi-partite global market place.
However, if the UK is to extend its reach in this way it must be certain that those targets are in fact bad actors, and that the UK is not simply overreaching in order to punish those that do not elect to voluntarily adopt, and by that action support, the UK’s foreign policy measures.
[1] UK and allies announce price cap of $60 on Russian Oil – GOV.UK.
[2] Support for Ukraine is unwavering as UK announces new sanctions on Russian oil giants – GOV.UK
[3] s21, Sanctions and Anti-Money Laundering Act 2018.
[4] UK cracks down on gold and oil networks propping up Russia’s war economy – GOV.UK , 8 November 2023.
[5] Prime Minister announces new sanctions and £35 million of emergency support for Ukraine as Russia continues to attack critical national infrastructure – GOV.UK.
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