The House of Lords European Union Committee has published a report on UK-EU relations after Brexit which expresses concern about the “delay and uncertainty” surrounding the Government’s development of “detailed, workable proposals” for the framework for future UK – EU relations.
As regards sanctions, the report notes that the UK Government position and EU Council & Parliament are agreed that there should be cooperation on sanctions, including information exchange, but no agreement about the mechanism for delivering that outcome. It also notes the European Parliament’s position that “as a third country UK will not be able to participate in the EU’s decision-making”.
UK Foreign Secretary Boris Johnson, in response to a letter from the House of Commons Foreign Affairs Committee, has confirmed that after Brexit the UK will remain part of the JCPOA and continue to comply with it, and that the UK will:
- work closely with the EU to maintain Iran’s compliance and sanctions relief.
- carry over all existing EU sanctions regimes on Iran.
- “engage” at national and EU level to ensure that “business gets as much clarity and guidance as possible” on the EU blocking regulation.
- call on the US to “preserve the gains” the JCPOA has brought and to avoid actions “that would prevent the remaining parties from meeting their commitments to upholding the deal”.
As previously indicated, Brick Court Chambers is hosting an event this Thursday at 4.30pm at the Savoy Hotel (London) to explore the impact of Brexit on sanctions. Details here. Please send us questions for the panellists in advance to email@example.com so we can include as many as possible in the discussion. Please let us know if would still like to register for this event or can no longer attend.
The Sanctions & Anti Money Laundering Act 2018 received royal assent on 23 May. It is the first substantive piece of Brexit-related legislation to have been enacted, and sets up a whole new framework for United Kingdom sanctions. It contains:
- New broad powers for the UK to make / suspend / revoke sanctions regimes, either to implement UN sanctions or for other purposes including the prevention of terrorism, international peace and security. The regimes may consist of a broad range of measures (targeted and sectoral) including shipping, trade and aircraft restrictions as well as financial sanctions and travel restrictions.
- New powers for the UK to add and remove people / entities / organisations from targeted sanctions lists (‘designations’) where there are ‘reasonable grounds to suspect’ involvement (of defined kinds) in certain specified activities. The ‘reasonable grounds to suspect’ threshold reflects the UK’s Government’s current standard when proposing designations to the EU or UN. The EU has no published standard for its listings, although the European court has required there to be a ‘sufficiently solid factual basis’. The new powers include the potential to list by ‘description’ where it isn’t possible to name someone.
- New ‘Magnitsky’ sanctions powers, to freeze and seize assets on grounds of gross human rights violations (an amendment made to the Bill in the aftermath of the Skripal poisoning).
- Due process requirements for designations including notifying designated people and entities, and automatic reviews of designations every 3 years (currently every year), and the need for proportionality. The Act requires designations to be ‘appropriate’, having regard to the purpose of the regulations, and ‘the likely significant effects of the designation on that person’.
- New wider UK licensing powers. At the moment the grounds on which the Office of Financial Sanctions Implementation (OFSI) may grant exceptions and licences to sanctions prohibitions in the UK are for the most part limited to the specific grounds set out in the relevant EU or UN regime. The Sanctions Act allows regulations that create exceptions to any prohibition, including general and specific licences, on far wider grounds (i.e. powers potentially more akin to US OFAC licences).
- New framework for UK court review. Certain sanctions decisions (including UK designations) will be subject to judicial review in the UK courts, with new rules of court to follow. Judicial review in the UK was previously limited because sanctions were imposed by the UN and EU rather than the UK. New court review will include closed material procedures in some cases, and damages for cases of negligent decisionmaking. Different remedies available for those listed on UN rather than EU lists (for legal reasons connected with the Kadi and Al Jedda cases).
- New UK terrorist asset freezing regime. The Act repeals the Terrorist Asset Freezing Act 2010, the current regime for terrorist asset freezing in the UK. This means the Act brings together terrorist asset freezing and other forms of sanctions into one piece of legislation. The Sanctions Act makes it easier to freeze terrorist assets (on a ‘reasonable grounds to suspect’ threshold as opposed to ‘reasonable belief’ plus ‘necessity’). There will still be an independent reviewer of terrorism designations (but not other sanctions designations).
- Powers to make UK regulations for enforcement and breach of sanctions, both civil and criminal, in relation to conduct in the UK or by UK nationals / incorporated bodies.
- Increased powers to require the provision and sharing of information and for search, entry and seizure. And obligations on the Government to issue guidance about prohibitions and requirements and the report on use of sanctions powers.
- New registers of beneficial ownership in overseas territories to be published by 2020.
See the most recent World Export Control Review for a longer piece by Maya Lester QC which explains the context of the Act and its immediate / future implications and effect.
The E3 have signed a joint letter addressed to US Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo saying that they regret the US decision to withdraw from the JCPOA and request EU and UK exemptions from the US secondary sanctions, namely:
1. Exemptions from US sanctions for EU companies that initiated or concluded their contracts after JCPOA Implementation Day (16 January 2016);
2. Exemptions for key sectors, such as energy, automotive, civil aviation and infrastructure;
3. Confirmation that secondary sanctions will not apply to the areas of pharmaceuticals and healthcare;
4. Exemptions to enable banking and financing channels with Iran to be maintained;
5. Extension and adaptation of the winding-down periods.
6. They also ask the US to prolong General Licence H (foreign subsidiaries of US companies to be able to continue business); and to reaffirm the exemption for Embassy bank accounts.
The letter is signed by Federica Mogherini (EU High Representative), Philip Hammond (UK Chancellor), Boris Johnson (UK Foreign Secretary), Bruno Le Maire (French Minister of Finance), Jean-Yves Le Drian (French Minister for Europe and Foreign Affairs), Olaf Scholz (German Minister of Finance and Vice Chancellor), Heiko Maas (German Minister of Foreign Affairs), and Peter Altmaier (German Minister for Economic Affairs and Energy).
The British Government published a Framework for the UK-EU Security Partnership in May which is part of a series of presentations produced by the UK negotiating team for discussion with the EU. It says the UK “wants to build a new, deep and special partnership with the European Union” comprising an economic and security partnership.
As regards sanctions, the presentation states that:
1. The Prime Minister “is clear that we will all be stronger if the UK and EU have the means to cooperate on sanctions and the potential to develop them together in the future”.
2. The UK is developing national sanctions powers which will “mirror existing EU legislative powers” and will be used “in line with shared foreign policy objectives. The new Act received Royal Assent last week (previous blog).
3. The UK is currently “reviewing more than 1000 listings and sectoral measures to identify the best way to transfer these into UK law”. “Over 50% of existing EU sanctions designations are underpinned by UK evidence”.
4. The UK could agree to provide UK information and technical support and expertise to contribute to existing and future EU listings, and vice versa.
5. “Close cooperation and consultation on the development and adoption of measures will be in the UK and EU interest.”
6. The UK and EU could reach “an agreement for sharing and protecting classified information with the EU institutions as soon as possible”.
7. “We should not wait where we do not need to. The UK welcomes the agreement that future arrangements on CFSP… could become effective during the implementation period”.
The Sanctions and Anti-Money Laundering Act 2018 received royal assent yesterday which means it has completed its passage through Parliament and is now an Act rather than a Bill.
A copy of the Act is here, and all the documents / drafts leading up to its passage here.
The Foreign Secretary’s statement says this is “an important moment for the UK. It is the first of the bills which prepares for life after our exit from the EU to complete its passage through Parliament. Thanks to this new law, once we have left the EU, we will have full control of our own sanctions policy again…”
OFSI has published a new form to help individuals and organisations to comply with the UK financial sanctions reporting requirements that came into force on 8 August 2017 (previous blog).
The form enables reporting of frozen assets, information about a suspected designated person an sanctions breaches. It gives information about the information OFSI requires in each of those areas. See OFSI blog here.