Insight

UK sanctions – under new management

Written by David Povey & UK Finance on Tuesday January 26, 2021

The UK has completed the process of leaving the European Union. This article is a follow up to a previous ICA insight piece where the complicated relationship between sanctions and the UK’s transition from the EU was assessed. Here we will look at the reality of post-transition UK sanctions and the new sanctions landscape in the UK.

The UK transition period concluded at 23:00 on 31 December 2020. This signalled the moment when the UK moved into a fully autonomous sanctions programme. The Libya (Sanctions) (EU Exit) Regulations 2020[1] was also published at 23:00 on 31 December. While this wouldn’t be laid before parliament until 4 January 2021, effectively this piece of legislation completed the immediate requirements of the UK sanctions programme.

One of the consequences of the transition period was that the UK was legally bound to implement EU sanctions throughout 2020, despite not being part of the decision-making process to issue them. This too came to an end on 31 December, ending the unique position in which the UK found itself during the transition period.

The end of the transition period marked the start of the UK’s position as a separate sanctions actor for international commerce and finance, as adherence to UK sanctions is not just confined to those based in or resident in the UK.

The extra-territoriality of the UK sanctions programme is due to the applicability to any UK national or a body incorporated or constituted under the law of any part of the UK, irrespective of their global location, as set out in s.21 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).[2] This is not an unusual approach and mirrors other sanctions programmes around the world.

Attention is now focused on the alignment and divergence between the autonomous UK sanctions programme and other key sanctions such as those imposed by the US or the EU. Further complicating matters, the US and EU programmes do not fully align with each other and contain some areas of conflict which can be problematic to fully comply with.

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Divergence between UK and EU approaches

In 2019, sanctions practitioners were asked for their thoughts on the alignment of UK/EU sanctions[3], both during the transition period and afterwards. The responses were weighted towards the UK and EU maintaining alignment during the transition period, something which was emphasised by the requirements for the UK to enact EU sanctions during the period.

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Figure 1: UK/EU alignment during withdrawal period: Weighted 6.82

The UK Global Human Rights sanctions enacted in July 2020 were the only autonomous regime that the UK set up during the transition period. With this regime in place in the UK, but with the EU lacking a similar programme, the first indications of a UK/EU divergence became visible.

Later in the year, the EU introduced the legal framework for its own human rights sanctions regime.^[4] Such sanctions could offer the EU and the UK the opportunity to develop an ambitious common understanding and a coordinated approach to sanctioning human rights abusers, alongside other countries with similar regimes.

Although no designations have been made yet, the EU has confirmed that it will not replace country-specific regimes covering human rights abuses. This means that EU sanctions against Belarus, for instance, will not form part of this new regime. The UK used its own global human rights sanctions regime to respond to human rights abuses in Belarus when the European Council failed to achieve unanimity in September.

On the EU side, designations will be made on a proposal from a member state or from the High Representative for Foreign Affairs and Security Policy. It is unclear whether any proposals are currently being looked at (representatives stated only that no proposal has been put forward by member states specifically on potential sanctions against the Chinese government for its treatment of the Uyghur population).

Following 31 December 2020 there have emerged other areas where the divergence between the EU and UK has become clear.

The UK spent over two years laying out Statutory Instruments (SI) which would allow it to manage its own sanctions. As part of that process, there was an opportunity to enhance and clarify the legislation, something which we have already seen in four areas.

The EU manages three sets of sanctions for Ukraine. The UK approach was to enact a newly titled Russia SI which encapsulated two of the EU Ukraine programmes. The third EU Ukraine sanctions restrictions were moved under the new UK misappropriation sanctions, which also encapsulates the EU Tunisia and Egypt sanctions.

This shift to more thematic-styled sanctions, rather than multiple geographic programmes that cover the same restrictions, gives the UK more flexibility when it comes to adding new individuals or entities.

The third area where the UK has diverted from the EU approach is with sanctions related to unauthorised drilling activities in the eastern Mediterranean. At present, these replace the EU ‘restrictive measures in view of Turkey’s unauthorised drilling activities in the Eastern Mediterranean’ (CSFP) 2019/1894 regulation for the UK, but they are a thematic rather than geographic-based set of restrictions.

Finally, we have also seen areas where the legislation is broadly comparable, but where the UK has not carried over all (or any) of the listings which it held as an EU member. There are many listings which are currently not applicable in the UK, with the most recent EU Belarus additions forming a significant area where the UK currently does not align with the EU.

Was this expected?

When sanctions practitioners were questioned about their view on the post-transition period sanctions alignment[5], there was a shift in expectations, with those certain of alignment dropping from over ten per cent to under one per cent.

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Figure 2 UK/EU alignment after withdrawal period: Weighted 5.50

This belief in a lack of full alignment has been borne out and, at the time of writing, the UK does not have any sanctions listings under either the misappropriation or the unauthorised drilling sanctions. These omissions, combined with the UK Global Human Rights sanctions and the lack of parity on the Belarus listings, show there is already a divergence between the UK and the EU.

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The UK was also seen as one of the more ‘enthusiastic’ EU members when it came to proposing sanctions. There is little doubt that the EU will be different without the UK as a member; the question is just how different it will be and if either side feels better or worse off for the change.

The UK now finds itself in the position of having an extremely agile and autonomous sanctions programme, something which will allow it to respond quickly with new listings under existing programmes. This may mean that the UK becomes divergent from the EU either permanently or, as with Global Human Rights, on a more temporary basis.

Global partnership is still important

The UK requires global partnerships and alignment in order to maximise the effectiveness and impact of sanctions. Pre-transition, this was achieved by near 100 per cent alignment with the EU, which gave greater weight to the sanctions restrictions as 28 countries were immediately aligned and other ‘third countries’, such as Norway, Switzerland and others, regularly align their sanctions with those of the EU.

Outside of the EU, the UK will have to align with those countries with which it shares common foreign policy goals. An early indication of this is with the UK Global Human Rights, where the UK listings are in strong alignment with those of the US and Canada. In September 2020 after the UK, the US and Canada made statements on election rigging in Belarus,[6] Alexander Lukashenko and others were added to the Global Human Rights sanctions in the UK, while the US and Canada added him to their Belarus sanctions.

More recently, we have seen continued alignment between the UK and Canada, with both countries announcing human rights measures[7] concerning the Xinjiang region in China. It will be interesting to see how these alignments continue when considering global events such as the new Biden administration and any other future changes of world leaders.

The road ahead

As the UK starts 2021 with its own autonomous sanctions framework, all eyes are on which direction this may take.

Early distancing from the EU regime, albeit in a minor way, shows that the UK’s regime is not going to be fully aligned with the EU’s. Recent announcements by the UK alongside the US and Canada indicate that perhaps the value of the ‘five eyes’ intelligence sharing in the sanctions space allows a more coordinated set of restrictions. The deep trust of sharing intelligence at the level of the five eyes agreement highlights the closer alignment of foreign policy goals, another important aspect for the implementation of sanctions.

While it is easy to see alignment opportunities with the US and Canada, the UK also holds close ties with European nations such as France, a fellow United Nations Security Council permanent member. This relationship should not be underestimated, and the Anglo-French history and policy alignment will be a strong influence on the future of UK-EU sanctions programmes.

[1] Legislation.gov.uk, ‘The Libya (Sanctions) (EU Exit) Regulations 2020’: https://www.legislation.gov.uk/uksi/2020/1665/introduction/made – accessed January 2021

[2] Legislation.gov.uk, ‘Sanctions and Anti-Money Laundering Act 2018, s.21 extra-territorial application’: https://www.legislation.gov.uk/ukpga/2018/13/section/21/enacted – accessed January 2021

[3] Neil Whiley, ‘UK-EU Sanctions alignment: Survey feedback’, UK Finance, 3 March 2020: https://www.ukfinance.org.uk/news-and-insight/blogs/uk-eu-sanctions-alignment-survey-feedback – accessed January 2021

[4] European Council, ‘EU adopts a global human rights sanctions regime’, 7 December 2020: https://www.consilium.europa.eu/en/press/press-releases/2020/12/07/eu-adopts-a-global-human-rights-sanctions-regime/ – accessed January 2021

[5] Neil Whiley, ‘UK-EU Sanctions alignment: Survey feedback’

[6]Arshad Mohammed, Matt Spetalnick and Robin Emmott, ‘Exclusive: U.S., UK, Canada plan sanctions on Belarusians, perhaps Friday, Reuters, 24 September 2020: https://www.reuters.com/article/us-belarus-election-sanctions-exclusive-idUSKCN26F2A5 – accessed January 2021

[7] Gov.uk, ‘Human rights violations in Xinjiang and the government’s response: Foreign Secretary’s statement’, 12 January 2021: https://www.gov.uk/government/speeches/foreign-secretary-on-the-situation-in-xinjiang-and-the-governments-response and Government of Canada, ‘Canada announces new measures to address human rights abuses in Xinjiang, China’, 12 January 2021: Canada announces new measures to address human rights abuses in Xinjiang, China - Canada.ca – accessed January 2021

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