Brexit: UK introduces new sanctions regime amidst heightened diplomatic tensions

The March 2019 Brexit negotiation deadline gets ever closer and, after hours of fierce debate in the UK Parliament, the European Union Withdrawal Bill was finally enacted on 26 June. The subsequent resignation of UK Secretary of State for Exiting the European Union, David Davis, is set to make talks all the more fraught. Nevertheless, the passing of the Sanctions and Anti-Money Laundering Bill on 23 May is likely to have a more immediate impact on the City of London as the UK faces international diplomatic pressure to adopt a more combative approach, particularly towards Russia.

The new Act will allow the UK to establish an autonomous sanctions regime once it leaves the EU. But it comes at a fraught time in international relations as the US steps up its own sanctions. First, against Russia after the country allegedly meddled in the 2016 US presidential election. And, second, against Iran, following President Trump’s decision to pull out of the Joint Comprehensive Plan of Action on Iran’s nuclear activities.

‘For the first time at a Brexit conference, the lawyers will not be bleating, “Oh, we don’t know what the law will be after we leave the EU, nothing is decided”,’ says Maya Lester QC, a barrister at Brick Court Chambers, speaking at a recent discussion hosted by her chambers. ‘In the case of sanctions we do know what the law will be, because it has been laid down in the brand new Sanctions and Anti-Money Laundering Act.’

“Acting collectively, you share the burdens of any impact on trade and that’s obviously the disincentive of taking unilateral action as it has a negative impact on your own companies

Rae Lindsay
Partner, Clifford Chance; member of the IBA Legal Policy & Research Unit's economic sanctions working group

As an EU member, the UK currently operates under the EU sanctions regime and only has a limited sanctions regime of its own, which is confined to targeting terrorism and related activities. The Act ensures that once the UK leaves the EU it will have a framework in place that gives the UK government the authority to impose, amend or lift sanctions independently from the United Nations or the EU without breaching its international obligations. A specific clause – the ‘Magnitsky amendment’ – will also enable the UK to impose sanctions on people who commit gross human rights violations.

Although lawyers may be clearer now on the legal framework for sanctions post-Brexit, there are still many questions as to whether the UK will adopt a more aggressive approach once it no longer requires the consent of 27 other EU member states to impose sanctions.

Harold Hongju Koh was a legal adviser to the US Department of State under the Obama Administration. He used an apt sporting analogy for the contrasting European and US approaches to sanctions.

‘When Europeans talk about football, they think team coordination and technical finesse; when Americans talk about football, they think of crushing their opponent. The question is: what kind of football are you going to play?’

David Mortlock is Chair of Wilkie Farr & Gallagher’s Global Trade & Investment Group in Washington. ‘The UK and the US are much more likely to act in tandem on more aggressive measures in future,’ he says.

Kimberly Prost, former UN Ombudsperson 

Miriam Gonzalez, Co-Chair of Dechert’s International Trade and Government Regulation Practice suggests there are still a lot of questions and it’s uncertain what the impact will be on British Overseas Territories.

Rae Lindsay, a partner at Clifford Chance, is a member of the working group for the IBA's Legal Policy & Research Unit project on economic sanctions. ‘The UK has always been quite a strong proponent of the use of sanctions and has been one of the advocates within the EU for particular sanctions,’ she says. ‘Acting collectively, you share the burdens of any impact on trade and that’s obviously the disincentive of taking unilateral action as it has a negative impact on your own companies and businesses and economy in some way. Generally speaking, I think the UK government has indicated they would hope to align with EU positions. The government has all the toolkit to do it, but whether they will actually act more independently remains to be seen.’

As a member of the UN, the UK will still be obliged to implement sanctions imposed by the UN Security Council. Kimberly Prost, former Ombudsperson for the UN Security Council Al-Qaeda Sanctions Committee and incumbent judge on the International Criminal Court, queries how the issue of fair process will be guaranteed and implemented under the new UK sanctions regime. ‘The policy clearly is that if you are listed through the UN and the Security Council then any fair process or remedy has to come at the international level,’ she tells Global Insight. ‘I’m hopeful that the UK will become advocates for the extension of the Ombudsperson mechanism and I’m hoping that it will be about the need for every restrictive measure to be accompanied by a fair process.’ As for the EU, former MI6 Chief Sir John Sawers expresses concern that the ‘salience’ of the EU sanctions regime could be reduced in the absence of the UK’s intelligence-gathering capabilities and political influence. 

‘The UK plays a huge role in specific parts of policy-making, including the fact that the UK is one of the main providers of intelligence that you can disclose in terms of a judicial process,’ Manuel Lafont Rapnouil, Senior Policy Fellow at the European Council on Foreign Relations, told Global Insight. ‘In these cases you really need some kind of open-source intelligence and the UK has really invested in this area a lot. There are a lot of things that the EU will need to do on their own in order to continue with their own sanctions policy.’