Reed Smith Client Alerts

Until the end of the Transition Period (currently 31 December 2020), during which the UK will be bound by existing EU sanctions decisions, the UK may, in exceptional circumstances, exercise discretion and decide to diverge from any new EU sanctions regime. Companies should update their sanctions procedures and sanctions clauses to account for the developing UK sanctions regime.

Autoren: Brett Hillis Ray-Shio Ho Alexander Brandt

Position up to “exit day”

As an EU member, the UK participated in the EU’s Common Foreign and Security Policy (CFSP), which included the EU’s sanctions regime. Over the past few years, the EU has imposed a range of international sanctions, either implementing UN decisions or acting autonomously (e.g., in relation to Ukraine and Crimea, where Russia’s status as a permanent member of the UN Security Council would have prevented any UN action). Changes to the EU’s foreign and security policy require unanimity and in controversial cases (such as Ukraine) it can be argued this limited the EU’s ability to respond to changing circumstances.

EU regulations and decisions establishing sanctions had direct effect in the UK pursuant to the European Communities Act 1972 (“1972 Act”). In addition, the UK established criminal sanctions for non-compliance with EU sanctions by making UK regulations under section 2(2) of the 1972 Act.

The Sanctions and Anti-Money Laundering Act 2018 (“2018 Act”) introduced UK domestic powers for Ministers to make sanctions regulations. 

Once the Transition Period has ended, the 2018 Act is expected to be the main legal authority for the promulgation of sanctions regulations. Since 2018, several regulations have been introduced under the 2018 Act (e.g., The Russia (Sanctions) (EU Exit) Regulations 2019) in anticipation of the end of the Transition Period. The sanctions-related restrictive measures put in place by these regulations, which are largely similar to the current EU sanctions regime, come into force at 11 p.m. on 31 December 2020.1

Transition Period

Notwithstanding the above, section 1A of the European Union (Withdrawal Agreement) Act 2020 (Withdrawal Act), which received royal assent on 23 January 2020, states that despite the repeal of the 1972 Act on “exit day”:

“[t]he European Communities Act 1972, as it has effect in domestic law or the law of a relevant territory immediately before exit day, continues to have effect in domestic law… on and after exit day so far as provided by subsections (3) to (5).” 

The 1972 Act continues to have effect until 11 p.m. on 31 December 2020 unless otherwise stated by the UK government2.

Equally, under the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community passed on 19 October 2019 (Withdrawal Agreement),3 the UK has entered into a transition period, which will continue until 31 December 2020,4 with the possibility of extension for up to two further years.5 Article 127 of the Withdrawal Agreement envisages that EU law will continue to apply until the end of the Transition Period, and references to Member States in the EU sanctions regime shall include the UK.6 The Withdrawal Agreement was ratified on 29 January 2020.