On June 23, 2016, the United Kingdom voted to exit the European Union in a historic referendum. Following the referendum, legal issues relating to export control, sanctions programmes, and preferential trade have arisen for consideration.
Impact on Export Controls The United Kingdom is currently a member in its own right of several international agreements, including the Wassenaar Arrangement, the Missile Technology Control Regime, the Nuclear Suppliers Group, and the Australia Group. The Wassenaar Arrangement is a voluntary multilateral export control regime in which 41 countries are a part. This arrangement puts forth the List of Dual-Use Goods and Technologies and Munitions List, for which participating states must implement regulations to prevent the unauthorized export or re-export of controlled items. Being a member of the Wassenaar Arrangement requires that member states adhere to certain non-proliferation policies and maintain fully effective export controls. The United Kingdom’s membership in these agreements is not dependent on its membership of the European Union, which will result in no immediate changes to its export regime, particularly for military goods.
Following the United Kingdom’s exit from the European Union, however, the manner in which the United Kingdom and European Union transfer dual-use items may be impacted. Currently, dual-use items may not leave European Union territory without an individual or general export authorization, but a general export license permits the transfer of these items between European Union nations. Depending on the outcome between the United Kingdom and European Union, companies may need to obtain export authorization to send certain dual-use items between the European Union and the United Kingdom.
U.S. export controls related to the United Kingdom will remain largely unaffected by the United Kingdom’s exit from the European Union. The United States tends to treat and recognize the United Kingdom and individual EU Member States as separate sovereign nations, not as part of the greater EU. Entities in these countries will still be required to ensure that necessary authorizations are in place for re-exports of U.S.-origin items or technical data controlled by the Export Administration Regulations (EAR), for dual-use items; or the International Traffic in Arms Regulations (ITAR), for defense articles.
Under the EAR, the United Kingdom will continue to be recognized in “Country Group A:5,” which is subject to some of the least restrictive export controls. Certain license exceptions, such as Strategic Trade Authorization (STA), will continue to be available for certain exports, re-exports, and transfers.
Impact on Sanctions Programs Nothing will change until the United Kingdom formally leaves the European Union. According to one report,1 after Brexit, the House of Commons Foreign Affairs Committee has said the government may adopt a “policy mirroring approach” to align itself to EU sanctions, similar to Switzerland and Norway, or grant more authority to enforcement agencies like the Office of Financial Sanctions Implementation (“OFSI”).
There are currently three types of European Union sanctions:
- Those agreed at the United Nations Security Council (UNSC), which all Member States are required to adopt. After Brexit, the United Kingdom must and will continue to implement and enforce such sanctions by virtue of its membership. These include Cote d’Ivoire and the Central African Republic.
- Those that supplement UNSC sanctions; the Iran and North Korea regimes are an example. In the case of Iran, Council Regulation (EU) No 267 of 2012 was amended to reflect the Joint Comprehensive Plan of Action (JCPOA), to which the United Kingdom is an individual subsidiary. That being so, at least initially post-Brexit, the United Kingdom will have to do what's necessary to continue to give effect to its obligations under the JCPOA.
- Autonomous European Union sanctions that are put in place in the absence of UNSC sanctions, for example, in respect of Russia. Russia wielded its veto in the UNSC to block a resolution on Ukraine. Russia and China vetoed proposed resolutions for Syria. The outcome is less certain in this context.
Preferential Trade Programs The United Kingdom’s participation in various free trade agreements will be impacted on its exit from the European Union, as the United Kingdom will no longer be a party to the approximately 58 EU-negotiated trade agreements and their preferential programs. Because the United Kingdom will have to negotiate and implement separate trade agreements, the extent to which Brexit will impact tariffs is unknown at this point. Companies may face significant tariff changes. Alternatives the United Kingdom may consider are joining the European Economic Area (like Norway), negotiating bilateral deals with the European Union, or dealing with the EU merely as a member of the World Trade Organization.
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If you have any queries about the contents of this alert or about sanctions regimes in general, please contact one of the authors, email@example.com, or your usual contact at Reed Smith.
- See WorldECR, https://www.worldecr.com/uk-to-re-assess-its-sanctions-regimes-after-brexit-vote/ accessed 30 June 2016.