Last month our sanctions blog looked at  cryptocurrency-based sanctions evasion techniques and how North Korea exploits these. This month we turn our focus to the future of UK sanctions and what this may mean for UK/EU sanctions alignment.

Introduction 

The UK has left the EU and is currently in a transition period during which it will still adhere to EU sanctions. This places the UK in a unique position where it has reduced influence on EU sanctions developments but has a duty to implement them.

The transition period completes on 31 December 2020, at which point the UK will be fully in control of its own sanctions programme. However, the future of the UK sanctions direction is likely to be influenced by the close collaboration and historic ties with nations such as France, the wider EU and obligations such as the UK-USA intelligence sharing agreement.

The survey

A survey conducted by the author with financial services and legal sanctions practitioners posed two questions around UK/EU alignment, both during the transition period and what this may look like post-completion.

The survey generated comments that generally indicated a strong belief of alignment during the transition period, with the starting point of full alignment and the short transition period being key drivers for this (figure 1).

Some participants mentioned the UK alignment with France and Germany on Iran and the Joint Comprehensive Plan of Action (JCPOA), along with support for the EU blocking regulations and Instex, as areas where the UK had showed solidarity with Europe despite the low trade volumes between the UK and Iran, and said that this was likely to influence future UK/EU alignment.

When the question was directed at the post-transition period alignment, the responses moved towards a belief of less alignment (figure 2).

There is an expectation for the UK to increase its own sanctions within the areas of national security and terrorist sanctions, as well as implementing a Magnitsky-style human rights sanctions programme.

It was also thought that there may be instances where the UK will ?push back on sanctions from the EU that do not meet the UK foreign policy goals? and that while the UK will initially transpose all EU sanctions, one of the participants highlighted that ?not all of the targets on the lists are guaranteed to be included?.

The new UK general licences were highlighted as another potential area for change and divergence as these will ?introduce more flexible licensing than the EU [has], so this may lead to some changes?.  However, this may then complicate trade with an EU or US nexus as UK-licenced activities may not carry a corresponding EU or US licence.

The survey highlighted the United Nations Security Council (UNSC), the G7, G20, the Commonwealth and the EU as areas where the UK is expected to use its influence to ensure that sanctions are imposed at a wider level.

Finally, there were also concerns that without the UK, EU sanctions against Russia may soften as we have seen Italy and Austria amongst those calling for easing of sanctions. This would however need consideration of the political pressure from the US for a US/EU alignment on Russia sanctions.

Conclusion 

While London is clearly a major financial centre, sterling does not have the same global influence as the dollar or the euro. As a result, autonomous UK sanctions are unlikely to have the same impact as those of the US or the EU. The UK is more likely to enter into partnership with other nations or blocs such as the G7,or join with wider non-coordinated programmes such as the Magnitsky-style sanctions that the likes of the US and Canada have led on.

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The next blog, by Gloria Perez-Torres from BDO, will look into the Magnitsky sanctions that are currently in place and consider what the UK Global Human Rights (GHR) sanctions programme may look like.