The Sanctions and Anti-Money Laundering Bill (the Bill) passed its second reading in the House of Commons this week and will now be considered by a Public Bill Committee.
As we outlined in our previous blog, many sanctions regimes (whether UN or EU) apply in UK law as a result of EU membership. Without the powers necessary for updating, amending or lifting sanctions post-Brexit, the UK would be in breach of its international obligations and collaboration with European and international partners to tackle the shared challenges targeted by sanctions would be hampered.
UK sanctions regimes
The Bill sets out a statutory framework for imposing and enforcing sanctions post-Brexit, providing the UK Government with broad powers to make regulations creating six distinct types of sanctions, including
- financial sanctions (such as asset freezes);
- trade sanctions (such as export bans); and
- aircraft and shipping sanctions controlling movements of certain vehicles in UK waters or airspace.
The House of Lords has expressed concerns with a number of clauses in the Bill, including whether it is “constitutionally inappropriate” for Ministers to have such wide delegated powers under the Bill without sufficient safeguards and adequate parliamentary scrutiny.
Who can sanctions apply to?
Sanctions regulations made under the Bill will be able to impose prohibitions or requirements on any person in the UK or any UK person anywhere in the world.
Under the Bill, individuals, groups and organisations (including corporate entities) can be made “designated persons” and so subject to sanctions, which then impacts conduct of others (such as the financial sector) in dealing with those designated persons. The UK Government will be able to designate such persons by name or by description, in either case where the Government (1) has reasonable grounds to suspect the person is an “involved person” (i.e. someone involved in, or connected to, an activity set out in the regulations establishing a particular sanctions regime) and (2) it is “appropriate” to designate that person, having regard to the purpose of the sanctions regime.
The House of Lords has questioned whether the power to designate persons by description as opposed to name would be sufficient to allow persons to regulate their conduct accordingly and so comply with fundamental requirements of fairness and legal certainty. The Bill was amended in the Lords to provide that the power to designate by description can only be exercised when it is not practicable for the Government to identify by name all the persons falling within the description, and the description is sufficiently precise that a reasonable person would know whether any person falls within it. The Bill provides that sanctions regulations conferring the power to make designations must also oblige the Government, if it makes, varies or revokes a designation, to “without delay” take reasonably practicable steps to inform the designated person(s) in question.
Removing a designation
A designation can be varied or revoked at any time, and must be revoked if the Government considers that the circumstances that allowed for the designation do not (or no longer) exist.
As it stands, the Bill will oblige the UK Government to periodically review and reconsider every designation made under a set of regulations. This review must take place within three years of the sanctions regulations in question being made and then each three year period thereafter. The House of Lords had pressed for a review period shorter than three years.
A designation can be challenged by the designated person themselves in two ways:
- The designated person can request “at any time while a relevant designation has effect” that the UK Government vary or revoke the designation – this could be, for example, where the person believes they have been misidentified. Where a request is made the Government must decide whether to vary or revoke the designation or leave it unamended. As the Bill stands, a designated person can only make a subsequent further request in circumstances where there is a “significant matter which has not previously been considered” by the Government.
- The designated person can apply to have a decision made by the UK Government set aside by the court, other than a decision in respect of which the relevant person could request a review. This includes any decision made following a request to vary or revoke a designation, or a decision made following a periodic review. In determining whether the decision should be set aside, the Bill makes clear that “the court must apply the principles applicable on an application for judicial review”. A challenge could therefore claim that the Government had acted illegally or irrationally in designating an individual, or allege some procedural impropriety, but could not simply ask the court to substitute its own judgment for the Government’s.
Alignment with EU and others
The Bill’s key aims are consistency in allowing the UK to continue implementing and maintaining EU sanctions regimes, and flexibility for the UK in both policy and implementation (for example, providing for more or fewer exceptions to sanctions than the EU regime allows).
As mentioned in the Bill’s Explanatory Notes, sanctions as a tool of foreign policy are restrictive measures designed to be temporary and “to coerce a change in behaviour, to constrain behaviour, or to communicate a clear political message to other countries or persons”. By their nature sanctions are more effective when they are applied by many countries and partners acting together. EU sanctions regimes, whether autonomous or building upon UN sanctions, comprise around 75% of all sanctions currently implemented by the UK. While the current expectation is that the UK will not diverge from EU policy, and will continue to work with the EU to achieve a co-ordinated approach, sanctions regimes imposed by the UK in future may well diverge from the EU’s. Businesses and other organisations dealing with countries, organisations and individuals at risk of sanctions will need to stay aware of such differences to ensure they do not fall foul of the law.
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On February 23, 2018