Sanctions tracker – UK introduces legal services restrictions

The UK's long-awaited sanctions restricting the provision of legal services to Russia were announced on 29 June. The announcement gives a somewhat misleading impression of the law, and we summarise the new restrictions in this post.

The new measures are introduced by the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023 (the "Amending Regulations"), which amend the Russia (Sanctions) (EU Exit) Regulations 2019 (the "Russia Regulations").

The new restrictions

The new restrictions provide that a person must not directly or indirectly provide "legal advisory services" to any non UK person in relation to, or in connection with, any activity which would be prohibited by the Russia Regulations if done by a UK person or carried out within the UK.

To give an example, it is prohibited for UK persons to provide certain types of loans to persons connected with Russia. Therefore, it would be prohibited for a UK lawyer to advise a French client on a loan of this type – even if it would be lawful for the French client to make the loan because they are outside the jurisdictional scope of UK sanctions.

"Legal advisory services" are defined as the provision of legal advice to a client in non-contentious matters, involving any of the following:

• the application or interpretation of law,
• acting on behalf of a client, or providing advice on or in connection with, a commercial transaction, negotiation or any other dealing with a third party, or
• the preparation, execution or verification of a legal document.

Legal advisory services do not include any representation, advice, preparation of documents or verification of documents undertaken as part of legal representation services provided in or in anticipation of any proceedings before administrative agencies, courts or other duly constituted official tribunals, or arbitral or mediation proceedings.

Comparison with the EU regime

The UK restrictions are both wider and narrower than the parallel EU restrictions (in Article 5n(2) of Regulation 833/2014), for two main reasons:

• Firstly, the EU restrictions relate only to legal advice provided (directly or indirectly) to the Government of Russia or legal persons, entities or bodies established in Russia, whereas the UK restrictions apply to legal advisory services provided to any non-UK person. The UK restrictions are therefore considerably wider;
• Secondly, the EU restrictions apply to legal advisory services in respect of any subject matter, whereas the UK restrictions must "relate to" or be "in connection with" an activity which would be prohibited for a UK person. In this respect the EU restrictions are wider.

Both the EU and the UK include a carve-out for contentious proceedings – noting the importance of access to justice - albeit these are drafted somewhat differently. (The Belgian and French bars have nonetheless brought challenges to the EU sanctions relating to alleged infringements to fundamental rights and the principles of proportionality and legal certainty).

Exceptions

The Amending Regulations contain exemptions in respect of: (i) acts that are necessary for the official purposes of a diplomatic mission or consular post in Russia, (ii) the discharge of or compliance with UK statutory or regulatory obligations, (iii) advice as to whether an act or proposed act complies with the Regulations, and (iv) acts done prior to 29 September 2023 in satisfaction of an obligation under a contract concluded before 30 June, where notification is made to the Secretary of State.

The Amending Regulations come into force on 30 June (although, as noted above, there is a three month wind-down period in respect of prior contracts, subject to notification).

One important point to note is that the exception for 'compliance advice' (point (iii) above) on its face relates only to compliance with the UK Regulations, and not advice relating to compliance with US or EU sanctions (or any other law). At first blush, this would appear to restrict UK lawyers/firms from assisting (for example) EU clients to comply with EU sanctions regimes. This would seem a bizarre outcome from a restriction which is being badged by the Government as a measure whereby "wealthy individuals and big businesses linked to the Russian regime will be further restricted from accessing UK legal expertise to carry out deals that could bolster the nation’s war chest". It is to be hoped that this and other issues with the drafting of the new restrictions will be addressed during the wind-down period.

The introduction of these restrictions also has implications for the interpretation of the anti-circumvention prohibitions in the UK Regulation more broadly, which we will discuss in a separate update.