The UK Government announces consultation on sanctions post-Brexit

The two year process of the UK's exit from the EU formally began on 29 March 2017 with notice being given under Article 50 of the Treaty on the European Union of the UK's intention to leave the EU. One of the many legal issues to be determined will be the way in which the UK approaches its international sanctions framework post-Brexit, since the vast majority of the sanctions currently in force in the UK have directly applicable EU Regulations as their basis.

The Government has recently launched a public consultation into the question of the legal powers needed to impose sanctions after Brexit, while a House of Lords enquiry into UK sanctions policy is also underway. What do these two processes tell us about the UK's future sanctions regime?

Public Consultation on the legal powers needed to continue to impose and implement sanctions after Brexit

On 21 April 2017 the Foreign and Commonwealth Office, HM Treasury and the Department for International Trade launched a public consultation in the form of a White Paper, seeking views on the legal powers needed to continue to be able to impose and implement sanctions upon the UK’s withdrawal from the European Union.

Currently the UK, like other EU Member States, adopts UN and EU sanctions primarily through EU legislation which applies in the UK through section 2 of the European Communities Act 1972. The UK has limited domestic powers to impose certain types of sanctions, but these are not sufficient to replicate the full range of restrictive measures currently imposed at international level. The United Nations Act 1946 provides a power to implement decisions of the UN Security Council by domestic Order in Council, but there is no general power to impose sanctions of the type currently imposed by the EU where the UN has not acted. Therefore, when the UK withdraws from the EU it will need new legal powers to enable the country to impose autonomous UK sanctions in coordination with its allies.

The consultation is focused on the legislation that needs to be introduced, the form of that legislation and its content. The Government identifies that it is important that the legislation contains provision for specific sanction regimes (including, for example, regimes targeting both particular countries or activity such as terrorism) and that it is able to suspend sanctions without entirely lifting them to respond to changes of behaviour, and to lift sanctions regimes as rapidly as possible once a desired outcome is achieved. As with the current regimes, the Government identifies the need for clear enforcement powers and notification obligations placed on third parties, together with a challenge and review mechanism. In line with current practice, the consultation suggests that UK sanctions would continue to apply to persons in the UK and those subject to the UK’s jurisdiction.

The proposed framework would consist of over-arching primary legislation containing powers to impose sanctions regimes and specific processes (such as review, notification, challenge and enforcement), but with specific sanctions regimes and sanctions designations set out in secondary legislation to enable a rapid and flexible response to international crises.

While setting out the Government's current outline proposals, the consultation seeks feedback from all stakeholders to help inform the design of the UK’s future sanctions legal framework. The consultation can be found here and closes on 23 June.

The House of Lords Inquiry into UK sanctions policy after Brexit

The new consultation is in addition to an ongoing House of Lords EU External Affairs Sub-committee inquiry into UK sanctions policy after Brexit. The inquiry will explore:

• the advantages and disadvantages of future co-operation between the UK and EU on sanctions policy;

• how such co-operation might take place;

• examples of EU co-ordination with non-Member States on sanctions (for example, it is anticipated that the models adopted by Norway and Switzerland may be under consideration for the UK);

• the current sanctions regime and how this will be transposed into UK law, including through the Great Repeal Bill; and

• the impact of a separate UK sanctions regime on the UK's ability to achieve its foreign policy goals.

It may be that the process of the inquiry is delayed while the consultation is ongoing, but as the outcome of that inquiry is made public we will report in further details on its findings. One particular concern from the business perspective will be to ensure so far as possible that UK sanctions are consistent with existing international regimes, to avoid the creation of an additional regulatory layer for businesses operating across borders.

For more information, please contact Andrew Cannon, Partner, Susannah Cogman, Partner, Elizabeth Head, Senior Associate or your usual Herbert Smith Freehills contact.