Further to the triggering of Article 50 on 29 March 2017, and the start of the two year negotiation period ahead of the UK's departure from the EU, the three UK Government offices with responsibility for sanctions (the Foreign and Commonwealth Office, HM Treasury, and the Department for International Trade) have issued a joint consultation paper on the future legal framework for imposing and implementing financial and trade sanctions in the UK (the Consultation Paper).
The Consultation Paper sets out the Government's current plans for a proposed new legal framework, and invites responses to a number of consultation questions.
The UK Government does from time to time enact sanctions on its own initiative. For example, the Financial Restrictions (Iran) Order 2011, which restricted transfers of funds between the UK financial sector and the Iranian financial sector, was made under the auspices of the Counter-Terrorism Act 2008. However, the existing domestic legislative framework does not allow for the implementation of as broad a range of sanctions as those that are imposed by the EU, which make up the majority of sanctions currently in force in the UK.
These sanctions originate in EU legislation, which has direct civil effect in the UK, and is given criminal effect through statutory instruments made under section 2 of the European Communities Act 1972. The "Great Repeal Bill" proposed by the Government will preserve all existing EU sanctions in UK law after the 1972 Act is revoked, but will not provide the legislative powers necessary to impose, revise, or lift sanctions.
The Consultation Paper does not seek to address any foreign policy matters, such as whether the UK will continue to align itself with sanctions imposed by the EU or other international partners, though it notes that the UK will continue to work closely with its allies and partners to ensure that the application of sanctions is effective. The UK will also continue to implement any new EU sanctions legislation during the two year negotiation period.
The Consultation Paper suggests that any new legal framework will likely be formed of two parts:
- Primary legislation, which will create a structure allowing for the imposition of sanctions regimes. This legislation will include measures allowing for the imposition of asset freezes, the adoption of financial and trade restrictions (such as investment bans and export controls), and the implementation of controls in areas such as ports, shipping, airports and aircraft; and
- Secondary legislation, such as statutory instruments, which will put in place the specific measures for individual sanctions regimes, and sanctions designations. Unlike primary legislation, which requires an Act of Parliament, secondary legislation can be made by persons acting under delegated powers. This allows for the swift implementation of sanctions regimes, including the listing of asset freeze targets.
The legislative framework proposed by the Consultation Paper does not suggest that the UK intends to implement additional sanctions programmes or enhanced measures on withdrawal from the EU: the general recommendation is for the maintenance of the "status quo". There are only a few instances where the revised framework diverges from the current position. These include:
- The creation of a mechanism for sanctioned persons to challenge their UK sanction listing before the Courts. This includes a new "closed material procedure", to be used in circumstances where the Government has sanctioned an individual or entity on the basis of "sensitive material". The consultation suggests a procedure similar to that set out in the Counter-Terrorism Act 2008, where special advocates who have undergone security vetting procedures are appointed, and sensitive material is disclosed only to the presiding Judge; and
- New additional powers for law enforcement to seize funds / assets from a sanctioned person to enable those funds / assets to be frozen: for example, in circumstances where a sanctioned person brings funds / assets into the UK without the relevant licenses. The funds / assets would still be owned by the sanctioned person but would be frozen until their listing was revoked.
As with many other aspects of the UK's departure from the EU, it is difficult to predict with certainty the effect that Brexit will have on the UK's sanctions regime. However, the Consultation Paper suggests that, at least initially, the UK Government will seek to maintain the status quo as regards its powers to administer and implement sanctions.
Responses to the Consultation Paper are now open, with a request for comments to be provided by 23 June 2017.
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