The UK’s post-Brexit sanctions policy towards Russia
Post-Brexit, the UK will no longer be constrained by the EU’s consensus-based decision-making and can re-calibrate its response in line with its domestic interests and with the pace of political urgency.
As Brexit looms and the UK prepares to officially leave the EU, London will enact its own sanctions policy. Given the tumultuous exit negotiations, the post-Brexit sanctions policy has been one of the few areas that was planned well ahead. From the very beginning, the autonomous sanctions policy has been considered an indispensable part of the UK’s foreign policy, vital for upholding a rules-based international order. Since May 2018, the Government passed the Sanctions and Anti-Money Laundering Act (SAMLA), aimed to ensure an uninterrupted implementation and enforcement of sanctions. Although the UK has repeatedly emphasised its desire to closely cooperate with the EU on the matter, post-Brexit sanctions will inevitably diverge from the EU’s. No longer subject to the EU’s required unanimity, London can design unilateral sanctions that are undiluted by the member states’ different national interests.
The SAMLA introduces a number of new elements that shift the UK’s sanctions policy closer to the US’ sanctions model. The UK has used this opportunity to address weaknesses in the EU’s current sanctions policy and to re-shape the policy according to its new priorities. First, the listing criteria for adding individuals and entities will be strengthened. Given the dramatic increase in legal challenges at the Court of Justice of the European Union in the last few years , the UK will bolster the standard of proof by reviewing the evidentiary basis. Instead of the EU’s threshold of “reasonable suspicion”, the UK will apply the test of “reasonable grounds for suspicion” that an actor was involved in the sanctioned activity. This will provide more transparency and substance to the listing process, enhancing the due process. It is foreseen to conduct a periodic review of certain designations every three years. Second, the burden of judicial challenge will be shifted to the UK Courts and will inevitably lead to the proliferation of litigation cases. The SAMLA will allow the deployment of intelligence information during the cases’ hearings. In the past, the EU’s inability to disclose the confidential information often resulted in the cases’ overturn if no open-source information was available to corroborate. In 2015, the General Court’s Rules of Procedure introduced a ‘closed-material procedure’ allowing the use of sensitive information, but the UK remained dissatisfied with the safeguards of the mechanism and in practice it has been rarely used. Third, the UK’s post-Brexit sanctions policy plans to issue more guidance about regulations and enhanced Frequently Asked Questions. This adjustment is akin to the US’ approach, whereby OFAC often resorts to these instruments. Finally, following the US’ suit, a broader application of licensing powers is anticipated. Currently, the EU sanctions regimes issues only specific licenses that authorizes a certain activity. It does not envision general licenses which allow multiple actors to carry out specified activities, thus maximizing the effectiveness of sanctions. The introduction of general licenses makes the sanctions policy more flexible for the private sector and less uncertain for financial institutions.
How will the UK’s post-Brexit sanctions policy affect Russia-/Ukraine-related sanctions? The UK’s departure from the EU will weaken the core of member states that supports sanctions on Russia. Together with Germany and France, the UK has played a crucial role in forging sanctions coalitions and maintaining sanctions unanimity at times when reaching consensus was at risk. As one of the strongest advocates of Russia sanctions, the UK provided “a significant part of the political will” to keep the pressure on Russia. On the other hand, unconstrained by the required unanimity, the UK can move away from the currently maintained status quo on Russian sanctions. Following the Salisbury nerve agent attack against Sergei and Yulia Skripal in 2018, London sought to expand sanctions, but limited its response to diplomatic measures. The introduction of new measures was handicapped at the EU level, as other member states experienced a sanctions fatigue. With its autonomous sanctions, the UK can introduce measures with strong points of leverage, in particular in the financial sector given its place in the international financial markets. One of such examples where the UK’s sanctions policy has already started to diverge is the introduction of the Magnitsky-style sanctions. Earlier this year, the UK Government announced its plan to activate the Magnitsky Act after Brexit and freeze UK-based assets of foreign citizens, including Russian individuals, deemed responsible for gross violations of human rights. In doing so, the UK will follow the footsteps of the US and Canada which have their own versions of the Magnitsky Act.
The UK’s departure from the EU may affect the quality of listings and can result in technical differences in the letter of the law. London has traditionally provided intelligence- and information-sharing to underpin listings and has been responsible for approximately 80 per cent of the EU’s sanctions overall. Given that no clear coordination mechanism between London and Brussels is in place, the EU’s new listings might not correspond to the same standards of quality and robustness as before. With the UK’s exit, there is a loophole emerging between the EU’s and UK’s sectoral sanctions. Under the UK’s new legislation, the prohibitions on new debt issuing do not extend to the subsidiaries of the targeted entities incorporated or established in the UK. This differs from EU’s sanctions regimes which covers the subsidiaries owned or controlled anywhere in the EU.
The UK’s drive to enhance the evidentiary basis and to introduce a stricter standard of proof for the listings may also impact the Ukraine misappropriation sanctions. Since 2014, the sanctioned Ukrainian kleptocrats have been quite successful in challenging the legal and political basis for their designations in the EU Courts. Out of 22, only 12 Ukrainian individuals remain on the list. If the UK Courts are to apply a more rigorous threshold for the grounds of sanctioning, it is likely that the current evidence will not stand up to judicial scrutiny and more individuals will be delisted.
This article was inspired by a lecture given by Maya Lester, QC (Brick Court Chambers) on the impact of Brexit on the UK in Geneva earlier this year.
Dr. Maria Shagina is a postdoctoral fellow at the Center for Eastern European Studies at the University of Zurich. She specialises in international sanctions and post-Soviet studies. She is affiliated with the Geneva International Sanctions Network at the Graduate Institute. Her publications have appeared in the European Council on Foreign Relations, Foreign Policy Research Institute, Atlantic Council, New Eastern Europe, and Global Risk Insights.