UK Expands Russia Sanctions Regime in Anticipation of Ukraine Invasion

The UK government has widened the scope of its Russia sanctions regulations in anticipation of a Russian invasion of Ukraine. The amendments to the existing Russia sanctions regulations significantly broaden the definition of “involved persons” to increase the number of persons who could be so designated and be made subject to sanctions.

The Russian (Sanctions) (EU Exit) (Amendment) Regulations 2022 (the “Amended Regulation”) came into force on 10 February 2022 and provides the UK government with the power to designate both individual and corporates, without delay, “in the event of further Russian aggressive action towards Ukraine.”[1]

The UK’s existing regulation can be traced back to 2014, when the European Union (EU) first imposed economic sanctions following the Russian annexation of Crimea. Upon departure from the EU on 31 December 2020, the UK implemented regulations with substantially the same effect. The Amended Regulation, however, broadens the UK government’s authority in a way that signals it will be prepared to take independent action in response to further Russian aggression in relation to Ukraine.

The Amended Regulation provides that, as well as being able to designate any individual or entity that is or has been involved in destabilising Ukraine or undermining or threatening its territorial integrity, sovereignty or independence (as was the case under the pre-existing legislation), the UK government can now also designate those involved in “obtaining a benefit from or supporting the Government of Russia”.

The position continues to be that those who are responsible for, engage in, support or promote “any policy or action” that destabilises Ukraine or undermines or threatens its territorial integrity, sovereignty or independence may be sanctioned, together with those who provide or make available financial services, funds or economic resources for destabilising activities, or to those who are responsible for such destabilising policies or actions. In expanding the category of persons to include those involved in obtaining a benefit from or supporting the Government of Russia, sanctions can now also be imposed on those carrying on business as an affiliate of, or of economic significance to, the Government of Russia. Notably, this includes the owners, directors and trustees of such entities. The Amended Regulation does not define “economic significance”, but it gives the Secretary of State power to consider a range of evidence to assess whether there are reasonable grounds to suspect that a person falls under this category.

In addition, businesses operating in sectors of “strategic significance” to the Government of Russia can now also be subject to sanctions. Such sectors include construction, defence, electronics, energy, extractives, financial services, information, communications and digital technology, and transport.

The ‘Government of Russia’ in the Amended Regulation is defined widely, as:

• The Presidency of the Russian Federation;
• Public bodies and agencies subordinate to the President of the Russian Federation (including the Administration of the President of the Russian Federation);
• The Chairman of the Government of the Russian Federation and the deputies of the Chairman of the Government;
• Any Ministry of the Russian Federation;
• Any other public body or agency of the Government of the Russian Federation (including the armed forces and law-enforcement organs of the Russian Federation); or
• The Central Bank of the Russian Federation.

Whilst the Amended Regulation does not designate specific individuals or entities automatically, it does provide the UK government with the power to do so, should Russia persist in its military threats against Ukraine. The Foreign, Commonwealth and Development Office will now be able to pressure and restrict the activities of those who it considers bear the greatest responsibility for Russia’s actions and can influence change. Given the breadth of the sectors of strategic significance, companies with exposure to Russia should be wary of the potential impact of the Amended Regulation on their operations, should designations be made under the new legislation. It will remain to be seen how soon and how many designations under the Amended Regulation will occur, or whether they will ultimately have any impact at all. Nonetheless, it is clear that the UK has taken this independent action to ready itself for a Russian invasion of Ukraine.

Emily Duffy, a trainee solicitor in our London office, contributed to the writing of this alert.

[1] Explanatory Memorandum to The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 No. 123, page 1.