New EU sanctions framework under the Russia regime and entry into force of UK framework for enforcement of trade, aircraft and shipping sanctions
Yesterday, on 8 October 2024, the EU Council established a new framework under the Russia sanctions regime in response to hybrid threats from Russia. Tomorrow, 10 October 2024, will see the entry into force of the UK's new framework for enforcement of trade, aircraft and shipping sanctions.
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In this alert, we consider each of these two frameworks in turn.
EU framework in response to hybrid threats
The background for the new framework is a broad range of activities characterised as hybrid threats against the EU and its member states such as cyber-attacks, information manipulation and interference campaigns, cases of arson, vandalism and sabotage, including against critical infrastructure as well as instrumentalisation of migration, disruption of satellite communications, violation of European airspace and physical attacks against individuals on the territory of the EU. The EU characterises such actions as a "broad coordinated hybrid campaign" directed to divide, destabilise and weaken the EU as stated in the press release:
"These malicious activities are part of a broad coordinated hybrid campaign directed by Russia as an attempt to divide our society, destabilise and weaken the EU and its Member States and our resilience as well as to undermine our support to Ukraine and its ability to defend itself. This will not succeed: we will act united and determined to address these activities and hold perpetrators accountable. Our support to Ukraine will remain solid and unwavering for as long as it takes."
The new framework applies in response to Russia's destabilising actions abroad and will seek to target entities and individuals engaged in actions and policies by the government of Russia which undermine the values of the EU and its member states, as well as international organisations and third countries. The framework seeks to address several categories of new threats including:
- undermining electoral processes and the functioning of democratic institutions
- threats against and sabotage of economic activities, services of public interest or critical infrastructure
- the use of coordinated disinformation, foreign information manipulation and interference (FIMI)
- malicious cyber activities, the instrumentalisation of migrants, and other destabilising activities.
We would expect the EU to publish designations under the new framework shortly, including individuals and entities which will be subject to asset freezes. In brief, this means that their assets are frozen and it will be prohibited to make funds or anything of value available, directly or indirectly, to such individuals and entities. Note that this also applies to entities owned or controlled by designated individuals and entities.
See more on the press release from the EU.
2. UK framework for enforcement of trade, aircraft and shipping sanctions
The new framework is set out in the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the "Regulations"). The Regulations do not introduce any new sanctions or related restrictions. Rather, they act as a supplement to existing trade, aircraft and shipping sanctions made under the Sanctions and Anti-Money Laundering Act 2018 by introducing new powers for the enforcement of such sanctions, as well as certain obligations to report suspected breaches of sanctions in scope of the Regulations.
Notably, the Regulations introduce new civil enforcement powers, including the power to impose monetary penalties on a strict liability basis for breaches of aircraft, shipping and certain trade sanctions (see Reg.5(1)). This means that the UK authorities only need to show, on a balance of probabilities, that a breach has occurred. It also means that any defence that would ordinarily be available for a breach of sanctions, namely that the person did not know or suspect that they were committing an offence, will not apply, although it will be relevant in assessing the size of the monetary penalty. Note that the strict liability offence for a violation of UK financial sanctions has been in place since June 2022.
It should be noted that these enforcement powers are in addition to, and separate from, His Majesty's Revenue and Customs' (HMRC) existing enforcement powers (both criminal and civil). HMRC will remain responsible for the enforcement of trade sanctions that fall within its remit as the UK’s customs authority and for the enforcement of trade sanctions measures that relate to strategic goods and technology. They are also separate from the financial sanctions enforcement powers of the Office of Financial Sanctions Implementation (OFSI).
In terms of the reporting obligations stipulated by the Regulations, these apply to entities operating within the regulated sector, which will be required to report suspected breaches of trade, aircraft and shipping sanctions in scope of the Regulations. The relevant entities include those in the financial, legal and money service businesses, as well as certain regulated entities in the aviation and maritime industries (see Reg. 15(4)). Failure to comply with these reporting obligations (as well as information requests made by the Secretary of State) will be a criminal offence (see Reg. 22). Regulation 29(3) makes clear that information subject to legal professional privilege is exempt from the reporting obligations.
The maximum monetary penalty that may be imposed under the Regulations is the greater of GBP 1 million or 50% of the estimated value of the breach (or, for breaches involving aircraft or ships, 50% of the estimated value of the aircraft or ship used in connection with the breach).
The Regulations will apply to:
- all UK nationals and companies, including branches of UK companies operating overseas, irrespective of where the conduct takes place, and
- any other person or company in respect of conduct that takes place within UK territory.
The Regulations are the latest illustration of the UK authorities' increasing focus on sanctions enforcement.
Further information can be found in statutory guidance published by the UK authorities.
WR Sanctions Alerts provide you with updates on material developments in the country-specific sanctions programmes implemented by the US, the UN, the UK, the EU and Norway. We will not provide updates on mere prolongations, without material changes, of existing sanctions programmes, nor on any listings or de-listings of individuals/entities placed on implemented sanctions lists. Please note that the WR Sanctions Alerts are provided as general information and do not constitute legal advice.