UK Expands Powers to Impose Russia Sanctions

The UK Parliament today passed legislation that expands the power of the UK Government to impose Russia sanctions.

Here is what you need to know:

1. No new sanctions have been imposed

The new legislation empowers the UK to impose additional sanctions in the future.

It does not add any new persons or entities to existing sanctions lists.  It also does not impose any additional asset freezes or other financial or trade restrictions on any persons or entities on existing sanctions lists, and does not impose any new sectoral sanctions or export controls measures.

2. An expansion – not a new framework

The new legislation amends the UK’s pre-existing Russia sanctions legislation by amending regulation 6 of the Russia (Sanctions) (EU Exit) Regulations 2019. 

Specifically, the new legislation expands the “designation criteria” that the UK must use when determining if a person or entity can be added to the UK’s Russia sanctions list, and thereby become subject to an asset freeze and/or visa restriction.

Because the new legislation does not create an entirely new legislative framework for UK sanctions on Russia, provisions in the pre-existing Russia sanctions legislation such as those relating to exceptions, licenses, reporting obligations and enforcement remain as they were before the amendment.

3. Broader power to designate

The heart of the new legislation is a broadening of the UK’s authority to impose sanctions on people and entities, and in particular businesses, with connections to the Government of Russia.  The broader designation powers in the legislation align the UK’s sanctions authority with that of the United States, which, as UK Foreign Secretary Liz Truss stated on 31 January, “will mean we can act swiftly in lockstep with the US and other allies to freeze assets and ban travel”.

Previously, the UK had the power to designate people and entities destabilising or threatening the territorial integrity of Ukraine and certain people and entities associated with them.  Under the new legislation, the UK retains that power, but also now has the power to impose sanctions on people and entities “involved in obtaining a benefit from or supporting the Government of Russia”.

The definition of persons considered “involved in obtaining a benefit from or supporting the Government of Russia” focuses (although not exclusively) on businesses.  Among the persons likely to meet this definition are:

• businesses controlled directly or indirectly by the Government of Russia;
• businesses owned in whole or in part by the Government of Russia – with no de minimis threshold;
• businesses of economic significance to the Government of Russia;
• businesses in a “sector of strategic significance” to the Government of Russia – specifically, the Russian chemicals; construction; defence; electronics; energy; extractives; financial services; information, communications and digital technologies; and transport sectors;
• businesses that receive financing from the Russian Direct Investment Fund or the National Wealth Fund;
• businesses that obtain a financial benefit “or other material benefit” from the Government of Russia;
• individuals and entities that own or control, directly or indirectly, any of the above; and
• individual directors, trustees or equivalent of any of the above.

The fact that an entity or individual may meet one or more of these descriptions does not mean that it is or will become sanctioned.  Any decision to impose sanctions on a particular entity or individual must be taken on a case by case basis by the Secretary of State, having regard to the overall purpose of the UK’s Russia sanctions regime – “to encourage Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine”. 

Our Global Sanctions and Trade team will continue to monitor developments.