Restrictions on sanctions law advice eased, but hurdles remain ​- Stacy Keen

​The UK’s rules on sanctions have been altered as the confilct in Ukraine continues (Picture: Anatolii Stepanov/AFP via Getty Images)

Restrictions in UK Russian sanctions law on firms providing legal and regulatory advice have been relaxed, providing clarity for advisors and clients.

The previous Conservative government legislated to introduce a restriction relating to the provision of legal advisory services to non-UK persons in the context of activity prohibited under the UK’s financial and trade sanctions (even if those sanctions were not appliable).

The UK restriction was – and remains – considerably wider in scope than the comparable EU restriction, which applies only to the provision of legal advisory services to legal entities established in Russia (unless an exception applies, or prior authorisation was obtained).

Stacy Keen, Partner and sanctions and compliance expert at Pinsent Masons

While an exception to the UK restriction was provided for compliance advice on whether an act complied with the UK Russian sanctions regime, it did not extend to advice given to non-UK persons as to whether acts or proposed acts comply with other sanctions regimes that may be relevant, such as the EU or US Russian sanctions in place.

To address the problem, the UK Government issued a “general licence”, which provided an ability to provide such advice in relation to any sanctions concerning Russia imposed in any jurisdiction, as well as Russian countermeasures.

The original drafting of the UK Russian legal advisory restriction created a challenge within the legal industry as the regulations could prevent UK lawyers and compliance officers – including those within in-house legal teams – from providing a holistic view on sanctions risk and compliance. Use of the general licence provided a solution to that challenge, but only if its conditions, for example, on registration and record keeping, were met.

The new government has now updated the regulations to permit the provision of legal advice in relation to compliance with global sanctions and criminal legislation. The change means that the general licence is no longer needed.

The scope of the restriction has also narrowed. Previously, it was prohibited to provide legal advice “in relation to or in connection with” activity prohibited by the sanctions. The restriction now applies only to providing legal advice that “enables or facilitates” underlying prohibited activity.

This aligns the restriction more closely with the feature of US sanctions programmes that prohibit US persons from facilitating a third-party transaction that would contravene US sanctions if carried out by a US person.

A breach will now only occur where the person giving the legal advice has actual knowledge that the object or effect of the legal advice provided is to enable or facilitate prohibited underlying activity. Previously the test was knowledge or reasonable cause to suspect.

Other clarifications made in the new regulations include the definition of legal advisory services, which make it clear that the term does not include representation or advice in any proceedings before administrative agencies, courts or other duly constituted official tribunals in any jurisdiction. The addition of “in any jurisdiction” clarifies that this applies to non-UK courts or agencies and is activity that falls outside the scope of the restriction.

Stacy Keen, Partner and sanctions and compliance expert at Pinsent Masons