Brexit also separates sanctions regimes – with consequences for EU companies

The United Kingdom’s (UK) withdrawal from the European Union (EU) not only has consequences for customs and export control law (see our news article of 29.09.2018); it also has an impact on sanctions regimes – with consequences for companies in the EU.

Background: the political declaration

At the end of November 2018, the EU and the UK published a (legally non-binding) political declaration, in which the parties set out a framework for their future relationship. The third part of the declaration regarding cooperation in the area of security and foreign policy also deals with the issue of sanctions. Accordingly, the EU and the UK will pursue independent sanctions policies, but will engage in close consultation and cooperation (paragraph 99). This consultation and cooperation on sanctions is to include an exchange of information on policy objectives, listings and their justification, as well as the (technical) implementation and enforcement of the sanctions (paragraph 100, sentence 1). Where policy objectives are essentially aligned, the declaration provides for an intensified exchange of information with the objective of adopting mutually reinforcing sanctions (paragraph 100, sentence 2).

A new British sanctions policy?

Initially the current legal situation in the UK will continue to apply as national law, as provided in the European Union (Withdrawal) Act 2018 – admittedly, the British legislator has always gone beyond the embargo and sanctions regulations of the EU by carrying out its own listings.

This trend is likely to intensify. The UK has, for example, already created the legal basis for its own legislation with the Sanctions and Anti-Money Laundering Act 2018. The first regulations based on this have already been issued with respect to Burma/Myanmar, Iran and Venezuela and come into force when Brexit takes place. Any deal between the EU and the UK would have not have any influence on this. At any rate, the proposed Withdrawal Agreement does not contain any references to sanctions.

How big the gap between the EU and the UK will become cannot currently be predicted. This question is likely above all to depend on to what extent the UK wants to align itself in terms of foreign policy with the USA – whose sanctions policy has diverged significantly from that of the EU since 2017.

Consequences for companies: increased plurality of sanctions regimes

Companies based in the EU will as a rule continue to maintain intensive relations with the UK, whether as a sales market or a purchasing market. Many companies in the EU also employ British citizens.

All these aspects are potential connecting factors for the extraterritorial applicability of UK sanctions within the meaning of section 21 of the Sanctions and Anti-Money Laundering Act 2018. Naturally, special attention must therefore be paid to this. EU companies are unlikely to be able to avoid adapting their compliance processes to the concrete extraterritoriality of UK sanctions, quite similar to the partial orientation towards US sanctions.

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