On 29 June 2023, the UK introduced further restrictions to The Russia (Sanctions) (EU Exit) Regulations 2019 (“UK Russia Regulations”) through the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023 (the “Amending Regulation”). The principal change enacted by the Amending Regulation is the introduction of restrictions on the provision of certain legal advisory services, which entered into force on 30 June 2023.
The Amending Regulation prohibits the direct or indirect provision of legal advisory services to any non-UK person in relation to, or in connection with, any activity which satisfies certain “conditions”. The activity will satisfy the conditions (and therefore the provision of legal advice in relation to these activities will be prohibited) if the activity would be prohibited under a broad range of restrictions contained in the UK Russia Regulations (the scope of the prohibition largely covers the UK Russia Regulations’ financial, trade and professional service measures, as well its circumvention controls), if it were to be carried out within UK sanctions jurisdiction (i.e., by a UK person or within the UK) (the “Legal Advice Prohibition”).
“Legal advisory services” includes the provision of legal advice to a client in non-contentious matters involving:
- the application or interpretation of law;
- acting on behalf of a client, or providing advice on or in connection with, a commercial transaction, negotiation or any other dealing with a third party; and/or
- the preparation, execution or verification of a legal document.
Notably, the Amending Regulation’s definition of “legal advisory services” does not include any representation, advice, preparation or verification of documents undertaken as part of legal representation services provided in, or in anticipation of, proceedings before administrative agencies, courts or other official tribunals, or arbitral or mediation proceedings. Currently, it is not clear whether the carve out for “legal representation services” includes legal advice provided in relation to actual or foreseeable sanctions licensing processes and/or engagement with sanctions authorities.
Exceptions to the Legal Advice Prohibition
The Amending Regulation provides that the Legal Advice Prohibition will not be contravened where legal advisory services are provided to any person for the purposes of:
- the discharge of or compliance with UK statutory or regulatory obligations; or
- determining whether an act or a proposed act complies with the UK Russia Regulations.
The Amending Regulation also provides for a prior-contract exemption, exempting legal advisory services in-scope of the Legal Advice Prohibition provided under contracts concluded before 30 June 2023 (or in respect of related ancillary contracts) provided that the services are carried out before the end of 29 September 2023, and the person subject to the obligation notifies the Secretary of State of the provision of such services by the end of 29th September 2023.
The statutory UK Russia Sanctions Guidance provides for limiting licensing grounds (applicable to individual licenses, which would require an application to be filed with the Export Control Joint Unit), including where:
- a licensing ground would apply to the underlying prohibited activity in relation to which the legal advice is being given; or
- a licensing ground would apply to the underlying activity in relation to which the legal advice is being given if such activity was done by a UK person or taking place in the UK.
Key Issues Raised
Given the scope of the above measures, and the lack of published guidance to aid in its clarification, initial key issues raised by the Legal Advice Prohibition include:
- the impact on in-house legal functions, particularly where legal advisory services are provided from the UK or by UK persons;
- the impact on UK persons providing advice on non-UK law (e.g., EU or US sanctions);
- the ability for UK persons to provide advice on non-sanctions related compliance risks in relation to Russia-related activity (e.g., anti-bribery compliance advice); and
- how the restrictions affect dual-qualified lawyers, particularly those not residing in the UK.
As the legal community continues to engage with UK authorities to clarify the scope of the new sanctions measures, and in lieu of any imminent published guidance, businesses should assess their internal legal functions, particularly where legal advisory services are provided from within the UK or from UK persons.