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UK introduces further sanctions against Russia and Belarus

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The UK has recently adopted the following pieces of legislation which introduce new restrictions against (mainly) Russia and Belarus.

The UK has also updated its Russia Guidance to reflect the changes introduced. The updated guidance can be found here.

This blog outlines the changes introduced by these various pieces of legislation.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 introduce a ban on certain types of investments in relation to Russia by UK persons.

In short, the UK investment restriction prohibits a person carrying out ‘investments in relation to Russia’ if they know, or have reasonable cause to suspect, they are carrying out such an activity. This includes:

  • directly acquiring any ownership interest in land located in Russia;
  • indirectly acquiring any ownership interest in land located in Russia for the purpose of making funds or economic resources available to or for the benefit of a person connected with Russia;
  • directly acquiring any ownership interest in or control over a person, other than an individual, connected with Russia;
  • indirectly acquiring any ownership interest in or control over a person, other than an individual, connected with Russia for the purpose of making funds or economic resources available to or for the benefit of a person connected with Russia;
  • directly or indirectly acquiring any ownership interest in or control over a relevant entity for the purpose of making funds or economic resources available to or for the benefit of a person connected with Russia;
  • directly or indirectly establishing any joint venture with a person connected with Russia;
  • opening a representative office or establishing a branch or subsidiary located in Russia; or
  • providing investment services directly related to an activity referred to above.

There are certain exceptions to the above.

The UK had also issued a general license for wind-down activities related to the aforementioned restrictions. This license expired on 26 July 2022.

OFSI updated its Russia guidance to (amongst other things) provide further guidance on these investment restrictions.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 introduce the following new restrictions:

  • Prohibition on the direct or indirect provision of accounting, business and management consulting, and public relations services to a person connected with Russia.  The scope of the UK services prohibition is materially consistent with the similar EU prohibition under Article 5n of Regulation 833/2014 (as amended).

An important point to note is that the new Regulations do not include an equivalent carve-out to the EU restrictions to allow services to Russian subsidiaries of UK businesses.

  • Prohibitions on the export, supply and delivery, and making available of certain goods (as well as related technical assistance, financial services and funds, and brokering services) to, or for use in, Russia. These goods have been identified as items of significant importance to the Russian economy and goods for which Russia particularly depends on the UK and its G7 partners. These are included in Schedule 3E of the UK Russia Regulations.
  • Broader restrictions on the existing energy-related goods and services prohibitions under the UK-Russia Regulations. These provisions will now capture the export of energy-related goods to Russia, regardless of their eventual point of use (which could be outside Russia), the making available of energy-related goods to a person connected with Russia, and the provision of technical assistance, financial services and funds, and brokering services related to these activities. Prohibitions on energy-related services, such as drilling or well testing, are expanded so that it is prohibited to provide these services to all oil and gas exploration and production projects in Russia.
  • Prohibitions on the import, acquisition, supply or delivery (as well as related technical assistance, financial services and funds, and brokering services) of oil and oil products which originate in Russia, as listed in a new Schedule 3F under the UK Russia Regulations.
  • Prohibitions on the import, acquisition, supply or delivery (as well as related technical assistance, financial services and funds, and brokering services) of gold which originates in Russia on or after 21 July 2022, as listed in a new Schedule 3G under the UK Russia Regulations.
  • Prohibitions on the import, acquisition, supply or delivery (as well as related technical assistance, financial services and funds, and brokering services) of coal and coal products which originate in or are consigned from Russia, as listed in a new Schedule 3H under the UK Russia Regulations. These restrictions come into effect after the ‘relevant day’ which means 10 August 2022.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022. Apart from correcting certain minor errors and omissions, the Regulations:

  • Amend the designation criteria under the Russia sanctions. They specify additional activities for which a person may be designated; they make minor amendments to the definition of “being involved in obtaining a benefit from or supporting the Government of Russia”; and they broaden the interpretation of being “associated with” a designated person.
  • Provide for a new exception from trade sanctions measures for humanitarian assistance activity in non-government controlled areas of the Donetsk and Luhansk oblasts.
  • Clarify that aircraft or ships owned via a majority interest in a company are in scope under shipping and aircraft sanctions.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022. Apart from correcting certain minor errors and omissions, the Regulations remove certain prior prohibitions that relate to maritime technology and relevant restricted technology; and interception and monitoring services.

The UK has also adopted The Customs (Additional Duty) (Russia and Belarus) (Amendment) (No. 2) Regulations 2022, which increase, from the 20th of July, import duties on certain specified Russian and Belarusian goods (please see here for the lists of Russian and Belarusian goods which includes e.g. caviar and caviar substitutes, fish and crustaceans, and certain chemicals).

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Tristan Grimmer is a partner in Baker McKenzie's London office and the UK Head of the International Trade Practice Group. He is also a member of the Compliance & Investigations and the International Trade and Competition practice groups. Tristan joined Baker McKenzie as a trainee in March 2004, qualifying in March 2006. He has advised on parallel investigations by authorities in the United States, Switzerland, Brazil and Japan, and has spent time working in Baker McKenzie's Chicago office. Tristan is named as a "Leading Individual" for EU And Competition: Trade, WTO Anti-Dumping and Customs in the UK Legal 500 2023 directory.

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Ben Smith is a Partner in Baker McKenzie’s London office and a member of the firm’s Compliance & Investigations and International Trade practice groups. Both these practices are ranked Tier 1 by Legal 500 UK. Ben joined the London office of Baker & McKenzie in September 2007. He has also worked in Baker McKenzie's San Francisco and Brussels offices, as well as on secondment to the legal and compliance teams at three FTSE 100 UK plcs. The Legal 500 UK ranked Ben as a “Rising Star”, noting “Ben Smith is a pleasure to work with. Professional, knowledgeable and always ready to assist with practical solutions.”

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