Alert 12.31.20
Alert
Alert
By Matthew Oresman,
01.04.21
Some of the key changes brought about to UK export control and sanctions laws as a result of Brexit can be summarised as follows:
Impact on UK export controls
Initially, the EU export control regime (e.g., the EU “Dual-Use” Regulation 428/2009) will broadly be retained and transposed into UK law.
However, from 1 January 2021, the UK will be treated as a “third country” from the perspective of EU law, which will impact licensing requirements. In particular, those exporting between the UK, EU and elsewhere will need to consider their current export licences and whether any fresh licences are required to remediate the impact of Brexit.
(a) Exports from the UK to the EU (and the Channel Islands) and elsewhere
Exporters of dual-use items will require a UK export licence to export from the UK to the EU or the Channel Islands. The UK’s Export Control Joint Unit (ECJU) has published an Open General Export Licence (OGEL) for this purpose which can be used from 1 January 2021. While this helpful development means exporters need not apply for a bespoke individual licence for many dual-use items heading from the UK to the EU, they are still required to register with the ECJU to use this OGEL and must comply with the conditions on the OGEL (e.g., relating to record keeping).
Licences that exporters have to export dual-use items to a non-EU country issued in the UK will remain valid for export from the UK. An export licence issued by an EU Member State for such exports will no longer be valid for export from the UK, however.
(b) Exports from the EU to the UK and elsewhere
Exporters of dual-use items will require an export licence issued by an EU Member State to export from the EU to the UK. The EU “Dual-Use” Regulation provides for the export of certain dual-use items to various third countries under certain conditions via “Union General Export Authorisations” (UGEAs). For example, UGEA “EU 001” provides for a general export authorisation for certain low-risk transactions to various “friendly” countries, i.e., Australia, Canada, Japan, New Zealand, Norway, Switzerland and the U.S. The UK has now also been added to this list which is welcomed news to many EU exporters. Exporters need to be aware of registration requirements in the relevant EU Member State and the licence conditions generally, before using any UGEA, however, as before.
Licences issued in the UK will no longer be valid to export dual-use items from an EU Member State to a non-EU country (i.e., a licence issued by an EU Member State will be required).
(c) Northern Ireland
Certain EU export control laws (including those related to dual-use goods) will continue in Northern Ireland by virtue of the Northern Ireland Protocol. Following Brexit, initially, there will be no additional licence requirements for the export of dual-use goods from Northern Ireland to the EU, or to move dual-use goods between Northern Ireland and Great Britain (i.e., England, Scotland and Wales). The UK government has, however, requested that exporters with a nexus to Northern Ireland make various representations to the ECJU.
(d) Use of UGEAs in the UK and Northern Ireland
UGEAs will no longer be usable to export from Great Britain. However, versions of the UGEAs based on UK legislation and known as “retained GEAs” will be available to use.
To minimise the impact on exporters, the ECJU will be automatically copying existing registrations for the UGEAs, held by organisations or individuals within the UK, to the associated retained GEA. This will mean they will be issuing new licence registration numbers for these retained GEA licences.
The UGEAs will continue to be usable to permit specified exports from Northern Ireland. The retained GEAs, coming into force on 1 January 2021, will permit specified exports from Great Britain.
Exporters will need to check the registration for their UGEAs to view their new retained GEA licence registration number. For exports from Great Britain, this new registration number must be provided on any relevant export documentation.
Impact on UK Sanctions Laws
The UK now implements new sanctions regimes via regulations enacted pursuant to the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). As things stand, the UK’s new sanctions generally mirror current EU sanctions legislation; however, this is likely to change over time. As EU sanctions regimes have been transitioned into UK law, this has also resulted in some changes. For example, several EU regimes concerning sanctions relating to Russia have been merged into one set of UK sanctions. Those required to comply with UK sanctions laws should not assume that UK laws are now identical to those found in the EU and vice versa.
(a) General Licences
Helpfully, similar to the position in the United States, the UK is now issuing general licences under many of the UK’s sanctions regimes, which allow parties to carry out specific activities that would otherwise have been prohibited without a specific, bespoke licence being in place upfront. There will, however, be notification, reporting and record-keeping requirements where such licences are used. Businesses should therefore check whether existing specific licences have been revoked and familiarise themselves with the conditions of any new General Licence which now may be in place.
(b) Sanctions Lists
Prior to 11 pm UK time on 31 December 2020, the UK’s Office of Financial Sanctions (OFSI) published a consolidated list of all asset freeze targets under EU law and any UK law that went beyond EU measures (Consolidated List).
From this time, OFSI has updated the Consolidated List so that it only includes financial sanctions targets under SAMLA-derived regulations or other UK law. The UK’s Foreign, Commonwealth and Development Office (FCDO) will also now publish a separate list containing all persons, entities and ships designated under SAMLA-derived regulations (i.e., not only those designated under financial sanctions but also those designed under trade, travel and transport sanctions).
To facilitate screening as a result of the changes to the Consolidated List, the UK Government has published a “Bridging Document” which will be identical to the Consolidated List as published at 10:59 pm UK time on 31 December 2020, with only certain administrative fields updated to reflect the changes made at 11 pm.
(c) “Ownership and Control”
To facilitate sanctions screening, i.e., to help determine whether an entity was owned or controlled by a target subject to asset-freezing sanctions, the EU Council has issued Guidelines 5664/18.
In a divergence from the EU approach, the UK sanctions that have been published so far generally contain language to confirm when an entity will be owned or controlled by another person, along with a schedule of further guidance in the form of “rules for interpretation.”
(d) “Blocking” Regulations
The EU’s “Blocking” Regulation 2271/96, which prohibits compliance with certain U.S. sanctions that have extraterritorial reach and are deemed to unduly affect non-U.S. persons, is largely retained by the UK, however, the UK’s Secretary of State for International Trade (rather than the European Commission) will now administer requests for compliance with U.S. sanctions and be responsible for enforcement.
Following Brexit, businesses with cross-border interests connected to the UK should consider now how the new UK export control and sanctions laws will impact them, including the different rules applicable to trade between Great Britain and Northern Ireland.
It will also be important to keep up to date with further divergence over time between UK and EU export control and sanctions laws—it cannot be assumed any longer that the UK position will mirror the EU position.