The UK Government has introduced a further suite of trade and financial sanctions prohibitions in response to the ongoing conflict in Ukraine.
This latest suite of amendments to the UK's sanctions regime against Russia came into force on 16 December 2022 in terms of the Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022 ("the No.17 Regulations"). The No. 17 Regulations expand the current trade sanctions regime by broadening the scope of the professional services sanctions first introduced in July earlier this year. The No. 17 Regulations also introduce further financial sanctions prohibitions in connection with the provision of trust services to, or for the benefit of, designated persons and persons connected with Russia.
Trade: professional services sanctions
We previously discussed the introduction of the first suite of professional services prohibitions which entered into force on 21 July 2022. As originally introduced, regulation 54C of the Russia (Sanctions) (EU Exit) Regulations 2019 ("the 2019 Regulations") prohibited the provision, directly or indirectly, of the following professional services to "persons connected with Russia":
- accounting services (excluding audit services)
- business and management consulting services
- public relations services
For the purposes of the 2019 Regulations, "persons connected with Russia" includes individuals ordinarily resident or located in Russia, as well as entities incorporated or domiciled in Russia.
On 30 September 2022, Foreign Secretary, James Cleverly, announced that the UK Government would expand the scope of professional services sanctions designed to increase the economic pressure on the Russian Government. The additional professional services referred to included IT consultancy, architectural, engineering, advertising, auditing and transactional legal advisory.
The No.17 Regulations now introduce prohibitions on the provision of the following professional services:
- IT consultancy and design services
- architectural services
- engineering services
- advertising services
- auditing services
It is however notable that the No.17 Regulations do not include a prohibition in connection with transactional legal advisory services, as forecasted by the UK Government's announcement on 30 September 2022.
The No.17 Regulations also expand the current financial sanctions regime by introducing prohibitions on the provision of trust services. Effective from 16 December 2022 a person ("P") must not provide trust services:
(i) to or for the benefit of a designated person; or
(ii) to or for the benefit of a person connected with Russia ("C") unless pursuant to an ongoing arrangement pursuant to which P provided those trust services to or for the benefit of C immediately before 16th December 2022.
"Designated person" means a person who is listed in the UK Sanctions List (i) as a designated person for the purposes of the prohibition on the provision of trust services as contained within regulation 18C(1) and (2) of the 2019 Regulations and / or (ii) as a designated person who is subject to an asset freeze.
“Trust services” means:
- the creation of a trust or similar arrangement;
- the provision of a registered office, business address, correspondence address or administrative address for a trust or similar arrangement;
- the operation or management of a trust or similar arrangement; or
- acting or arranging for another person to act as trustee of a trust or similar arrangement.
Trust services are provided “for the benefit of” a person ("B") where:
- B is a beneficiary of a trust or similar arrangement;
- B is referred to as a potential beneficiary in a document from the settlor relating to a trust or similar arrangement (such as a letter of wishes); or
- having regard to all the circumstances, B might reasonably be expected to obtain, or to be able to obtain, a significant financial benefit from the trust or similar arrangement.
The No.17 Regulations expand the current prohibitions on the export, supply and delivery of certain goods to Russia and making certain goods available to "persons connected with Russia", including camouflage, oil production, mining equipment and five additional chemicals.
We will be monitoring developments closely over the coming period. If you have any questions on how the new sanctions might impact on you please don't hesitate to get in touch with us.