Articles Posted in United Kingdom (UK)

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On February 24, 2025, the EU adopted its 16th package of sanctions against Russia, Belarus and non-government-controlled areas of Ukraine, symbolically marking the third anniversary of the start of Russia’s invasion of Ukraine and constituting the largest set of updates that we have seen in the past two years. On the same day, the UK also issued new designations under its Russia sanctions regime impacting 107 entities, individuals and ships. See a summary of the updates below.

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Earlier this week, the U.S. Office of Foreign Assets Control (OFAC) and the UK Office of Financial Sanctions Implementation (OFSI) published a Memorandum of Understanding (MoU), which was previously signed on October 9, 2024, formalizing a framework to govern cooperation including in relation to exchanging information, coordinating investigations, training personnel, discussing regulatory expectations and economic analyses.

Part of a Broader Trend of U.S.-UK Collaboration

The MoU represents a significant step within a broader shift toward increased collaboration between the U.S. and UK on sanctions adoption and enforcement. Several key developments exemplify this trend:

  1. OFAC-OFSI Partnership: The MoU formalizes the growing partnership between OFAC and OFSI, which has been developing through initiatives such as the deployment of OFAC secondees to OFSI and the establishment of regular communication channels.
  2. Joint Guidance: U.S. and UK authorities have increasingly worked together to issue joint guidance (such as this Humanitarian Assistance and Food Security guidance note), streamlining compliance expectations and providing unified directions to stakeholders.
  3. Coordinated Sanctions Adoption: Both countries have increasingly aligned their sanctions measures, particularly in response to geopolitical crises such as Russia’s invasion of Ukraine. Sanctions have been adopted not only bilaterally but also in coordination with allies through forums such as the G7, the Five Eyes community and in collaboration with the EU, signaling a commitment to unified enforcement. By way of recent example, last week, OFAC and OFSI jointly designated two Russian energy companies, Gazprom Neft and Surgutneftegas.

The UK Sanctions Regime’s Shift Toward a U.S.-Style Framework

The MoU has emerged in the context of a broader transformation of the UK sanctions regime, which has gradually been evolving to align with the U.S. regime. Key examples of this shift include:

  1. Civil Strict Liability Powers: As reported previously, the UK has introduced civil strict liability enforcement powers for OFSI and the newly established Office of Trade Sanctions Implementation (OTSI). Absent from the UK sanctions regime prior to Brexit, these powers bring the UK’s sanctions regime closer in line with the U.S. strict liability approach to sanctions enforcement, without a requirement to prove intent or negligence.
  2. Increased Use of General Licenses: The UK has significantly expanded its use of General Licenses, a tool that mirrors OFAC’s approach and provides flexibility in sanctions implementation by permitting UK sanctions authorities to adopt general exemptions for specific activities otherwise prohibited under sanctions laws.
  3. Post-Brexit Autonomy: Following the UK’s exit from the EU, the UK has sought to collaborate with other allies and partners with the intention of pooling expertise, sharing and developing ideas, and extending collective reach to maximize the impact of sanctions and to address loopholes. The UK’s collaboration in this regard with the U.S. (and its approach in general, as referenced in the UK government’s policy paper on the UK sanctions strategy published in February 2024) has spanned sanctions strategy, design, implementation and enforcement, and has also sought to prevent circumvention.

Implications

The MoU between OFAC and OFSI marks a significant turning point in the enforcement of sanctions, underscoring growing alignment between U.S. and UK authorities. At its core, the MoU enhances the ability of the U.S. and the UK to collaborate on key areas such as information sharing, joint investigations, and regulatory alignment. This increased coordination means that businesses must prepare for greater scrutiny and the possibility of facing enforcement actions simultaneously in both jurisdictions.

For companies, the impact of this cooperation extends beyond compliance obligations. Internal controls and monitoring systems must be robust enough to withstand the enhanced scrutiny that comes with shared intelligence and enforcement efforts between regulators. Compliance programs should be harmonized to address both U.S. and UK requirements so as to reduce the risk of oversight in a rapidly converging regulatory environment.

 

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On September 12, 2024, the UK government published the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the “Regulations”), granting the UK’s trade sanctions enforcement body, the Office of Trade Sanctions Implementation (OTSI), new implementation and enforcement powers effective from 10 October 2024. The Regulations also grant the Department for Transport (DfT) corresponding powers in relation to aircraft and shipping sanctions (i.e., sanctions relating to the movement, registration and ownership of aircrafts and ships).

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The United Kingdom introduced new sanctions against Russia on December 14, 2023, with the European Union also adopting its twelfth package of sanctions against Russia on December 18, 2023.

The latest UK restrictions include:

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On June 8, 2023, the United States and the United Kingdom announced the Atlantic Declaration for a Twenty-First Century U.S.-UK Economic Partnership (“Declaration”). The Declaration reaffirms the need to adapt and reimagine the unique alliance between the two countries. From critical and emerging technologies to digital transformation, clean energy, and defense collaboration, businesses can leverage the partnership to exploit new trans-Atlantic opportunities.

(This is the first post of a three-part series on U.S., UK and EU alignment on economic security strategy.)

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Takeaways

  • Sanctions operate prospectively and do not affect payment obligations to a non-sanctioned party accruing before sanctions became effective.
  • Payment obligations under standby letters of credit at issue were autonomous and unconnected with the underlying transaction.
  • The fulfilment of an independent obligation owed by a German bank to Irish-incorporated aircraft lessors was found not to have intended to benefit the Russian entities involved in other elements of the transaction.

The English Court recently confirmed that sanctions do not excuse non-payment to a non-sanctioned party where the aircraft lease arrangements and related letters of credit were created before sanctions came into effect: Celestial Aviation Services Limited, Constitution Aircraft Leasing (Ireland) 3 Limited and another v UniCredit Bank AG (London Branch) [2023] EWHC 663 (Comm).

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On February 24 and 25, 2023, the United Kingdom and European Union each adopted additional sanctions against Russia due to the ongoing conflict in Ukraine. These new measures are summarized below.

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In the final few days of September, the U.S. and global allies issued a number of sanctions and export controls against actors who have supported Russia’s referendums in Ukraine and related attempts to annex four Ukrainian territories. The referendums have been condemned by the Group of 7 (G7) nations, which committed to imposing further economic costs on individuals and entities both inside and outside of Russia.

The latest measures include actions by the Office of Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), the U.S. Department of State, and the United Kingdom (UK) Office of Financial Sanctions Implementation (OFSI), as well as further announcements from the European Union (EU), described in turn below.

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EU update
On July 21, 2022, the EU published its “maintenance and alignment” package of sanctions. This latest package seeks to tighten existing sanctions, perfect their implementation, and strengthen their effectiveness. In summary, this latest package has the following effects:

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