Ukrainian Crisis – Sanctions
As the conflict in Ukraine continues, we have prepared a summary of the impact of the sanctions against Russia and Belarus upon businesses in the following Q&A.
How might the imposition of sanctions affect my business?
Whilst blanket trade embargos or countrywide sanctions might come to mind (such as those that the US has in place relating to Cuba and Iran), in the modern world, sanctions tend to be targeted financial sanctions on listed individuals and companies which, in effect, prohibit business with those who are sanctioned.
Broadly speaking, those falling within the jurisdiction of a particular sanctions regime must not: (i) deal with the funds or economic resources of a designated person, or make funds or economic resources available to them (whether directly or indirectly) and, (ii) where they hold funds or economic resources of a designated entity, they must freeze them immediately and notify the relevant regulator or enforcement body (in the UK this is the Office of Financial Sanctions Implementation, the OFSI).
Therefore, consider who you are working with in your supply chain – are they subject to any particular sanctions and are any goods you are supplying on the sanctions list?
What are the risks of breaching a sanctions regime?
Generally speaking, breaches of sanctions legislation, such as providing funding to a designated person, are extremely serious – they are criminal offences and result in tough penalties. Penalties vary but can extend from fines through to prison sentences. In addition to criminal sanctions, there will likely be reputational damage and there is the potential for a breach of a sanctions regime to contravene warranties or other contractual obligations you may have with third parties.
Who has to comply with UK sanctions?
All individuals and legal entities who are within or undertake activities within the UK’s territory must comply with UK financial sanctions, irrespective of where their activities take place. All UK nationals and legal entities established under English or Scots law or the law of Northern Ireland, including their branches, must comply with UK financial sanctions that are in force, irrespective of where their activities take place.
How do I find out if my counter-party is subject to UK sanctions?
The OFSI produces a list of those subject to financial sanctions imposed by the UK, which it keeps updated. The details of those subject to UK sanctions are also categorised by the OFSI and available in specific regime lists.
Due to the dynamic nature of sanctions, with further entities being added on a daily basis at present, we would recommend checking regularly and working from the online OFSI list, which can be accessed here.
Which other sanctions regimes might apply to our business?
Depending on the location of the parties, place of delivery or performance, or governing law of the contract, it is possible that a transaction may be caught by other sanctions regimes.
EU sanctions apply to all companies incorporated in EU Member States, including overseas branches of EU companies, and to non-EU companies doing business in the EU. They also apply to EU nationals.
US sanctions can be of very broad effect and, where there is a US nexus in a transaction or relationship, then specialist advice on the extra-territorial jurisdiction of US sanctions is advisable.
Given the rapidly developing situation in Ukraine, restrictions applied by other regimes may be amended or extended at short notice, and we would therefore recommend that thorough, up to date searches of the relevant lists are made and, where there is any doubt, specialist local law advice sought.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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