Emphasis on sanctions compliance legal advice record-keeping under new licence

Earlier this summer, new UK Russian sanctions regulations took effect and prohibited UK persons and overseas persons when in the UK – including those working in-house at organisations – from providing legal advisory services to non-UK persons in relation to, or in connection with, any activity that is prohibited under the UK’s financial and trade sanctions on Russia if the activity in question was done by a UK person or taking place in the UK. The ban is not restricted to legal advice to the Russian government or entities and is wide enough to apply to lawyers and other persons who provide legal advice, for example, to export control and compliance professionals.

The regulations contain exceptions, including one which enables the provision of legal advice to non-UK individuals and businesses on whether an act, or proposed act, complies with the UK Russian regulations. However, the exception does not extend to advice to non-UK persons as to whether acts or proposed acts comply with other sanctions regimes that may be relevant, for example the EU or US Russian sanctions in place – raising the risk that UK lawyers would be unable to provide holistic advice without committing a criminal offence.

In response to concerns raised by the legal industry, the government has now moved to issue a general trade licence (4-page / 240KB PDF) which permits UK persons to give otherwise prohibited legal advice to non-UK individuals and businesses subject to particular exclusions, conditions and requirements.

The licence enables the provision of advice on whether an act or a proposed act complies with, or could trigger punitive measures in relation to, restrictive measures, including sanctions, export and import controls on or concerning Russia or the non-government controlled Ukrainian territory, imposed by any jurisdiction.

Those bound to comply with UK sanctions – UK nationals and those in the UK – will also be able to provide advice in relation to, or in connection with compliance with, or addressing the risk of punitive measures in relation to, restrictive measures, including sanctions, export and import controls on or concerning Russia or the non-government controlled Ukrainian territory, imposed by any jurisdiction; any laws of Russia that have as their object or effect the frustration of any laws specified at, including sanctions, export and import controls or other restrictive measures imposed by Russia; or any criminal law imposed by any jurisdiction, under the licence.

The licence also enables the provision of legal advice in relation to the discharge of or compliance with UK statutory or regulatory obligations.

Sanctions expert Stacy Keen of Pinsent Masons welcomed the move but highlighted that legal service providers wishing to take advantage of the new licence will be subject to registration and record-keeping obligations.

“To use the licence, providers of legal advisory services will need to register with SPIRE, the UK’s export licensing system, within 30 days of giving the otherwise prohibited advice. They will also need to maintain a record of instances where the general licence is used. A failure to do so is a criminal offence. The government has not prescribed a format for maintaining records, but a log would be a sensible step. A person authorised by the secretary of state or HMRC may enter premises to inspect compliance with record keeping requirements. Records must be retained for four calendar years from the end of the calendar year in which the record was created,” she said.

The UK Russian sanctions regulations detail the information that must be recorded, being such details “as may be necessary to allow the following information, where appropriate, to be identified in relation to each act done under the authority of the licence”: a description of the act; a description of the relevant services; the date of the act or the dates between which the act took place; the name and address of the entity / person utilising the licence; the name and address of the recipient and, if applicable, end-user of the services; any further information required by the licence.

Sanctions expert Tom Stocker of Pinsent Masons said an important protection has been built into the record-keeping requirements.

“Nothing in the requirements relating to maintaining records or inspections, obligates a legal adviser to disclose privileged information. Those acting under the general licence need to balance satisfying an authorised person that the terms of the licence have been complied with, and ensuring privilege is not inadvertently breached.”