Out-Law Guide 9 min. read
18 Jul 2022, 11:41 am
The UK, EU and Canada have imposed 'sectoral' sanctions against Belarus, and the US have put in place a legal framework for doing likewise. The UK, EU, US and Canada have also coordinated the imposition of financial sanctions in the form of asset freezes against named individuals and entities. In March 2022 the UK, EU, US and Canada each imposed additional restrictive sanctions against Belarus following Belarus’ involvement in the Russian aggression against Ukraine.
Editor's note 18/07/22: This is a general guide which does not constitute legal advice. The guide is up to date as at 18 July 2022 and at the time of reading points may have been superseded by additional sanctions or formal guidance from the sanctions authorities. Before proceeding with any Belarus-related business, the updated position should be ascertained and specific legal advice should be taken.
This guide provides an overview of the position relevant to UK businesses and overseas businesses with UK operations.
The UK’s departure from the EU triggered the implementation of an autonomous sanctions regime, including the regime specific to Belarus imposed by the Republic of Belarus (Sanctions)(EU Exit) Regulations 2019 (UK Belarusian sanctions). The UK Belarusian sanctions were expanded in August 2021, and amended in October 2021.
On 5 July 2022, the Republic of Belarus (Sanctions) (EU Exit) (Amendment) Regulations 2022 (the 2022 Regulations) came into force introducing new designation powers, and financial, trade, shipping and aircraft sanction measures. In essence, the new measure extend existing Russia sanctions measures to Belarus in certain areas.
The UK Belarusian sanctions apply to:
The prohibitions in the UK Belarusian sanctions can be categorised as follows:
The financial sanctions prohibit:
The Belarusian specific financial sanctions targets are listed in the UK's Consolidated List of financial sanctions targets under the heading “Regime: Belarus”. There are additional Belarusian financial sanctions targets designated under the UK Russian sanctions regime under the Russia (Sanctions) (EU Exit) Regulations 2019.
The 2022 Regulations widen the powers of the secretary of state to designate persons, to include conduct destabilising or undermining the sovereignty, territorial integrity or independence of Ukraine; threatening peace in Europe or otherwise supporting or obtaining a benefit from the government in Belarus through prescribed activities. They also now allow for designation by description rather than only by name.
The prohibitions extend to businesses owned or controlled by a sanctions target even if the particular business is not listed on the UK’s Consolidated List of financial sanctions targets. There is therefore a need to carry out due diligence on any customer or business partners from or connected with Belarus
Financial sanctions also capture dealings and transactions with entities that do not feature on the consolidated list if that entity is more than 50% owned or controlled by a financial sanctions target. This means that the prohibitions detailed above extend to businesses owned or controlled by a sanctions target even if the particular business is not listed on the UK’s Consolidated List of financial sanctions targets. There is therefore a need to carry out due diligence on any customer or business partners from or connected with Belarus.
A licence can be obtained from the Office of Financial Sanctions Implementation (OFSI) to deal lawfully with a financial sanctions target, or an entity that a sanctions target owns or controls. The grounds upon which a licence may be sought are:
The UK Belarusian sanctions prohibit, without a licence issued by HM Revenue & Customs (HMRC), the export, supply, making available and/or transfer of certain goods and technology (directly or via a third person) to, or for use in, Belarus, or to a “person connected with” Belarus.
The goods and technology subject to these prohibitions include certain:
There are also prohibitions on the import of mineral products, arms and related materiel, iron and steel products which originate in or are consigned from Belarus.
The provision of technical assistance and brokering services related to restricted goods and technology where there is a link to Belarus is also prohibited. Technical assistance includes instructions on the use of equipment, repair and maintenance; and brokering services includes arranging and negotiating transactions.
It is prohibited, except under the authority of a licence, to provide financial services, including payment processing services, or funds in pursuance of an arrangement whose object or effect is the export or supply of restricted goods or technology, or related technical assistance.
It is likely that where an exporter needs an export licence, the exporter’s bank will need a corresponding financial services licence.
The provision of financial services in relation to foreign exchange reserve and asset management to The National Bank of Belarus, the Ministry of Finance of Belarus and related entities is also prohibited.
A further prohibition is imposed on the direct or indirect provision of interception and monitoring services to, or for the benefit of, the government of Belarus. These include any service that has as its object or effect the interception of a communication in the course of its transmission by means of a telecommunication system.
The import, acquisition or supply/delivery to another country of potash and petroleum products which originate from Belarus, are located in Belarus or are shipped through Belarus is prohibited, without authorisation by way of licence. A UK person cannot directly or indirectly acquire these products from a person connected with Belarus.
There are also prohibitions on the provision, directly or indirectly, of technical assistance, financial services, funds or brokering services related to, or arrangements relating to, petroleum products.
A wider category of ‘persons’ are targeted under the UK Belarusian sanctions in respect of the provision of loans or credit and dealing with certain of their transferable securities and money market instruments.
From 5 July 2022 there is a total prohibition, subject to limited exceptions and prior authorisation, on the granting of a loan or credit, or on entering into an arrangement to grant a loan or credit, to:
There is a further prohibition on loans or credit, with a maturity exceeding 30 days, issued after 5 July 2022 to a wider category of entity “connected with Belarus”.
The prohibition is not breached where the relevant loan or credit has a specific and documented objective of making funds available for non-restricted trade.
From 5 July 2022, dealings with transferable securities and money market instruments issued by the above or by an entity connected with Belarus, is also prohibited.
There is a carve out for the above prohibitions relating to transferable securities, money market instruments and loans and credit for Belarusian entities that are majority owned by non-Belarusian entities.
There is a prohibition on the provision of financial services in relation to foreign exchange reserve and asset management to the National Bank of Belarus, the Ministry of Finance of Belarus and entities owned/controlled by either.
Aviation restrictions prevent:
A number of aircraft are listed in relation to which the UK government considers that as of 9 August 2021 technical assistance would be for the benefit of the relevant designated persons.
Subject to exceptions for protecting safety and dealing with emergencies, the UK has banned its ports from allowing access to ships owned, controlled, chartered or operated by a designated person or a person connected with Belarus or which is flying the Belarusian flag, is registered there or is otherwise specified by the secretary of state.
UK persons and British businesses must not provide insurance or reinsurance services to:
The UK Belarusian sanctions do not prohibit compliance with any insurance or reinsurance agreement concluded before 9 August 2021. Exemptions permit the provision of compulsory or third-party insurance to Belarusian nationals or a Belarus-incorporated entities located in the UK; and insurance for a diplomatic mission or consular post of Belarus in the UK. The prohibitions also do not apply to persons who are in charge of a ship or aircraft and who are temporarily acting at the direction of the Belarusian authorities for certain specified purposes.
Restrictions on the provision of insurance is subject to licensing under specific grounds.
The EU’s sanctions apply to nationals of EU member states, to businesses incorporated or constituted in EU member states and to non-EU nationals and businesses when in, or doing business in, the territory of the EU.
The EU sanctions related to Belarus are Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures in respect of Belarus, which has been extended and amended most recently by Council Regulation 2022/577 of 8 April 2022 and Council Regulation 2022/877 of 3 June 2022. Although there are differences in the terminology and precise scope, these sanctions broadly target the same items and activities as the UK regime, with some exceptions.
Following Belarus’ involvement in the Russian aggression against Ukraine, the EU imposed further import bans against Belarus in March 2022 prohibiting the import, purchase or transport, directly or indirectly, of certain wood, steel, iron, cement and rubber products if they originate in or have been exported from Belarus. It is also prohibited to provide, directly or indirectly, technical assistance, brokering services, financing or financial assistance, including financial derivatives, as well as insurance and re-insurance related to these sanctioned items.
An additional prohibition applies to the sale, supply, transfer or export, directly or indirectly, of certain machinery to any person, entity or body in Belarus or for use in Belarus. The prohibition does not apply to the sale, supply, transfer or export of the machinery or the related provision of technical and financial assistance, for non-military use and for a non-military end-user, intended for certain purposes. Contracts concluded before 2 March 2022, or ancillary contracts necessary for the execution of such contracts, may continue until 4 June 2022.
The EU has adopted additional sectoral sanctions targeting the Belarusian financial services sector. It is prohibited to:
To date, the EU has excluded four Belarusian banks, along with any entity more than 50% owned by one of those banks that is established in Belarus, from the SWIFT messaging network.
The US also maintains a sanctions regime designating named individuals and entities referred to as Specially Designated Nationals (SDNs). These sanctions restrict dealings with these targets and also entities that are majority owned by such targets, either individually or in aggregate. Given Belarus’ involvement in the Russian aggression against Ukraine, the US has added certain Belarusian banks, defence companies and individuals to the SDN list.
The US has also issued an executive order which empowers the US government to impose sectoral sanctions on persons operating in the defence and related materials, security, energy, potash, tobacco products, construction and transportation sectors. US sanctions in those sectors are likely to be similar to the UK, EU and Canadian sectoral sanctions that already apply.
For non-US persons with no 'touch points' with the US, enforcement action can be taken by US authorities against those that, for example:
Wider US export controls apply in respect of US origin goods and technology.
Rebecca Devaney of Pinsent Masons contributed to this guide.
01 Jun 2022