The UK Government has introduced key changes to the sanctions provisions regarding legal advisory services in the Russia (Sanctions) (EU Exit) Regulations 2019 (“Russia Regulations”). The amendments bring some much-needed clarity to the restrictions on certain legal advisory services under Regulation 54D. These amendments are relevant for lawyers as well as UK businesses and non-UK businesses that are navigating global sanctions compliance.
Context
Regulation 54D of the Russia Regulations prohibits UK legal service providers from directly/indirectly providing (without a licence) legal advisory services to any non-UK persons in relation to, or in connection with, activity which would be prohibited under the Russia Regulations if the activity was done by a UK person or was taking place in the UK.
Originally, the only general exceptions to regulation 54D were if the legal advisory services were provided for the purposes of: (i) the discharge of or compliance with UK statutory or regulatory obligations; or (ii) determining whether an act or proposed act complies with the Russia Regulations. (There was also a legacy carve-out for contracts concluded before 30 June 2023, provided that the services were concluded by 29 September 2023.)
A post-implementation review by the UK Government into regulation 54D, which involved consulting with key stakeholders including the legal community, revealed that regulation 54D was preventing the legitimate provision of legal advisory services on non-UK sanctions compliance under certain circumstances. As a result, in August 2023, the UK responded to these issues by issuing a General Licence (GL) permitting legal advisory services on non-UK sanctions compliance.
Importantly, these restrictions and GL (which fall under the heading of ‘trade sanctions’) are different from the rules for paying legal fees of designated persons (under the ‘financial sanctions’), which have their own GL and are not affected by these changes.
Key Changes
The UK Government has now sought to address these and other issues caused by regulation 54D via the Russia (Sanctions) (EU Exit) (Amendment) (No 4) Regulations 2024, which took effect on 6 September 2024.
In summary, the instrument has made three key amendments:
Narrowed Scope of the Offence Provision
- Previously, regulation 54D prohibited a person from providing legal advisory services “in relation to or in connection with” certain financial or trade activity which would be prohibited by the UK sanctions regime if the activity was done by a UK person or was taking a place in the UK.
- Now, regulation 54D requires proof of knowledge, as it only prohibits a person from providing legal advisory services to a non-UK person if the person providing the advice “knows that the object or effect” of this advice is to enable or facilitate certain financial or trade activity which would be prohibited under the UK sanctions regime if the activity was done by a UK person or was taking place in the UK. This makes the rule more focused and reduces the risk of inadvertent breaches by lawyers who provide general compliance advice.
Expanded Exceptions
The exceptions to regulation 54D now include legal advisory services provided in relation to:
(i) compliance with any UK sanctions regimes or non-UK sanctions regimes;
(ii) Russian measures whose primary object or effect is to frustrate sanctions; and
(iii) any criminal law imposed by any jurisdiction.
- This replaces the previous general exception (the legacy carve-out remains).
- The amendment allows legal service providers to offer a broader range of compliance services, and is particularly valuable for multinational clients. As a result, the General Licence that previously permitted certain advice has been revoked, as it is no longer needed.
Clarified Definition of Legal Services
The definition of “legal advisory services” was amended explicitly to confirm that the restriction does not prohibit (i) representation or advice in any proceedings before administrative agencies, courts, or other official tribunals in any jurisdiction, or (ii) legal advice in connection with (re)insurance claims management.
What This Means for Clients and Lawyers
For businesses, these changes simplify the process of seeking legal guidance on sanctions compliance, particularly for multinational operations. The clarification of what constitutes a breach, and the expansion of allowable services, mean that companies can more confidently engage UK lawyers without fear of inadvertently violating sanctions.
For lawyers, the amendments provide much-needed clarity and flexibility in advising clients on complex cross-border sanctions issues. However, the regulations continue to demand careful attention to ensure advice does not inadvertently breach the narrowed provisions of Regulation 54D.
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