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UK lays framework for increased Russian sanctions in the event diplomacy fails

News / / London

The UK Government has introduced amendments to the UK sanctions on Russia, which came into force at 5pm UK time on 10 February 2022 and which significantly increase the scope to sanction entities linked to the Russian Government and those involved across the Russian economy.

Under the UK sanctions on Russia, the Secretary of State can designate “involved persons” as subject to an asset freeze.

Previously, a person could be designated as an “involved person” where they are or were involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.

The amendments provide that an “involved person” can now include a person who is or has been involved in obtaining a benefit from or supporting the Government of Russia.  This can include:

  1. Carrying on business as a Government of Russia-affiliated entity;
  2. Carrying on business of economic significance to the Government of Russia;
  3. Carrying on business in a sector of strategic significance to the Government of Russia;
  4. Owning or controlling directly or indirectly, or working as a director (whether executive or non-executive), trustee or equivalent of (i) a Government of Russia affiliated entity or (ii) a legal person which falls within (b) and (c).

The “Government of Russia” includes the Presidency, public bodies and agencies subordinate to the President, the Chairman of the Government, any Ministry of Russia and any other public body or agency of the Government and the Central Bank.

Government of Russia affiliated entities includes legal persons (i) owned or controlled directly by the Government, (ii) where the Government holds directly or indirectly a minority interest, (iii) which receives or has received financing directly or indirectly from the Russian Direct Investment Fund or National Wealth Fund or (iv) otherwise obtains a financial benefit or other material benefit from the Government.  

Of particular note and of importance to those involved in international trade is the number of sectors listed as sectors of strategic significance to the Russian Government and for which a party can be designated by virtue of their involvement. These sectors include (a) chemicals, (b) construction, (c) defence, (d) electronics, (e) energy, (f) extractives, (g) financial services, (h) information, communications and digital technologies and (i) transport.

Whilst the UK has not yet designated a person under these amendments, the messaging in relation to potential future action if a resolution to current issues cannot be found is clear. Given the nature of sanctions and the fact that they can change with immediate effect, it would be prudent for any business that may be caught by these sanctions to consider and evaluate the risks they may be exposed to and try to mitigate those risks accordingly, for example by including appropriate contractual sanctions clauses.

Please contact the authors if you have any query in relation to this article or on sanctions generally.
Fionna Gavin

Fionna Gavin Partner

James Rose

James Rose Managing Associate

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