The UK Parliament’s EU External Affairs Sub-Committee published its inquiry report on the UK sanctions policy post-Brexit on December 17, 2017 It takes a comprehensive look at Brexit impacts and the future of the UK sanctions list and embargoes. The original report can be found here.
The UK government's response to this Parliament report was released on February 26, 2018. The publication of the response is available here.
For companies engaged in UK trade with dual-use goods and controlled items this means: Change is ahead for the UK sanctions list and embargoes. But the scope and impact of future UK export control changes on the business community is not known at this point.
Key findings of the Parliament’s report conclude that the effectiveness of UK sanctions and embargoes will be undermined unless the UK can quickly agree arrangements for future sanctions policy co-operation with the EU.
Actual changes to the UK sanctions list and embargoes, however, are not expected to take effect during an initial Brexit transition phase. But while certain alignment with current EU, US and UN sanctions is expected under new UK sanctions policies, the impact of changes and the scope of self-governance is currently unclear.
You can find the key findings of the UK sanctions policy inquiry in 16 summarized points in the next section. Special consideration should be given to the details of point 14 and 15 as follows:
- “The extent to which businesses operating in the UK are affected by the change to an independent sanctions regime will depend on how closely the UK continues to align with the EU’s restrictive measures. Should the UK choose to diverge from the EU-27’s measures, this could lead to additional administrative burdens for businesses. (Paragraph 152)“
- “The UK has the expertise and capacity to develop and implement sanctions outside the EU. The Foreign and Commonwealth Office is developing a dedicated sanctions unit, and depending on the UK’s sanctions policy decisions outside the EU, further resources might be needed. (Paragraph 153)“
So how exactly the future UK sanctions list and embargoes will deviate from current and future EU policies is not know yet. But it's clear that both the business community engaged in trading dual-use goods and controlled items across UK borders and the government need to prepare now for changes in the UK sanctions policy after the Brexit Transition Period.
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The following points are the key findings of the House of Lord inquiry and resulting report with its government response.
At a glance: 16 government report findings on future UK export controls
- The most effective sanctions regimes are designed and applied alongside international partners, to strengthen the signal to the target and deliver the maximum possible economic impact. (Paragraph 43)
- The EU’s sanctions regimes have a significant impact where agreement cannot be reached at the UN, or agreed UN measures are limited in scope. This reflects the significance of the EU as an economic bloc, and the signalling power of 28 Member States acting in concert. (Paragraph 44)
- Financial sanctions can be particularly effective in applying pressure to targeted entities. The role of the City of London as an international financial centre heightens the value of participation by the UK in collective sanctions regimes, at both UN and EU level. (Paragraph 45)
- The UK is widely recognised as playing a leading role in developing the EU’s sanctions policy, and the listings for these regimes. In cases such as Russia and Iran, both UK foreign policy priorities, the collective imposition of restrictive measures by 28 Member States has magnified their economic impact and projected a strong message to the targeted entities. (Paragraph 67)
- The UK is embedded within a formal structure for co-operation on sanctions with the 27 other Member States. This is further strengthened by informal opportunities to engage actively, in the margins of formal EU meetings and wider foreign policy discussions. (Paragraph 68)
- While the Sanctions and Anti-Money Laundering Bill would allow the UK to implement unilateral sanctions regimes, sanctions are most effective when imposed in concert with international partners. We therefore welcome the Government’s intention to continue to work in close partnership with the EU and other international partners after Brexit. (Paragraph 144)
- Although the UK will leave the common EU framework for designing and imposing sanctions, the common interests and threats facing the UK and the EU-27 will not change fundamentally. (Paragraph 145)
- The US and the EU already co-ordinate closely on the design of sanctions. It would be desirable for the UK, the US and the EU to maintain a broadly similar approach to sanctions policy after Brexit. (Paragraph 146)
- The UK could choose to align itself with EU sanctions after Brexit. This would preserve the current unity of approach by the 28 countries, but would require the UK to implement decisions taken by the EU-27, without having any influence over their design, or voting rights. (Paragraph 147)
- Informal engagement with the EU on sanctions—as undertaken by the US—can be very valuable, and should be pursued by the UK. Informal dialogue is, however, no substitute for the influence that can be exercised through formal inclusion in the EU meetings where the bloc’s sanctions policy is agreed. (Paragraph 148)
- It is not yet clear what the “tailored arrangement” proposed by the Minister for cooperation between the UK and EU on sanctions would involve. The Government’s ambition is for an “unprecedented” level of co-operation, which is an untested approach. (Paragraph 149)
- The UK’s new legal framework for sanctions, and position outside the Single Market and EU customs union, could limit the extent to which the UK is able to enter into such a partnership on sanctions with the EU. (Paragraph 150)
- If participation in the Common Foreign and Security Policy after Brexit is not possible—or not sought by the UK—then the Government should propose that a political forum be established between the UK and the EU, for regular discussion and co-ordination of sanctions policy. (Paragraph 151)
- The extent to which businesses operating in the UK are affected by the change to an independent sanctions regime will depend on how closely the UK continues to align with the EU’s restrictive measures. Should the UK choose to diverge from the EU-27’s measures, this could lead to additional administrative burdens for businesses. (Paragraph 152)
- The UK has the expertise and capacity to develop and implement sanctions outside the EU. The Foreign and Commonwealth Office is developing a dedicated sanctions unit, and depending on the UK’s sanctions policy decisions outside the EU, further resources might be needed. (Paragraph 153)
- Sanctions policy is one subset of wider foreign policy. The influence of the UK on the sanctions policy of its international partners will depend on the extent to which it is able to retain its authority and leadership on key foreign policy dossiers after Brexit. Further consideration of the impact of leaving the EU on the UK’s ability to pursue and achieve its foreign policy objectives will be urgently required. (Paragraph 154)