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After the election: all change for UK sanctions litigation? | Feature

Though polls consistently show a Conservative lead, it would be a brave writer who’d hazard a prediction of the outcome of the UK General Election.

But one thing is clear.

If the new government seeks to exit Britain from the European Union in line with the 2016 referendum result, assuming there are no unexpected amendments to the current legislative agenda it will mean a dramatic change to the UK’s economic sanctions regime, and the probability of more sanctions cases in the domestic courts.

Current framework

The UK currently implements sanctions in accordance with its international obligations. These include European Union sanctions, which are given direct effect in the UK by virtue of the European Communities Act 1972, and UN sanctions (to the extent these are not already reflected through EU sanctions), which are effected through domestic legislation. There are also narrowly defined circumstances in which the UK implements its own sanctions, such as in the fight against international terrorism.

Individuals and companies can be designated under any of these three sanctions frameworks.

Brexit will bring an end to the automatic implementation of EU sanctions, although the UK will still be required to implement UN sanctions through domestic legislation. Instead there will be a lacuna where the UK will be free to develop its own autonomous sanctions programme once it is no longer subject to the EU’s Common Foreign and Security Policy.

The framework for this programme is found in the Sanctions and Anti-Money Laundering Act 2018 which received Royal Assent on 23 May 2018.

The result of this is that individuals may find themselves designated under UK-specific sanctions, as well as under European and/or UN sanctions.

Challenging sanctions designations

The UK government’s power to forge its own sanctions path in accordance with its chosen foreign policy objectives will have interesting implications at a more practical level for those wishing to overturn sanctions designations made under those policies.

The traditional forum for those seeking annulment of sanction-designations is within the very limited options available under the UN system (for UN sanctions), or before the European courts (for EU sanctions). While enforcement of those designations may occur at country level, the decisions to designate are not those of the individual state and so there is limited scope to bring claims for judicial review in domestic courts (although there are exceptions).

However, once the UK government takes its own decisions on sanction-designation (rather than simply enforcing decisions made by the executive branches of the EU), it will itself be vulnerable to judicial review by the English courts. And indeed, the Sanctions and Anti-Money Laundering Act gives detailed guidance on reviews by domestic courts of designation decisions. 

Consequences for designated persons

Where previously a designated person seeking to challenge that designation needed only to apply to the European courts for annulment of any EU measure directed against them, two separate sets of litigation may now be required: one in the domestic court and the other before the General Court in Luxembourg.

In some circumstances the UK government may mirror EU sanctions, especially given Westminster’s expressed desire to carry on working closely with the EU after Brexit. (Although note that in a recent House of Commons debate on the future of the UK’s sanctions policy post Brexit (held on 3 October 2019), the government said it could not set out in detail yet how the UK and EU will cooperate on sanctions post Brexit, which was ‘evolving all the time’, but wanted the UK to continue to be ‘a global leader on sanctions’ and confirmed that sanctions will remain a key part of the UK’s foreign policy after we leave the EU.) In these cases, someone designated under those sanctions will need to consider seeking annulment of the European Council’s decision through the General Court of the EU as well as separate proceedings for the annulment of the decision of the UK government through the English courts.

A blessing in disguise? 

And yet, contrary to first impressions, these changes could bring advantages to designated persons. While on one hand the additional layer of litigation could potentially add to costs, the flipside is that designated persons will now be able to be more strategic in their challenges.

For example, if assets subject to an asset freeze are largely located in the UK, or if a designated person wishes to travel to and from the UK, they may decide that a challenge to knock out the UK designation is sufficient. This would allow a potentially more focussed and efficient challenge, in courts which are generally considered to be quicker than their notoriously slow European counterparts.

What’s more the process in the European courts can be unwieldly and unpredictable, with access to interim measures in short supply. By contrast the English courts are both procedurally and substantively considered amongst the best in the world with the ability to make a meaningful order for payment of costs as well as the flexibility to grant interim remedies more freely.

A shorter, sharper success in the English courts may also have more immediate advantages. The key issue for many designated persons is not restrictions on access to their personal property (although this is of course most unwelcome); rather it is the detrimental effect such measures can have on their reputation. A successful annulment from a respected court can offer vindication.

Finally, while technically not binding on the European courts, a designated person may find that a successful judgment in the domestic courts may be persuasive in European proceedings brought on materially identical or even substantially similar measures. In this way a litigant can move to obtain relatively swift judgment from the domestic courts and seek to then deploy this as persuasive evidence in concurrent sanctions litigation in other forums.

Looking forward

These are undoubtedly interesting times for those wishing to challenge European sanctions, and for those that advise them. Brexit has undeniably thrown a spanner in the works of sanctions as an automatic expression of pan-European foreign policy. It has also created a new layer of bureaucracy for litigants to consider. However, out of chaos can come opportunity.

 

Charles Enderby Smith, Carter-Ruck


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