This article examines the changes to be enacted by the The Iran (Sanctions)(Human Rights)(EU Exit) Regulations 2019 (“the Regulations”) to the UK’s existing sanctions regime and assesses the impact on those in the UK engaged in trade with Iran in light of recent developments in the Gulf of Tormuz and the current course of the Brexit process.
The Regulations cover only the restrictions on the trade of “internal repression goods” and “internal repression technology” (e.g. firearms, explosive and any technology specifically designed to develop such items). It is uncertain what form any future regulations will take regarding other sanctions-related goods such as commodities, but it may well be that the more flexible approach in the Regulations set out below is reflected in these other areas.
The Regulations were enacted by the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) and come into effect upon the UK exiting the EU. The purpose of SAMLA was to ensure a smooth transition from the EU-derived sanctions regime currently in place once the UK exits the EU; however, there are some noticeable distinctions in the future Regulations:-
- The asset freeze provisions in the Regulations reflect those in the existing regime and enable asset freezing measures to entities that are directly or indirectly “owned or controlled” by a designated person. However, it is noticeable that the Regulations include much more detail on what constitutes the ownership of an entity (such as whether someone will be considered to hold shares or voting rights “indirectly”) than the current EU regulations. Such clarity is of course to be welcomed by anyone engaged in trade with Iran as they put in place measures to ensure compliance.
- The Regulations cover the issuance of general licences (a licence allowing multiple parties to carry out specified activities) without having to obtain a specific licence. The current sanctions regime under EU Council Regulation (EU) No 267/2012 prohibits issuing a general licence. Hopefully this is indicative of a more flexible approach to be adopted by the UK government in the future (of course such licences would not undermine the purpose for which the sanction was enacted).
- Most notably the Regulations expand the bases for disclosure of information by the Secretary of State, Treasury and HMRC to 3rdparties, including for the purpose of “facilitating the exercise by an authority outside the United Kingdom or by an international organisation of functions which correspond to functions under these Regulations”. The Regulations also specifically permit disclosure to “any other regulatory body (whether or not in the United Kingdom)”, expanding upon the previous wording that referred to regulatory bodies “including those of Member States”.
This means that a UK-citizen will be liable to have the information they provide for a licence to trade with Iran being disclosed to the United States potentially for the purpose of assessing any breach of US sanctions.
Such concerns should be tempered by the UK’s confirmation that it intends that it intends to uphold existing EU Regulations blocking prosecution of Member States’ citizens for breach of US sanctions concerning Iran. However, there are no such provisions covering this within the current Regulations.
- Under existing EU regulations “all natural and legal persons” are required to report whether a person has committed an offence under the regulations or is a designated person. Under the Regulations such reporting requirements will only apply to legal professionals, estate agents, accountants and financial institutions. Whether the government intends to expand this to other businesses (and there are potentially a very large number) remains to be seen.
The Regulations, despite largely mirroring the existing regime do have material differences and in particular any persons applying for a licence in future will need to be wary of the information they provide given that it may well be disclosed to the US authorities. These provisions of the Regulations do cause concern (and they are likely to be included in any future regulations), but they reflect the post-Brexit reality whereby the UK has to delicately balance its relationships between the EU and the USA- particularly when they are in conflict over Iran.