Legal services prohibition and General Licence

18 August 2023

UK Government issues Russia legal services prohibition followed by General Licence to permit compliance advice.

The Prohibition

Effective 30 June 2023, the UK Government introduced its long-awaited amendment1 to the Russia (Sanctions) (EU Exit) Regulation 2019 (Russia Regulations), described in the accompanying official statement as a “tough new law to stop Russia accessing UK legal expertise” (the Prohibition). See our visual aid explaining the amendment. The Prohibition, introduced at Regulation 54D of the Russia Regulations, is not limited to Russian clients specifically, nor does it prohibit the export of legal services to Russia in their entirety; rather it prohibits the provision of “legal advisory services” to non-UK persons “in relation to, or in connection with” activities which would be prohibited by the Russia Regulations if (hypothetically) they were undertaken by a UK person or took place within the UK. The effect is to make the current sanctions restrictions extraterritorial for lawyers by prohibiting UK lawyers from advising on overseas activities (such as commercial transactions involving sanctioned persons) which would breach UK sanctions on Russia were it not for the fact that the activities lack a sufficient jurisdictional connection to trigger UK sanctions.

The Prohibition includes exceptions permitting “legal representation services”, such as advice relevant to judicial, administrative, arbitral or mediation proceedings, to be provided, so as not to inhibit access to justice for sanctioned persons. It also excepts, via Regulation 60DB, legal advice in relation to compliance advice; however, such advice is permitted under the Prohibition only in respect of whether an act complies with the UK’s Russia Regulations, therefore excluding advice on compliance with foreign sanctions regimes or non-sanctions compliance, such as advice on bribery or money laundering issues.

The Law Society of England and Wales raised its concerns directly to the UK Government, emphasising the inherently cross-border nature of sanctions compliance, and stressing in particular the impact on compliance advice issued by multinational law firms and global banks with in-house practitioners.

The UK Government subsequently admitted in Parliament that this was an unintended consequence of the legislation:

“this legislation can be interpreted as having the unintended consequence of prohibiting persons in the UK and British nationals abroad from providing legal advice to clients seeking to comply with the sanctions regimes of our international partners. Let me assure noble Lords that it is not the intent of these regulations to prohibit this type of legal service. UK lawyers should be able to support their clients to be sanctions-compliant beyond UK law as we work closely with our allies to tighten the net on Russia’s economy.”

The General Licence

Therefore, on 11 August 2023 the Department for Business & Trade (DBT) issued a General Trade Licence (the Licence) under the Russia Regulations to address the issues with the Prohibition. The Licence (which does not have an expiry date) explicitly permits the “direct and indirect provision of legal advisory services […] so far as otherwise prohibited by Regulation 54D […] to any person” as to:

  1. whether an act or a proposed act complies with, or could trigger punitive measures in relation to, restrictive measures, including sanctions, export and import controls on or concerning Russia or the non-government controlled Ukrainian territory, imposed by any jurisdiction; and/or
  2. in relation to, or in connection with compliance with, or addressing the risk of punitive measures in relation to, (i) restrictive measures, including sanctions, export and import controls on or concerning Russia or the non-government controlled Ukrainian territory, imposed by any jurisdiction; (ii) any laws of Russia that have as their object or effect the frustration of any laws specified at (i), including sanctions, export and import controls or other restrictive measures imposed by Russia; (iii) or any criminal law imposed by any jurisdiction; and/or
  3. where the legal advisory services are provided in relation to the discharge of or compliance with UK statutory or regulatory obligations.

In order to avail of the Licence, “Providers”2 must satisfy the conditions contained in paragraph 3:

  • Notify the Secretary of State within 30 calendar days of their first use of the Licence of the name and address where records are kept in relation to the Licence using DBT’s platform SPIRE;
  • Keep records of its use of the Licence for 4 years beyond the calendar year in which the record was created, allowing inspection and copy by any person authorised by the Secretary of State;
  • Records must be kept in the form prescribed under Regulation 76 of the Russia Regulations.

Information which is subject to legal professional privilege does not need to be disclosed under the Licence.

Practical Steps

The practical effect of the Prohibition is that anyone (both foreign and UK persons in the UK and UK persons worldwide) giving legal advisory services of any type to non-UK persons will need to take extra precautionary measures to ensure that they come within either one of the exceptions to the Prohibition or the terms of the Licence.

Lawyers must in particular be aware that the Prohibition extends beyond legal advice given to Russian persons or persons connected with Russia; what must instead be considered is whether the broader transaction, advice or legal document would breach the Russia Regulations were it (hypothetically) to take place in the UK or involve UK persons. Guidance was simultaneously updated to reflect the Licence.

The Macfarlanes sanctions team was part of the Law Society Working Group which liaised with the UK Government on the Prohibition and the Licence.

Is your legal advice permitted? Expand the graphic below to find out.

1The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023 (S.I. 2023/713) which came into force on 30 June 2023.

2 Defined in the Licence as “any legal or natural person located in or operating from within the United Kingdom or which is a United Kingdom person as defined in Regulation 2 of the Regulations operating anywhere in the world engaging in any activity authorised at paragraph 1”.

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