Global sanctions – differing approaches to provision of services

This article was co-authored by Bushra Jalil, Trainee Solicitor.

More than two years have elapsed since Russia’s invasion of Ukraine, and multi-national businesses and their insurers face ongoing challenges in respect of the differing regional approaches to sanctions. The situation is fast moving, and many countries have hugely expanded their sanction measures against Russia to condemn the invasion and to promote foreign policy objectives.

The approach to sanctions varies by government, which has a significant impact on cross-border trade. Following our recent global sanctions webinars, this article focuses on the impact these differing approaches have to the provision of cross-border professional services.

You can request a recording of our global sanctions webinar here.

UK position

The deepening of financial and investment related sanctions has led to the UK targeting a prohibition on the provision of various services to persons connected with Russia, including accounting, engineering and legal services.

(Re)insurers will be affected by prohibitions on providing financial services in relation to the export, supply, delivery or transfer of i) restricted goods or technology, ii) energy related goods or iii) infrastructure related goods, to a person connected with or for use in Russia.

There is also a specific prohibition on the provision of (re)insurance services relating to aviation and space goods or technology to a person connected with Russia or for use in Russia.

While exports from Russia to third countries cannot be caught within the remit of the UK jurisdiction (unless there is a UK nexus), the UK government is trying to capture services ancillary to trade, for example where insurance is provided. This can lead to an overlap of the provision of services measure with trade sanction measures.

Under UK jurisdiction, all individuals and legal entities within or who undertake activities within the UK’s territory are caught by the provisions, irrespective of where their activities take place.

US position

US sanctions are primary in nature – they aim to control the contact of US persons and entities from engaging with Russia - and they are list based; there is no general prohibition on dealing with Russia or with Russian individuals. Unlike the approach taken by the UK, US sanctions target those specifically identified individuals and entities.

US regulations have been extended over recent months to include the imposition of secondary sanctions on those who have materially assisted or provided support, including financial, material or technological support for goods or services.

Asia Pacific (APAC) approach

APAC, as a large and diverse region, historically takes a less uniform approach to sanctions against Russian entities, and many countries in the region do not generally impose unilateral sanctions in absence of the passing of UN Council measures. This results in varying levels of sanctions and these generally fall into the broad categories of export controls and financial measures.

These sanctions are often targeted and sector specific. For example: Singapore has imposed restrictions on financial institutions and on the export of certain categories of goods; Japan and Australia have extensive sanctions in place; Indonesia has no sanctions in place and continues to actively trade with Russia.

The varying circumstances and responses to trade mean that should businesses and insurers wish to do business in the APAC region, it is crucial to seek sanctions and compliance advice.

Comment

Sanction measures by various states have sharply increased in recent months. Foreign policy objectives play a key factor in countries’ decisions in the varying approaches they take.

In a year when elections continue to take place across multiple counties, any change in government could result in a shift in approach and future policy towards Russia and its relations with foreign governments.

This means that carrying out due diligence and risk assessments in light of the rapidly changing landscape will be key for businesses and insurers operating across different jurisdictions.  Ensuring compliance with the relevant international trade sanctions and regulations and mitigating regulatory and legal risks to businesses will become increasingly important.

It is likely sanctions against Russian entities will continue to evolve, and in some cases be pursued aggressively in respect of secondary sanctions on those who indirectly provide support through goods or services. This evolving landscape does, however, depend on what any new governments consider their global trade relationship priorities to be.

Related items:Sanctions against Russia – March 2024 update