The UK has followed the EU in banning the provision of legal services in the in relation to the Russian Federation
On 29 June 2023, the UK adopted amendments to The Russia (Sanctions) (EU Exit) Regulations 2019 governing sanctions restrictions against the Russian Federation, which, inter alia, impose prohibitions on the provision of legal services as part of the sanctions programme against the Russian Federation.
| Background: In 2022, the EU imposed a ban on the provision of legal services to the Russian government and Russian entities as part of the eighth package of sanctions. More details on the EU restrictions on legal services can be found in a previous REVERA article. |
What's forbidden?
Under the adopted changes to the 2019 Regulations, UK persons* are prohibited from directly or indirectly providing "legal advice" to any non-UK person, subject to certain "conditions", namely in relation to or in connection with activities that are already restricted or prohibited by other provisions of the sanctions Regulations 2019 (11 to 18C of Part 3, Chapters 2 to 6 or Chapter 6B of Part 5 of the Regulation 2019).
In the context of sanctions regulation, UK persons will be treated as:
- All persons within the UK, regardless of nationality;
- British citizens (British citizen)
- Citizens of British Overseas Territories (Bermuda, British Virgin Islands, Gibraltar, etc.)
- British subjects (British subjects)
- Companies incorporated or formed in the UK.
The prohibition covers the provision of legal services in relation to transactions in bonds or money market instruments, in connection with the granting of loans or credit agreements, correspondent banking relationships, certain financial and trust services, advice on export, import, supply, delivery of restricted goods, including dual-use goods, energy-related goods, iron and steel, luxury goods, petroleum and petroleum products, professional and business services, and others.
Importantly, the provision of legal advice relating to activities already restricted by the 2019 Regulations is prohibited even if the activity itself does not have a "UK nexus" (UK nexus). For example, the prohibition will also apply when providing legal advice to clients in relation to financial or trading activities, even if such activities do not have a direct connection to the UK (UK nexus) but would breach UK sanctions legislation if such a connection existed.
What do "legal counselling services" mean?
"Legal advisory services" include providing legal advice to a client regarding non-contentious matters relating to:
- application or interpretation of the law;
- acting on behalf of a client, or providing advice on a commercial transaction, negotiation or any other relationship with third parties;
- preparing, reviewing or certifying legal documents.
However, legal advisory services do not include representation, counselling, preparation of documents or attestation of documents performed as part of legal representation services during or in anticipation of legal representation:
- any proceedings before administrative bodies, courts or other duly constituted formal tribunals, or
- arbitration or mediation procedures (mediation).
Exceptions
That said, the adopted changes to the 2019 Rules contain several exceptions where the provision of "advisory legal services" is permitted:
- For official purposes of a diplomatic mission or consular representation in Russian or an international organisation inheriting privileges under international law.
- In connection with the obligation to provide legal advisory services to any person where such services are provided in relation to the fulfilment of or compliance with UK statutory or regulatory obligations.
- When advising any person as to whether an action/act or proposed action/act is in accordance with the Regulations.
- In fulfilling an obligation under a contract entered into before 30 June 2023 or an ancillary contract necessary for its performance, provided that:
- action (services) is carried out until 29 September 2023,
- the person notifies the Secretary of State of the provision of the relevant services by 29 September 2023.
When?
- The amendments to the 2019 Regulations in relation to restrictions on the provision of legal services came into force on 30 June 2023.
REVERA Comment
The new UK restrictive measures against the Russian Federation have a significant impact on the provision of legal services. Traditionally, English lawyers have been very popular with residents of the Russian Federation, for example, due to the following wide application of "English law" tools in transaction support. Now Russian companies cannot turn to UK law firms for transaction support, legal advice and incorporation. At the same time, the already traditional exemption for representation of interests in courts, arbitration institutions, regardless of their location, will remain in force.
In order to determine whether the provision of specific "legal advice services" falls within the restrictions of the 2019 Regulations, it is necessary to ascertain:
- Is the activity/transaction which forms the subject matter of the legal advice prohibited under UK sanctions legislation (the 2019 Regulations)?
- Whether a particular type of service provided falls within the subject matter (scope) "legal counselling services"?
Where both of the above criteria are met, the provision of "legal advisory services" is subject to UK sanctions restrictions.
Comparing the UK ban on legal services with the earlier EU ban, it should be noted that the EU sanctions on legal services are slightly broader than the UK restrictions. In particular, the EU prohibits the provision of legal advisory services regardless of the subject matter of the advice. This means that if the services fall within the concept of legal advice, such services are prohibited regardless of whether the subject matter to which the advice relates is prohibited to EU residents.
We also note that, based on the changes made to the 2019 Regulations, it remains unclear whether advising clients on compliance with foreign sanctions restrictions (e.g. US, EU) falls within the sanctions compliance exception, which, given a literal interpretation of the text of the 2019 Regulations, only applies to UK sanctions.
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