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The Ukraine Recovery Conference and the strengthening of the UK sanctions approach against Russia

Posted: 24/11/2023

On 21-22 June, the UK and Ukraine co-hosted the Ukraine Recovery Conference 2023 (URC), bringing together a coalition of thousands of representatives from 59 countries – across government, business and civil society – to commit their support to Ukraine’s recovery. This year’s event followed the 2022 URC, which took place in Switzerland and launched the Lugano Principles, which were designed to lay the foundation for Ukraine’s reconstruction process following its invasion by Russia in February 2022. 

Alongside co-hosting the URC, the UK government has recently introduced new legislation enabling sanctions on Russia to be maintained until Moscow pays compensation to Ukraine, and is introducing a route for frozen Russian assets to be donated for Ukrainian reconstruction. This delivers on the commitment made by the Prime Minister and G7 leaders in May 2023 that sovereign assets will remain immobilised until Russia compensates Ukraine for the damage it has caused. The then Foreign Secretary, James Cleverly, announced these new legal provisions on 19 June, emphasising the strengthening of the UK’s sanctions approach and affirming that the UK is ‘prepared to use sanctions to ensure Russia pays to repair the country it has so recklessly attacked’.  

These additional provisions came into effect on 20 June and were enacted by The Russia (Sanctions) (EU Exit) (Amendment) (No 2) Regulations 2023, which amended The Russia (Sanctions) (EU Exit) Regulations 2019. 

The new legislation additionally introduces more onerous reporting obligations on designated people and entities through the Russian sanctions regime. This increased responsibility represents a key development of the UK’s existing compliance structure, and imposes further restrictions for those hiding assets in the UK by inflicting further financial penalties/confiscation of assets on anyone failing to disclose them. 

Sanctions have the potential consequence of preventing performance of contracts that involve the delivery of goods to Russia, or areas of Ukraine under Russian control. They may also prohibit performance of contracts involving commercial payments to a sanctioned entity or person, or to an entity which is owned or controlled by a sanctioned entity or person. Breaches of sanctions can have both severe criminal and civil penalties. Given this, it is critical for companies (and their directors, senior managers and employees) to be aware of the sanctions risks and of their own personal exposure. 

The sanctions regime is complex, multilateral and continues to evolve in response to the situation on the ground in Ukraine. Companies doing business across multiple jurisdictions face considerable challenges in addition to simply ensuring compliance with sanctions in their ‘home’ country. For multinational entities, legal compliance necessitates considering the application of varied and potentially conflicting sanctions regimes concurrently. Businesses must, in particular, be aware of the importance of ensuring compliance across all interactions with their subsidiaries, vendors and customers. 

Within the context of increasing scrutiny on both individuals and entities in relation to the Russian sanctions regime, it is important for companies to take proactive steps to protect themselves by ensuring their practices are compliant, and it is strongly recommended that businesses seek independent legal advice in relation to whether any actions risk contravening the relevant regulations.

In assisting clients with navigating the complex sanctions landscape, our firm is familiar with all relevant legislation, and can provide guidance in relation to the applicability of the UK and/or EU sanctions regimes. Please get in touch with one of our specialist sanctions lawyers for more information on this area. 

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Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP