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The UK’s New Autonomous Export Control and Sanctions Regimes

  • United Kingdom
  • Brexit
  • Competition, EU and Trade
  • Sanctions

04-03-2021

Following the end of the Brexit transition period on 31 December 2020, the UK is now a third country vis-a-vis the EU. In this briefing we explore the impact of this change in relationship on the UK’s autonomous export control framework and sanctions regimes

Export Controls

Under EU law, exports of controlled products are governed by Council Regulation (EC) No 428/2009 (the “EU Dual-Use Regulation”). Prior to the end of the Brexit transition period, the EU Dual-Use Regulation was directly applicable in the UK. From 1 January 2021, the UK now operates its own dual-use export control regime that is independent from the EU and applies alongside the UK’s pre-existing independent military export control regime. For the time being, the UK has retained and transposed the EU Dual-Use Regulation into UK law, which means that the existing legislation will continue to operate in the UK as it did prior to the end of the transition period – therefore the key difference is that the UK is now treated as a "third country" from the perspective of EU export controls, and vice versa (with the exception of Northern Ireland, as discussed below). This means that an export licence is required for dual-use items moving between the jurisdictions.

Key Impact of Brexit

The most significant immediate impact of these changes is the increased administrative burden for exporters. Following the end of the transition period, export licences are now required for the movement of controlled dual-use items between Great Britain and the EU (this was previously not the case, save for the most sensitive items listed in Annex IV of the EU Dual-Use Regulation). Both the EU and UK have sought to mitigate the impact on trade by allowing exporters to use open general export licences (“OGELs”), which can be used in place of specific individual export licences and apply to multiple exports to various consignees. In order to use the relevant OGELs to export dual-use items to the EU, UK businesses must register via SPIRE, monitor compliance with the OGELs conditions, and cooperate with the authorities during regular audits relating to the use of the licences.

In terms of exports to other countries, licences issued by the UK are no longer valid for exports from the EU to the rest of the world. Likewise, export licences issued by EU Member States are no longer valid for exports from the UK.

Trade with Northern Ireland

Pursuant to the Protocol on Ireland/Northern Ireland, the EU Dual-Use Regulation continues to apply directly in Northern Ireland. As a result, the majority of dual-use goods moved between Northern Ireland and the EU should not require an export licence as they should be treated as intra-EU transfers in both directions (with the exception for sensitive items listed in Annex IV to the EU Dual-Use Regulation).

Nonetheless, there appears to be a degree of uncertainty and inconsistency with regard to the status of exports between Northern Ireland and Great Britain – while the UK Government has issued guidance stating that there are no licensing requirements relating to the movement of dual-use items from Northern Ireland to Great Britain, the EU has stated in a notice to stakeholders that shipments of dual-use items between Northern Ireland and Great Britain are considered exports for the purposes of the EU Dual-Use Regulation, and that the UK designated authority is to act as competent authority for the purpose of the EU Dual-Use Regulation. At the time of writing, this inconsistency does not appear to have been resolved.

Future Developments

Although, for the time being, the EU Dual-Use Regulation has been kept as retained EU law in Great Britain, the UK can decide to diverge from the EU’s rules in the future. In addition, the EU is expected to update the Dual-Use Regulation during 2021; unless the UK independently decides to make similar amendments, there may be regulatory divergence fairly soon. It remains to be seen whether the UK will follow suit and, if so, the extent to which its reforms would match those of the EU.

Any future differences between the EU’s and the UK’s list of controlled dual-use items are likely to increase the administrative burden on UK businesses (who may need to classify their items under two sets of legislation). 

Sanctions

Exporters will also need to be mindful of changes resulting from the newly independent UK sanctions regime. As noted in the previous Eversheds Sutherland briefing, the new UK sanctions regimes have now officially come into force under the Sanctions and Anti-money Laundering Act 2018 (the “SAMLA”). Divergence from the EU regime is already taking place – for example, unlike under the EU regime, the concept of financial services under UK regimes will now include the processing of payments. The SAMLA also contains a provision that will enable designation by description rather than name, which is not currently a feature of the EU sanctions framework – this method of designation has not yet been used, and it remains to be seen whether difficulties arise in terms of accessing information that is reliable and sufficient to allow such assessments to be made.

It is important to note that, from 1 January 2021, sanctions licences that were previously issued in the UK will only cover UK nationals and activities with a UK nexus, and will not cover the activities of EU nationals. Likewise, licences granted in EU Member States will only cover activities with a relevant EU nexus, and not UK nationals acting outside the UK.

It will also be crucial to check whether the various exemptions under the sanctions legislation continue to apply to business transactions. For example, the so-called ‘trade finance’ exemption under the EU sanctions regime against Russia – under which the restrictions on extending credit to sanctioned entities do not apply to import or exports of goods between the EU and a third country – has been amended in UK legislation to reflect the fact that the exempted imports/exports now need to be between the UK and a third country.

The already emerging divergence between the UK and EU sanctions regimes means that, going forward, businesses will likely need to consult both consolidated lists to make sure that a proposed transaction does not fall foul of sanctions laws of either jurisdiction.