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Rayner my parade! The importance of specialist advice.
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The government has today laid before parliament regulations further extending the prohibition of the facilitation of sanction breaches, limiting access to advice from UK lawyers by individuals and businesses tied to the Russian regime, even where they have no underlying nexus with the UK.
The government has said that The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023 seek to block UK legal professionals from advising Russian companies in certain business deals, such as trade deals between global corporations or international money lending. The prohibition does not however extend as far as the EU ban on legal services.
Firms will need to review their risk assessments to ensure compliance from 30 June 2023.
A new provision – namely Regulation 54D(1) – introduces the new prohibition:
A person must not directly or indirectly provide legal advisory services to any person who is not a United Kingdom person in relation to, or in connection with, any activity (“the relevant activity”) which satisfies the condition in paragraph (2), whether or not those services are provided to a person in the United Kingdom.
Paragraph (2) contains the conditions which a “relevant activity” must satisfy, namely:
- It must be either prohibited under regulations 11 to 18C of Part 3 (Finance) (Chapters 2 to 6) or Chapter 6B of Part 5 (Trade), if the relevant activity was undertaken in the UK or done by UK person, or
- Contravene regulation 19 or 55 if done by a United Kingdom person or was undertaken in the United Kingdom.
The activities prohibited include the granting of a loan and trust services.
It is an offence to contravene this prohibition.
Legal advisory services
The ban relates to advice, not to, for example, legal representation in court or arbitral proceedings.
The new regulations amend the existing Russia (Sanctions) (EU Exit) Regulations 2019 by adding a new definition of “legal advisory services”, which means the provision of legal advice to clients in non-contentious matters, involving any of the following:
- the application or interpretation of law;
- acting on behalf of a client, or providing advice on or in connection with, a commercial transaction, negotiation or any other dealing with a third party; or
- the preparation, execution or verification of a legal document.
Legal advisory services do not include any representation, advice, preparation of documents or verification of documents undertaken as part of legal representation services provided in, or in anticipation of:
- any proceedings before administrative agencies, courts or other duly constituted official tribunals; or
- arbitral or mediation proceedings.
A “legal document” includes any document which is governed in whole or in part by law, or which satisfies a legal requirement. “Legal representation services” include advice given in relation to a dispute or potential dispute, and on the settlement of a dispute, whether or not the types of proceedings referred to above are commenced in relation to the dispute.
Potential defence
It is a defence for a person to show that they did not know and had no reasonable cause to suspect that the relevant activity satisfied one of the conditions in paragraph (2) above (Regulation 54D(4)).
Exceptions
There are also exceptions where the provision of legal advisory services is done for the following purpose/s (Regulation 60DB):
- for the official purposes of a diplomatic mission or consular post in Russian, or of an international organisation enjoying immunities in accordance with international law;
- in satisfaction of an obligation in respect of the provision of legal advisory services to any person where the services are provided in relation to the discharge of or compliance with UK statutory or regulatory obligations;
- providing legal advice to any person as to whether an act or a proposed act complies with the Regulations; or
- in satisfaction of an obligation arising under a contract concluded before 30th June 2023, or an ancillary contract necessary for the satisfaction of such a contract, provided that:
- the act is carried out before the end of 29 September 2023, and
- the person notifies the Secretary of State of the provision of the services, before or after the act is carried out, by the end of 29 September 2023.
Existing exceptions in the Regulations have also been extended to include the provision of legal advisory services in relation to, or in connection with, a relevant activity, such as where a person provides a justification to the Secretary of Statement that the act is dealing with an emergency.
Further information
If you have any questions regarding this blog, please contact Julie Norris and Alfie Cranmer in our Regulatory team.
About the authors
Julie is a partner in the Regulatory team. She predominantly acts in legal services sector, advising law firms, solicitors, and barristers on regulatory compliance, investigations, adjudication, enforcement, and prosecutions.
Alfie is an associate in the firm’s Regulatory team. He specialises in advising regulated professionals who are subject to investigations and disciplinary proceedings in the legal, finance and healthcare sectors. He has a particular interest and expertise in advising students who face behavioural, sexual or academic misconduct allegations brought by their education providers.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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