Sanctions Round-Up: Government bans on architectural and engineering services come into force

Introduction

As we previously reported, the UK Government announced on 30 September 2022 its intention to ban the provision of certain services to individuals connected to Russia, including architectural, engineering, advertising, IT consultancy and transactional legal services.

On 15 December 2022, the Russia (Sanctions) (EU Exit) (No 17) Regulations 2022 were passed, officially bringing these bans into effect on 16 December 2022.  This move was a continuation of sanctions against Russia in response to its invasion of Ukraine.

Violating these prohibitions can result in criminal liability with a maximum sentence of up to seven years in prison and/or an unlimited fine. The Office of Financial Sanctions Implementation (OFSI) also has the power to impose civil monetary penalties of up to the greater of £1 million or 50% of the estimated value of the breach. Company officers may also bear personal liability for their business’s failure to comply.

“Persons Connected with Russia”

The No 17 prohibitions forbid the provision of services to persons “connected with Russia”, as defined in Regulation 19A(2) of the Russia (Sanctions) (EU Exit) Regulations 2019. This includes individuals located or ordinarily resident in Russia, or organisations incorporated or constituted under Russian law or otherwise domiciled in Russia. This definition does not limit the prohibitions to specifically named individuals or organisations on the sanctions list. However, the ban only applies if the recipient has a real territorial link to Russia. Simply being a Russian national resident in the UK would not be sufficient for the ban to apply (unless that person or entity is on the designated persons list or subject to other sanctions measures).

Scope of “Architectural Services”

Schedule 3J of the legislation defines “architectural services” broadly, encompassing a range of different elements and phases of architectural projects, including advisory and pre-design services, design services, contract administration services, combined design and administration services, other architectural services, urban planning services, and landscape architectural services. It is advisable for businesses to assume that any service with an architectural dimension is covered by this definition.

Scope of “Engineering Services”

Similarly, the legislation defines engineering services broadly, including design services, project management services, and contract administration services for engineering projects.  The full list, set out in Schedule 3J, spans four distinct classes and 21 individual sub-categories of activity.  It is advisable for businesses to assume that any service with an engineering dimension is covered by this definition.

Applying for Licences

Licenses to Provide Prohibited Services Under certain circumstances, it is possible to obtain a license to provide services that are otherwise prohibited under the No 17 Regulations. These licenses may be granted by the Export Control Joint Unit (ECJU) in the UK Government if it is in the national interest to do so. Alternatively, licenses related to dealing with designated persons may be applied for through the Office of Financial Sanctions Implementation (OFSI). It is important to note that the burden of proof is on the applicant to demonstrate that the national interest would be served by granting the license.

Conclusion

It is crucial for businesses to be aware of these new sanctions and to ensure that they do not provide prohibited services to individuals or organisations connected with Russia. The penalties for violating these prohibitions can be severe, including criminal liability and monetary fines. In order to protect your business, it is important to carefully consider whether any potential clients or projects may be connected with Russia and to seek legal advice if necessary.

If you have any questions relating to sanctions compliance, please do not hesitate to contact Paul Henty or Harry Coates of this firm.