Increasing lists of differing sanctions complicate trade, bring legal uncertainty - lawyer

Author: Sarah Trinder


LONDON (ICIS)--Increasing trade sanctions around the globe are complicating trade as sanctions greatly differ between regions, according to an executive at UK-based law firm Eversheds Sutherland on Wednesday.

Zia Ullah (pictured), head of corporate crime and investigations at the law firm, added that around 25 countries are currently being subject to financial sanctions, an unusually high number.

“This [large number of countries under some type of santion] brings extra complexity to trade, as people question ‘what is it I can or cannot do when it comes to countries on the list?’,” Ullah said.

The lawyer was speaking at the 23rd ICIS World Base Oils and Lubricants conference in London, UK.

Obligations imposed by the EU and the US, for instance, differ. The former sanctions impacting companies which are majority owned (over a 50% stake) or controlled by the sanctioned party, while the US sanctions target any company owned by a sanctioned party.

Adding further intricacies is that whereas the US has the Countering America's Adversaries Through Sanctions Act (CAATSA), the EU decides on sanctions for the entire block but leaves it to individual member states to implement them with their own specific regulators.

When the US and the EU take opposing approaches to certain jurisdictions, trade becomes even more complex, most notably seen with Iran.

The US pulled out of the Joint Comprehensive Plan of Action (JCPOA) in November 2018, which reverted relations back to where they were prior to 2016, with any interactions with Iran prohibited in the US.

Ullah said that this was not a big change for companies operating in the US, but that US-owned foreign subsidiaries could no longer do business with Iran.

The EU, which continued to back the JCPOA, updated its blocking regulation, which had originally been brought into effect in 1996 in relation to US sanctions imposed on Cuba. This blocking regulation at the time served to make it illegal for EU citizens to block trade with Cuba.

It is now prohibited for those operating in the EU to implement blockades against Iran but Ullah said that companies have not found a great deal of comfort in the EU blocking regulation, with most opting to adopt the US sanctions in full.

There had been talk about a bartering arrangement between the EU and Iran coming into effect to facilitate trade, but Ullah said that many believe the effect of such an arrangement would be limited due to concern about US actions.

It is evident that companies now have a great deal to think about when it comes to doing trade with certain jurisdictions, with banks in some cases charging large amounts of money to investigate whether a company could do trade with Iran.

They also have to consider whether they can deal with any potential impacts on reputation, risks of criminal or civil liability for breaching sanctions and increased costs around compliance.

Ullah said that it was important for companies to take practical steps when working with sanctions, such as, to name a few, maintaining a strong paper trail, constantly monitoring sanctions updates and taking a “risk-based approach to sanctions exposure.”

It is not surprising that trade is stagnating in parts of the world, and Ullah said that there is an increasing potential risk companies will end up reducing their exposure to global trade on the back of legal ramifications.

The law firm's executive said that there was the potential for some companies to take the approach "If you can't get paid, there’s no point in trade."

Picture source: Eversheds Sutherland