‘Cause you’re hot, then you’re cold. You’re yes, then you’re no

When is a sanction not a sanction, but still a headache?

We are increasingly seeing individuals and entities becoming subject to designation or sanction in one jurisdiction and yet remaining free of sanction elsewhere. Or subject to a sectoral prohibition in the US and yet not in Guernsey. And, as political ideals, aims and goals in the US, EU and UK become more….distinct, these differences between countries’ lists are likely only to increase.

While there are sanctions in place in respect of a number of jurisdiction, Russia is, of course, the current hot potato. Only last week, President Trump wrote as if to President Putin –

“Settle now, and STOP this ridiculous War! IT’S ONLY GOING TO GET WORSE. If we don’t make a ‘deal’, and soon, I have no other choice but to put high levels of taxes, tariffs, and sanctions on anything being sold by Russia to the United States, and various other participating countries.”

Whether or not this apparent ramping up will come to pass, and whether or not the UK and EU will follow suit, remains to be seen.  But the chances of differences in approach appear increasingly likely.

Nearly every jurisdiction in the western world has imposed sanctions on Russia in one form or another, with, up until now at least, obvious attempts made to provide uniform and blanket coverage of the principles underlying those sanctions. The political decisions to designate or not to designate are, however, a different matter entirely. Pity the poor cross-jurisdictional fiduciary that happens to find on its books a company that has been put on the US’s / OFAC’s Sanctions List, yet which has not been designated under the UK’s / OFSI’s powers. Or the Guernsey bank with offices in Europe and clients who are Designated Persons vis a vis Guernsey (via the UK), but not subject to any sanctions from the European Union.

It happens. And it causes a headache. The legal answer is of course very easy. The office politics of dealing with such a situation can, though, be tricky, and tensions, or at least perceived tensions, can quickly arise between office A’s sanctions compliance and office B’s contractual requirements.

As ever, the answer is often a carefully documented audit trail of decisions made, and of legal advice taken. What might seem an obvious legal answer can often benefit the bigger, political picture for the firm if it is set out in writing and in black and white. That way, hopefully, cross-jurisdictional infighting might be avoided.

It would be lovely to be able to say that Dr Z is subject to sanctions everywhere, full stop. In the absence of such harmonisation, however, one must tread the legal and political tightrope with supreme care. In the meantime, as the supreme wordsmith Katy Perry says, we’re “stuck on a rollercoaster, can’t get off this ride….”

For advice, please contact Robin Gist, Alison Antill, Rebekah Johnston, Jana Valkovska, Charlotte Tomlinson, Glyn Davies or your usual contact at Ferbrache & Farrell.