Brexit stirs doubts about future of EU sanctions regime

19th August 2016. By Matthew Holehouse

The UK’s departure from the European Union raises questions about the bloc’s ability and appetite to impose economic sanctions on companies and individuals linked to rogue regimes.

Britain has been one of the bloc’s most active advocates for tough measures, such as those imposed against Russia’s state banks and oil industry following the annexation of Crimea in 2014.

The UK government has also gathered evidence and carried out the legal-preparatory work for roughly half of the EU’s own sanction programs. An EU without the UK could struggle to replicate that expertise swiftly.

Preserving the effectiveness of the EU’s sanctions regime, would ultimately be in Britain’s best interest. So British officials are understood to be considering ways to salvage the effectiveness of union’s sanctions architecture.

One possibility under review is an ambitious “27 + 1” format that would see the UK continue to collaborate with its European neighbors. That option would require a change to the EU treaty.

Another option would see the US share more information with both the EU and the UK. But London and Brussels might make independent decisions on how to act on that information. The US government is understood to be nervous about the split, especially at a time of increased tension with Russia.

EU regime at risk

About half of the sanctions imposed by the EU involve the transposition of UN Security Council resolutions into EU law — such as the wide-ranging embargo on the North Korean economy and the asset bans and travel freezes imposed on associates of Libyan leader Muammar Gaddafi. The preparatory work is conducted by US, French and British teams in New York.

Following a Brexit, the UK will need to transpose UN decisions into domestic law. That’s a relatively simple process. Much more uncertain is the fate of the EU’s autonomous sanctions regime, through which London has pushed for robust action against Russia, Zimbabwe and Burma.

The EU has relied heavily on the UK to gather intelligence and prepare evidence dossiers that can withstand challenges at the EU’s highest court.

Around half of the EU’s autonomous sanctions, including those related to Crimea, are based on citations prepared in London by a team of 30 officials divided between the Foreign Office, the Treasury and the Department for Business, Energy and Industrial Strategy.

Similar teams in other countries are much smaller or nonexistent. The EU’s diplomatic unit —the European External Action Service — is developing its own sanctions operation. But several of its key officials are UK government employees whose secondment to Brussels would end after a Brexit.

When companies or individuals challenge sanctions at the EU Court of Justice in Luxembourg, the British government often sends an amicus curiae, or “friend of the court,” to support lawyers representing the interests of EU member states. This practice is highly likely to cease once Britain withdraws, it is understood.

Many targets of sanctions have turned to British lawyers to challenge their case in Luxembourg. This work could dry up, as under current rules, only lawyers qualified to practice in an EU state can plead at the bloc’s highest court. An increasing number of UK lawyers are, however, taking steps to gain bar membership of an EU country to maintain their pleading rights.

Less influence now?

Britain’s influence to lobby for sanctions in the event of a new crisis could diminish even before the country leaves the bloc. The voices of EU countries with less appetite for confrontation could prevail in negotiations.

Ahead of the referendum on EU membership in June, the UK government warned that Norway’s approach of simply mirroring EU sanctions decisions, could amount to a major loss of influence.

Defense Secretary Michael Fallon argued that the EU, without British pressure, would have settled for “weaker” sanctions over Ukraine.

In 2014, following the annexation of Crimea, the EU imposed travel bans and asset freezes on 149 high-ranking Russian and Ukrainian officials. The union also slapped asset freezes on some 37 entities in Crimea and eastern Ukraine, including militia groups and appropriated businesses.

Five Russian state banks — including Sberbank and Rosneft Bank — three energy companies and three defense companies were banned from raising long-term loans in the EU.

The EU also forbade companies to invest in Crimea or to export dual-use military equipment and deep-sea oil-exploration technology to the disputed peninsula. The ban includes preventing European-owned cruise liners from docking in Crimean ports.

	Eliot Gao