As prospective lawyers trying to stay commercially aware, you will often see sanctions in the news, especially in stories involving Iran, Russia and North Korea. But what exactly are sanctions, who imposes them, who do they affect, and what happens if you breach them?
This overview gives law students a clear grounding before summer interviews. It is particularly relevant if you are applying to internationally focused firms or chambers, many of which have lawyers who specialise in this complex but fascinating area.
Who can impose sanctions?
Sanctions are imposed by both international and national bodies.
In the UK, Parliament can introduce sanctions through legislation. Most UK sanctions follow measures imposed by the UN Security Council or the EU Council, although the UK does occasionally impose its own independent sanctions.
The United States imposes many sanctions through the Office of Foreign Assets Control. US sanctions are not usually binding on people or companies in the UK unless there is a US connection, but the US regime can still affect non‑US actors, as explained below.
Why sanctions are imposed
Sanctions aim to influence a country or regime to change its behaviour.
They do this by restricting trade, financial activity or international engagement. For example, sanctions have been imposed on North Korea and Iran in relation to their nuclear programmes, and Russia has faced multiple sanctions since annexing Crimea in 2014.
Sanctions can affect powerful individuals within a regime or ordinary citizens.
For instance, US sanctions on Iran have contributed to currency instability and economic hardship. The intention is not to punish civilians, but to pressure governments to alter their conduct. However, this does not always work. North Korea’s population has endured severe poverty for years while the regime continued its nuclear ambitions.
What effect sanctions have
Sanctions fall into two broad categories: financial sanctions and trade or economic sanctions.
Financial sanctions target individuals or organisations. They freeze any assets held in the country imposing the sanctions and block financial transactions. The UK government publishes a list of people and organisations subject to UK financial sanctions. If someone on the list holds money in a UK bank account, it will be frozen. They are also effectively prevented from doing business in the UK.
Trade or economic sanctions target countries. They may apply to specific sectors, such as bans on selling arms or dual‑use items to certain states. They can also be broad. US sanctions on Iran, for example, restrict almost all trade with the country. Some regimes allow limited trade under licences issued by the authority imposing the sanctions.
Who must comply and what happens if they breach sanctions
Sanctions are usually defined by geography and nationality.
EU sanctions apply to people and businesses within the EU and to EU nationals or EU‑registered companies wherever they are located. Non‑EU subsidiaries of EU companies are a grey area, but EU guidance warns against using special purpose companies outside the EU to avoid sanctions. Breaching sanctions is a criminal offence and can lead to imprisonment or fines.
US sanctions apply to US persons and companies.
The US also uses secondary sanctions, which allow it to penalise third parties that continue dealing with countries subject to US primary sanctions. For example, the US has imposed secondary sanctions on countries buying Iranian oil. Although the US cannot impose criminal penalties outside its jurisdiction, it can restrict access to US financial institutions, which is often enough to force compliance.
What sanctions lawyers do
Sanctions lawyers help clients avoid breaching sanctions.
This may sound simple, but multinational companies with complex supply chains can breach sanctions without realising. For example, a UK company selling computers to a German aircraft manufacturer could inadvertently breach sanctions if the computer ends up in a fighter jet sold to Syria. Lawyers conduct detailed due diligence to identify these risks.
Sanctions lawyers also defend clients accused of breaching sanctions and represent individuals or companies seeking removal from financial sanctions lists.
It is a challenging and intellectually rich area of practice, especially for students interested in international relations and global politics.
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