City Lawyers Warn of Unintended Consequences of Tougher Controls on Legal Professionals Acting for Sanctioned Russians

City lawyers are sounding the alarm over the unintended consequences of tougher controls on legal professionals acting for sanctioned Russians, warning that the new regulations could criminalize a wide range of legal advice. The City of London Law Society has urgently called for amendments and guidance to address the ‘severe unintended consequences’ of the new rules.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023, announced in June, aim to extend existing regulations on Russian entities using UK legal professionals and prevent legal professionals from advising international companies dealing with Russian businesses. However, Regulation 54D of the measures goes beyond its intended scope, prohibiting legal advisory services in connection with any activity that would be prohibited if done by a UK national or in the UK.

In a draft submission, the City of London Law Society expressed support for the regulations’ objective but raised concerns about the language of the new regulation, which it believes is overly broad and creates problems for the legal services industry. The society highlighted examples where UK law firms advising overseas non-Russian clients could inadvertently commit criminal offenses, even without a UK nexus to the activity.

Furthermore, in-house lawyers working for multinational companies would be restricted from advising their employers on sanctions imposed by non-UK jurisdictions, potentially increasing the risk of non-compliance. The City of London Law Society emphasized that these issues are already causing problems and are likely to escalate over time.

The Law Society of England and Wales has been working with the government and sanctions compliance experts to address the challenges posed by the new regulations. While the publication of a general license and updated statutory guidance is a step in the right direction, the Law Society believes that significant amendments are needed to ensure sanctions compliance advice can be provided and legal professional privilege is protected.

The Law Society spokesperson stated that ongoing engagement with the government is crucial to achieving a speedy resolution to the issues raised by the new regulations. As the legal industry grapples with the implications of the stricter controls, the call for amendments and guidance remains urgent to prevent unintended consequences and ensure effective compliance with sanctions.