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May signs letter triggering Article 50.

Brexit and Sanctions: Can the UK Lead From Behind?

Tom Keatinge
Commentary, 14 August 2017
UK, Europe
Whitehall is consulting on new sanctions legislation fit for the country’s diminished global position.

For decades, the UK has taken pride in its ability to exert influence that far outweighs its actual economic stature in the world. Its position in multi-lateral bodies, such as its permanent membership of the UN Security Council alongside China, France, Russia and the US, has provided a platform from which to develop consensus and project united strength.

In leaving the EU, one such platform will, from March 2019 (and arguably already), be denied to the UK.

One tool that the UK has marshalled highly effectively in support of the foreign policy objectives of both itself and the wider international community is the use of economic sanctions.

The UK has displayed respected leadership in Brussels, bringing expertise and ‘backbone’ to the increasing use of sanctions by the EU. As the British government itself notes,

Sanctions are an important foreign policy and national security tool. They can be used to coerce a change in behaviour, to constrain behaviour by limiting access to resources, or to communicate a clear political message. As part of a wider strategy they can encourage positive change, for example by helping bring Iran to the negotiating table on its nuclear programme.

The effectiveness of sanctions is hotly debated, but the fact that when they are imposed from a position of strength and influence, they are more effective than those imposed unilaterally remains self-evident.

Against this background, the future of UK sanctions policy and legislation has been the subject of enquiries and consultations over the past six months, culminating in the Queen’s Speech in June that promised to introduce legislation that ensures the UK ‘makes a success of Brexit’, including new national policies on international sanctions.

Reflecting this commitment, in April the government issued a Public Consultation on the United Kingdom’s Future Legal Framework for Imposing and Implementing Sanctions, seeking views on the future shape of sanctions legislation.

The effectiveness of sanctions is hotly debated, but the fact that when they are imposed from a position of strength and influence, they are more effective than those imposed unilaterally remains self-evident

In contrast to the Queen’s Speech’s reference to new national policies on international sanctions, the consultation stressed that it was ‘about the legal powers we need to maintain sanctions as a viable instrument of foreign policy …not about the policy goals themselves or how we will align UK sanctions in future with those imposed by the EU or other international partners’.

The government’s consultation is unavoidable. Unlike most legislation affected by Brexit that will be incorporated into UK law via the European Union (Withdrawal) Bill, the continuity and management of sanctions that remain in force beyond the UK’s departure date will need new legal power.

These include provisions that allow for legal challenges to be brought by sanctioned entities and individual. These are currently heard by the European Court of Justice, since they invariably are an appeal against sanctions regimes, regulations and legislations imposed throughout the EU and based on EU or subordinate national legislation.

The British government has now published its response to the responses it received from its consultation exercise, alongside plans ‘to enable post-Brexit Britain to continue to play a central role in global sanctions’ and enjoy ‘greater flexibility in choosing when and how to introduce new [sanctions] measures’.

Yet in these statements lies an inherent contradiction. New legislation is certainly required to implement sanctions (indeed, it is a requirement that the UK has the necessary legislation in place to implement UN-designated sanctions) and operating outside the EU’s Common Foreign and Security Policy does allow for greater flexibility in the design of sanctions programmes.

As a result of Brexit, there is a very real chance that the UK will have to choose between following an EU position that may often be weaker than that advocated by the UK, or taking a more hawkish position that has the potential to damage UK economic interests

However according to the government, ‘sanctions require broad application to be effective…’ and from outside the EU such ‘broad application’ is far from assured. So, while Britain theoretically has more flexibility after it leaves the EU, it still needs the coordination of the same countries it used to partner with, if it is to ensure that such sanctions are truly effective.

While the introduction of new legislation provides an opportunity to address inefficiencies with the current framework – such as the licencing regime (which could have been fixed without the Brexit vote) – the key to the future of UK sanctions is less the legislation and more the extent to which the UK remains in a position to lead international policy on sanctions.

The EU is the world’s largest exporter of manufactured goods and services, the biggest export market for around 80 countries and the global leader for both inbound and outbound international investments. The bloc’s economic influence is considerable.

As a result of Brexit, there is a very real chance that the UK will have to choose between following an EU position that may often be weaker than that advocated by the UK, or taking a more hawkish position that has the potential to damage UK economic interests.

Not all UK influence will be lost. As one of the main global financial centres, the UK will retain a degree of out-sized influence, but this too may wane as financial institutions determine to move non-UK operations to centres elsewhere within the EU, such as Frankfurt, Dublin or Paris.

The government’s response makes much of the fact that the Sanctions Bill will provide the UK with greater flexibility in the use of sanctions. That’s as may be, but this greater flexibility, exercised on a unilateral basis, could be of no meaningful value.

Banner Image: Theresa May signs the letter triggering Article 50. What effect will Brexit have on Britain's role in the international sanctions regime? Courtesy of PA Images.

The views expressed in this Commentary are those of the author, and do not reflect those of RUSI or any other institution.

Author

Tom Keatinge
Director, Centre for Financial Crime and Security Studies, RUSI

Tom Keatinge is the Director of the Centre for Financial Crime and Security Studies at RUSI, where his research focuses on matters at... read more

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