Resources
Your relationship with your client after you confirm they are on a sanctions list
As the legal profession races to ensure compliance with so many new sanctions, solicitors, like many other industries, are considering ways to respond to Russia’s invasion of Ukraine.
In the UK, for example:
- some solicitors are refusing to work for sanctioned individuals
- some firms are going beyond sanctions and are ceasing all Russian work (commercial and private client)
- some solicitors are representing sanctioned individuals challenging the legality of sanctions
In Ireland, similar responses are being taken by firms likely in the context of Russian commercial work. In the context of representing individuals, the legal profession is the gatekeeper of access to justice in functioning democracies and are officers of the court. Solicitors will ensure that any person, irrespective of their nationality, has the ability to access legal advice and representation. The legal profession will continue to ensure access to justice via legal representation to Russian people living in the Ireland especially to Russian people who are not subject to sanctions and have no connection with the actions of the Russian state. For example, in the future, the legal profession may need to represent people with similar names to sanctioned individuals whose assets might be accidentally frozen. Also, people may become indirectly affected, for example, children or employees and they may also need legal representation. Our own democratic values require the legal profession to provide these types of legal advice and representation and, when they do, it will be important for them not to be identified with their client; something which has in the past been especially problematic for criminal defence lawyers.
At the same time, it is essential that solicitors acting for Russian business or sanctioned individuals comply with the sanctions and it is hoped that this updated information on sanctions will help the profession. Information about how the Society will ensure compliance through its supervision activities can be viewed here.
The Solicitors Regulation Authority in the UK recently provided the following further information with regard to ceasing/continuing to act for a client in the UK:
Even if a client is not on the sanction list, many firms are reviewing their client lists and considering who they feel comfortable acting for.
This is highly unlikely to be a regulatory matter. The general position is that firms can choose who they act for, and can choose not to act for any reason (unless unlawful, for example under equalities legislation). The question of terminating a current retainer is one for the common law, and turns on whether there is a 'good reason' for the termination.
The current situation with the conflict in Ukraine is clearly novel, and whether there is a 'good reason' for terminating a client retainer in response will be a matter for the courts to decide, on the individual facts. Either way, from a regulatory point of view, our concern is to ensure that the firm has carefully considered the legal position and also understood and mitigated any risks to the client.
Where solicitors have concerns about money laundering, they will need to consider their duty to make a suspicious transaction report to Ireland’s Financial Intelligence Unit and the Revenue. AML resources can be accessed by visiting www.lawsociety.ie/aml.
Authorisations/Derogations under Financial Sanctions
In the UK, there is an Office of Financial Sanctions Implementation (OFSI) which can grant licences on a case-by-case basis exempting certain transactions from financial restrictions. OFSI have also issued licences that govern certain situations such as the use of legal aid payments. Guidance on these in the UK is available online – see ‘Fees for the provision of legal services’ on page 27.
The Central Bank of Ireland’s webpages on sanctions provide the following information in relation to derogations.
In certain specific circumstances (which are set out in the relevant Regulations), a person may be authorised to make a transfer to a sanctioned person, entity or body if a prior authorisation is received or where notification is given to a competent authority in accordance with such Regulation.
Any requests for authorisations or derogations relating to a financial sanction under the relevant Regulations should be directed to the Central Bank by emailing sanctions@centralbank.ie. Derogation applications should be accompanied by the Central Bank’s Sanctions Derogation Application Form. For further information on derogations, please visit the Central Bank’s dedicated Derogations webpage.
Authorisation/derogation requests relating to other types of sanctions (e.g. dual-use goods / travel restriction) under the relevant Regulations should be directed to the most appropriate competent authority (Department of Foreign Affairs, or the Department of Enterprise, Trade and Employment).
The derogations webpage provides:
All natural and legal persons must comply with EU Council Regulations relating to financial sanctions as soon as they are adopted.
The sanctions measures used in a specific situation will vary depending on the objectives of the restrictive measures and their likely effectiveness in achieving these objectives under the particular circumstances, reflecting the EU’s targeted and differentiated approach. They include, inter alia, freezing of funds and economic resources, restrictions on admission, arms embargoes, embargoes on equipment that might be used for internal repression, other export restrictions, import restrictions, and flight bans. A ban on the provision of financial services, including in connection with bans on the export of certain products, has also been used as well as investment bans. In this context, sectoral bans or measures to prevent the misuse of equipment, technology or software for monitoring and interception of the Internet or of other forms of communication have also been used. Once a person, entity or body has been listed under EU financial sanctions as a “designated person” and the measure relates to the freezing of funds and economic resources, there is a legal obligation not to transfer funds or make funds or economic resources available, directly or indirectly, to that designated person. The assets of the designated person must be frozen.
Many EU Regulations relating to financial sanctions contain derogation provisions. Such provisions provide that competent authorities of the Member States may authorise inter alia the release of certain frozen funds or economic resources, the making of funds or economic resources available, directly or indirectly, to or for the benefit of a designated person, or the ability to provide goods or services to a designated person, subject to conditions, as set out in the legal acts. The Central Bank of Ireland considers derogation requests in respect of financial sanctions.
The Central Bank takes derogation requests, submitted in connection with EU financial sanctions, extremely seriously. In considering derogation applications, we take into account the relevant derogation grounds set out in the EU Regulations.
While the Central Bank seeks to ensure that all derogation requests are assessed in a timely manner it should be noted that derogation requests may take several weeks, and sometimes longer, to assess, depending on a number of factors, such as the quality of information and documentation submitted by the applicant, and potential engagement with relevant external stakeholders.
The Central Bank may authorise, under such conditions as deemed appropriate, the release of certain frozen funds or economic resources, if the Central Bank determines that the relevant conditions as set out in the relevant EU Financial Sanctions Regulation have been met.
How to make a derogation application relating to financial sanctions to the Central Bank
Derogation applications should be made to the Central Bank by using the below Derogation Application Form.
Completed application forms, together with relevant information and documentation, should be submitted by email to: sanctions@centrabank.ie.
