Guidance

Protection of Trading Interests (retained blocking regulation)

How UK persons are protected when trading with countries subject to extraterritorial laws.

Introduction

The Protection of Trading Interests legislation protects UK persons trading with countries affected by the extraterritorial application of certain laws.

These laws are currently US sanctions against Iran and Cuba. These extraterritorial sanctions seek to regulate the activities of non-US persons in any jurisdiction.

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The Protection of Trading Interests legislation protects UK persons by:

  • making it illegal for protected persons to comply with the legislation imposing the proscribed sanctions, both directly and indirectly, as set out in full in Article 5 of the retained Blocking Regulation
  • making it illegal for protected persons to fail to inform the Secretary of State for International Trade within 30 days of obtaining information that their economic interests have been affected by the legislation imposing the proscribed sanctions, as set out in full in Article 2 of the retained Blocking Regulation
  • allowing protected persons to recover damages arising from the application of the legislation imposing the proscribed sanctions, as set out in full in Article 6 of the retained Blocking Regulation
  • allowing protected persons to request an authorisation to comply with the legislation imposing the proscribed sanctions, if not doing so would cause serious damage to their interests or the interests of the UK, as set out in full in Articles 5 and 7 of the retained Blocking Regulation and the retained Implementing Regulation

Protected persons

The Protection of Trading Interests legislation protects all people and businesses listed, regardless of how many people they employ or the nature of their business.

A protected person is:

  • a UK national resident in the UK
  • a non-national resident in the UK
  • any legal person incorporated in the UK
  • a UK national providing maritime transport services
  • any legal person (wherever incorporated) providing maritime transport services and controlled by a national of the UK, where the vessel is registered in the UK
  • any other natural person physically present within the UK, including within its territorial waters or air space, or in any aircraft or on any vessel under the jurisdiction or control of the UK acting in a professional capacity

Actions and enforcement

Breaches of Article 2 and Article 5 of the retained Blocking Regulation are criminal offences in the UK, punishable by a fine. However, the intention of the Protection of Trading Interests legislation is to protect UK persons from the extraterritorial effect of legislation imposing the proscribed sanctions.

Protected persons must notify the Department for International Trade (DIT) if they consider that their interests have been affected by the legislation imposing the proscribed sanctions. You must do this within 30 days of obtaining information that leads you to consider that your interests have been affected.

If you are a consumer or small business and you think a UK financial institution has breached the retained Blocking Regulation and your interests have been affected, you also have the right to take your complaint to the free Financial Ombudsman Service which will consider what is fair and reasonable in all the circumstances of the case. You may also consider filing a civil claim to recover damages incurred.

Licences from the US

If protected persons requested a licence from US authorities to be exempt from legislation imposing the proscribed sanctions it would be compliance with said sanctions. This is in breach of the retained Blocking Regulation.

Nevertheless, protected persons may request authorisation from the Secretary of State to apply for such a licence from the US authorities.

Report your affected interests

Notify DIT that your interests have been affected, by completing the Protection of Trading Interests: report your affected interests form (ODT, 38.2KB).

The Secretary of State for International Trade will consider whether to undertake a review and decide to refer the notified matter for investigation. This could result in the possible prosecution of the person you allege complied with legislation imposing the proscribed sanctions. The time taken to complete the review will vary depending on the facts of the case and how quickly additional information, if required, is provided.

Damage recovery

Protected persons may take actions in addition to notifying DIT of the application of legislation imposing the proscribed sanctions. For example, you may be able to file a civil claim to recover damages incurred.

You should seek independent legal advice to decide if this is an option for you.

Authorisation to comply with legislation imposing the proscribed sanctions

In exceptional circumstances, protected persons may be authorised by the Secretary of State for International Trade to comply with legislation imposing the proscribed sanctions. In assessing authorisation applications, the Secretary of State will consider the criteria set out in the Implementing Regulation.

Full or partial authorisation may be granted if not doing so would seriously damage the interests of the protected person or those of the UK. Not every nuisance or damage suffered by protected persons will entitle them to obtain authorisation.

The Implementing Regulation sets out the basis on which applications will be assessed. The Secretary of State for International Trade will consider applications for authorisation. Whether the behaviour the protected person seeks to adopt is based on, or determined by, the legislation imposing the proscribed sanctions will be considered.

Status of protected persons granted authorisation before 1 January 2021

Prior to the end of the transition period on 31 December 2020, any authorisations must be sought from the European Commission. Authorisations granted before the end of the transition period will be treated as if they were authorisations issued by the Secretary of State for International Trade. They are therefore applicable in the UK after the transition period.

The UK will pursue an independent sanctions policy after the end of the transition period. An authorisation granted in the EU after the end of the transition period will not be recognised by the UK.

How to apply for an authorisation

Protected persons must state:

  • exactly what activity they seek to adopt that requires authorisation
  • which provision(s), or application, of the legislation imposing the proscribed sanctions they wish to comply with and describe the scope of the authorisation sought
  • the serious damage (Article 4, Implementing Regulation) that would be caused – either to the interests of the protected person themselves or to those of the UK – if they were not able to comply with the relevant proscribed sanction

Appropriate evidence to show that serious damage would be caused by not complying with the legislation imposing the proscribed sanctions must be provided. The evidence deemed appropriate would vary depending on the facts of the case.

Apply for an authorisation by completing the Protection of Trading Interests: authorisation request form (ODT, 39.1KB).

The time taken to complete the review will vary depending on the facts of the case and how quickly additional information, if required, is provided. Until any authorisation is granted, the protected person must continue to comply with the retained Blocking Regulation.

If granted, the authorisation will take the form of regulations made by statutory instrument. The authorisation will become effective on the date that the instrument comes into force and will be publicly available.

Subsidiaries and UK nationals resident outside the UK

UK nationals resident outside of the UK, including the US, remain subject to the retained Blocking Regulation.

UK subsidiaries of US businesses

UK subsidiaries of US businesses incorporated in any part of the UK are considered UK legal persons and are subject to the provisions of the retained Blocking Regulation. Their parent businesses are not UK legal persons and therefore are not subject to the retained Blocking Regulation.

Branches of US businesses in the UK

Branches of US businesses in the UK are not considered to have distinct legal personality from their parent company. They are not considered UK legal persons and therefore are not subject to the retained Blocking Regulation.

US subsidiaries of UK businesses

US subsidiaries of UK businesses are subject to the law under which they are incorporated. The retained Blocking Regulation only applies to legal persons incorporated in the UK.

UK subsidiaries of EU businesses

A UK subsidiary of EU businesses where the subsidiary is incorporated in any part of the UK is considered a UK legal person and is subject to the provisions of the retained Blocking Regulation.

A UK-incorporated subsidiary granted an authorisation prior to or during the transition period will be treated as if they were authorised by the Secretary of State for International Trade. An authorisation granted to an EU business with a UK subsidiary after the end of the transition period will not be recognised by the UK and a separate UK authorisation must be sought.

Background

With the end of the transition period, the Blocking Regulation (Council regulation (EC) 2271/96) and Implementing Regulation (Commission Implementing Regulation (EU) 2018/1101) form part of the retained EU law applying in the UK. This is by virtue of the European Union (Withdrawal) Act 2018. The Protecting against the Effects of the Extraterritorial Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2020 came into force from 01 January 2021.

These regulations amend the domestic legislation implementing the Blocking Regulation (the Protection of Trading Interests Order), the retained Blocking Regulation, and the retained Implementing Regulation. This is so that they are legally operable in the UK. The retained EU regulations and the domestic implementing legislation, as amended, together form the UK’s ‘Protection of Trading Interests Legislation’.

Legislation imposing the proscribed sanctions

Acts

  • National Defense Authorization Act for Fiscal Year 1993, Title XVII Cuban Democracy Act 1992, sections 1704 and 1706
  • Cuban Liberty and Democratic Solidarity Act of 1996
  • Iran Sanctions Act of 1996
  • Iran Freedom and Counter-Proliferation Act of 2012
  • National Defense Authorization Act for Fiscal Year 2012
  • Iran Threat Reduction and Syria Human Rights Act of 2012

Regulations

  • Iranian Transactions and Sanctions Regulations
  • 31 Code of Federal Regulations (CFR) Part 515: Cuban Assets Control Regulation

After the end of the transition period, the Secretary of State for International Trade will have the authority to amend the list of legislation imposing the proscribed sanctions that is in the retained Blocking Regulation. Updates will be posted on this page.

Key terms

Interests have been affected

Interests are not exclusively financial interests and can also include trading interests. Interests may also be affected by actions that have been imposed or threatened to be imposed under the legislation imposing the proscribed sanctions.

DIT will consider when interests have been affected on a case-by-case basis, taking into account whether protected persons consider their interests to have been affected.

Proscribed sanctions

The retained Blocking Regulation does not compel protected persons to do business with Iran or Cuba. Instead it ensures that commercial decision-making is not based on compliance with legislation imposing the proscribed sanctions.

Protected persons may also decide whether to engage or not in an economic sector, based on normal commercial decisions.

UK sanctions imposed on Iran must be taken into consideration.

Application of legislation imposing the proscribed sanctions

Protected persons may wish to seek independent legal advice on how to comply with the retained Blocking Regulation.

DIT will consider whether to refer a matter where interests have been affected for investigation. In considering whether to refer a matter, DIT will consider degree to which you have complied with the legislation imposing the proscribed sanctions.

Merely asking questions about the scope of a proscribed sanction in conversations with the US authorities may not be regarded as compliance with this sanction. This is especially if you subsequently request an authorisation.

Criminal offence

In the UK, compliance with legislation imposing the proscribed sanctions is a criminal offence. A criminal offence would include compliance with a decision or judgement based on or resulting from the legislation imposing the proscribed sanctions.

The decision or judgement could be administrative, judicial, arbitral or of any other nature. Prohibition against compliance applies except to the extent that compliance has been authorised by the Secretary of State for International Trade in a statutory instrument.

No decision or judgement carried out or issued as a result of the legislation imposing the proscribed sanctions may be executed in the UK without this authorisation. For instance, decisions or judgements requiring the seizure of assets or a fine against a person or business are prohibited under the retained Blocking Regulation.

Published 19 November 2020