Sanctions: a brief overview of their implications on trades outside of the US, EU or UK
Transport & Insurance Focus
Sanctions are increasingly shaping global trade, affecting not just US, EU, or UK businesses but also companies and transactions with no obvious link to these jurisdictions.
Law Update: Issue 376 – Transport & Insurance
Ahmed HashemPartner, Head of Shipping, KSA
Ahmed HassanAssociate, Transport & Insurance
Of note is that sanctions may apply not only to trades within the territories of the US, EU or UK, but also those trades which involve nationals of those jurisdictions, wherever they may be. In the context of US sanctions, sanctions may also apply to entities and/or trades not at all linked with the United States.
It therefore remains of vital importance that organisations carry out thorough due diligence checks to ensure that a particular trade and/or counterpart complies with any applicable sanctions, and that risks associated with extraterritorial sanctions are also considered.
The below is a non-exhaustive list of examples of certain trades and/or scenarios which might require sanctions considerations:
Trades involving companies with a US, EU or UK shareholder, director or person involved
Trades involving the import or export of products from or through the US, EU or UK and their territories
Trades involving sanctioned goods or products
Trades involving sanctioned vessels
This article discusses, in broad terms, the various sanctions regimes which might apply to traders within the region and the potential implications of breaching those sanctions.
The potential implications of breaching sanctions can be significant, and it is of vital importance that companies ensure that they maintain thorough due diligence processes to assess any sanctions exposure associated with a particular trade.
There is, strictly speaking, no formal sanctions regime within the Kingdom of Saudi Arabia.
Saudi Arabia is, however, a member of the United Nations, so that it does implement UN sanctions. The Kingdom is also a member of the Arab League, and co-chairs the International Terrorist Financing Targeting Centre (TFTC). The TFTC targets, as the name suggests, terrorist financing, and may issue directives preventing the dealing or entering into transactions with designated persons. Note that Saudi Arabia may also designate certain individuals or organizations either jointly with the Arab League or unilaterally through its Law of Terrorism Crimes and Financing.
The absence of sanctions issued by the Kingdom of Saudi Arabia – or any other nation – regarding a particular trade or counterparty does not, in itself, mean that there are no US, EU or UK sanctions considerations for Saudi persons or businesses. A trade involving an entity in the Kingdom of Saudi Arabia – or any non-EU, UK or US country – may still find itself falling foul of EU, UK or US sanctions, with potentially significant implications.
The US has issued a range of sanctions against various countries, persons and/or vessels. A non-exhaustive list of the type and nature of prohibited activities is set out below:
Transacting with persons designated on the United States Office of Foreign Assets Control (“OFAC”) SDN list, or entities owned 50% or more by that person.
Providing services in relation to the maritime transport of Russian oil and petroleum products in excess of the relevant price cap
Transacting with or assisting in transactions with Iranian persons or entities on the SDN list.
The export of various goods or services to Iran, including for individuals or companies within Iran.
Transacting with persons designated on the SDN list, or entities owned 50% or more by that SDN.
Engaging in transactions with PdVSA or its subsidiaries, unless covered by an OFAC General License permitting that activity (such as in respect of the exportation or re-exportation of liquefied petroleum gas to Venezuela).
Note that the US implements both primary and secondary sanctions. A brief description of the two types of sanctions regimes are set out below:
Primary sanctions apply where there is a US ‘nexus’ – that is to say, where there is the involvement of a US person, organization or where the trade itself occurs within the United States.
If, for instance, an organization (even if it is not incorporated within the United States) has within its structure any US shareholders, directors or employees, those persons would be prevented from engaging in any transactions which would breach US sanctions.
Similarly, the use of United States Dollars in a sanctioned trade may result in breaching sanctions. This is because the payment of USD almost invariably requires processing of the remittance by a US bank or financial institution. Should a US bank process a payment to or from a sanctioned entity, or in connection with a sanctioned trade, this would in and of itself constitute an offence of facilitating a breach of sanctions. Similarly, the act of causing a US bank (or in fact, any other US person) to breach sanctions may also result in the non-US entity breaching sanctions.
Secondary sanctions are sanctions imposed on non-US persons or entities for engaging in dealings with sanctioned persons or countries, even where no US nexus applies to the said transaction. The US may impose secondary sanctions if, for instance, a non-US company engages in significant trades with designated vessels, entities or countries.
Significant trades in the Russian oil trade may (and have) seen non-US entities hit with secondary sanctions, resulting in significant repercussions, including the loss of access to the US banking system. These measures are intended to deter trade with countries or persons sanctioned by the US, in accordance with US foreign policy.
UK sanctions apply within the territory of the United Kingdom, and in respect of the conduct of all UK persons wherever they are located, as well as companies incorporated within the United Kingdom. Sanctions will also apply to overseas branches of UK companies.
UK sanctions vary and include – in respect to Russia i) the designation of persons, ii) financial restrictions and iii) trade restrictions. There are also broad restrictions on providing technical, financial, brokering and insurance services. There may also apply certain restrictions to providing legal advisory services for particular trades, as well as other professional and business services.
Accordingly, where a UK person or entity is involved in a particular transaction or corporate structure, care should be taken to ensure that the envisioned trade does not breach applicable sanctions.
EU and UK sanctions broadly mirror, in that the EU also applies – although potentially against different entities and vessels – financial restrictions, asset freezes, export controls and travel restrictions on designated persons.
These sanctions apply in respect of all EU nationals wherever they may be, as well as entities incorporated under the law of an EU member state anywhere in the world. The sanctions also apply in respect of vessels or aircraft which transit EU territorial waters or airspace.
It is crucial that organizations, consider the potential impact of sanctions to their businesses, even if incorporated outside the UK, US or EU.
Organisations should take care to identify any potential UK, EU or US nexus in the envisioned trade, including all nationalities of shareholders, directors or employees. Other factors to consider include insurances, and whether any trade with Russia (or any Russian person or company owned by a Russian person), Cuba or any other sanctioned entity might result in that insurance being invalidated. This may be the case with insurers with structures which have a US, EU or UK element. Similarly, consider also any financing which is in place, and whether the relevant financing instrument prohibits trade with a particular country.
Al Tamimi & Company would be happy to assist with any related sanctions queries. Please do not hesitate to contact us should you have any questions.
For further information,please contact Ahmed Hashem and Ahmed Hassan.
Published in April 2025
