Due to the on-going conflicts in Syria and Ukraine, there has been much in the press recently about financial and economic sanctions being imposed against countries and territories and entities in those countries/territories. However, sanctions are applied to many different organisations and individuals. Indeed, at the time of writing, the Isle of Man has 23 sanctions notices in place. Details of current sanctions regimes may be found on the Customs and Excise website at http://www.gov.im/treasury/customs/sanctions.xml
In the Isle of Man, Treasury is responsible for administering United Nations and European Union sanctions regimes but has delegated this authority to its Customs and Excise Division. These regimes include sanctions imposed from time to time against specified countries, territories and entities and also those intended to combat the funding of terrorism. This article looks at regimes that impose financial or economic sanctions however, sanctions on trading, export embargoes and export prohibitions and licensing controls may also exist. Businesses and individuals in the Isle of Man may also be affected by sanctions imposed by certain US authorities and implemented by the Office of Foreign Assets Control (OFAC). OFAC sanctions do not have any direct legal effect in the Island however, businesses and individuals need to be aware of the US sanctions because if found to be in breach, the business and/or individual could face severe commercial problems and/or penalties.
The Isle of Man in not a member of the European Union. However, the Isle of Man does have free movement of goods into the European Union under the terms of Protocol 3 to the United Kingdom's Act of Accession 1972, which formed part of the Treaty of Accession (Protocol 3). Apart from the requirements of Protocol 3, all other EU legislation is not directly applicable in the Isle of Man. Therefore EU legislation (including sanctions orders) that fall outside matters which have direct effect in the Isle of Man under the terms of Protocol 3, do not have to be implemented into Isle of Man law.
HOW THE ISLE OF MAN IMPLEMENTS EU SANCTIONS ORDERS INTO DOMESTIC LAW
The Council of Ministers may, if it chooses to do so, make orders and regulations under the terms of section 2 of the European Communities (Isle of Man) Act 1973 (the Act) and thereby implement certain EU legislation into domestic Isle of Man law. The EU legislation that the Island adopts in this way can be subject to exceptions, adaptions and modifications as may be specified in the relevant order.
Since October 2011 (and the insertion of Section 2C into the European Communities (Isle of Man) Act 1973) all of the Island's EU sanctions orders and regulations include ambulatory provision in relation to their Annexes. This means that a provision of an EU instrument is to be construed as a reference to the instrument as amended from time to time. Prior to October 2011, if an EU sanctions order was amended (e.g. by deleting an individual's name from a sanctions list) then amending legislation was required in the Isle of Man to effect such amendment. There may therefore be orders that pre-date October 2011 that have been amended by the EU and care should be taken that such amendments actually apply in the Isle of Man.
Derogations can be granted in the legislation creating the sanction – for example, funds in frozen bank accounts may be used to make certain payments (such as professional fees) but if a derogation is granted under the relevant legislation to the sanctions regime and such requires authorisation then the request for such authorisation (i.e. a "licence") has to be made to Customs and Excise (exercising its delegated authority from Treasury). In considering whether or not to grant such a licence, if there is equivalent legislation in the UK, Customs and Excise will consult with HM Treasury (HMT) as there may be diplomatic and/or political issues to be considered between the two jurisdictions. However, Customs and Excise are not obliged to follow any view taken by HMT in this regard. In addition, any licence granted by Customs and Excise can be varied or revoked at any time.
WHAT MUST INDIVIDUALS AND ORGANISATIONS DO TO COMPLY WITH THE REGIMES?
All persons and entities in the Island are required to be aware of the restrictions imposed by the various sanctions regimes. Offences and penalties for failure to comply are set out in the relevant regulations accompanying the sanctions order. There is a particular requirement for banks, insurance companies, lawyers, CSPs and other licensed entities to be aware of them in the context of carrying out due diligence checks on existing and potential clients and in relation to the freezing of assets (including company shares) on behalf of the affected individuals/regimes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.