Express law No. 306

What are sanctions?

Sanctions are punitive measures not involving the use of armed force that target certain persons, entities or governments and include a 'complete or partial interruption of economic relations’. Australia has 2 legislative schemes for imposing sanctions:

• the Charter of the United Nations Act 1945 and associated regulations, which are used to implement sanctions giving effect to decisions of the United Nations Security Council
• the Autonomous Sanctions Act 2011 (Sanctions Act) and the Autonomous Sanctions Regulations 2011 (Sanctions Regulations), which provide for ‘autonomous’ sanctions (being sanctions imposed as a matter of Australia’s foreign policy, rather than in accordance with international obligations).

It is under the Sanctions Act and Sanctions Regulations that Australia has recently imposed further sanctions in relation to Russia (and certain regions of Ukraine), and on a number of Russian and Belarusian persons and entities.

Australia’s autonomous sanctions regime

Under Part 3 of the Sanctions Regulations, a person will contravene a sanctions law if they:

• make a ‘sanctioned supply’
• provide a ‘sanctioned service’
• make an asset available to, or for the benefit of, a designated person or entity
• hold a ‘controlled asset’ and use or deal with the asset, or allow or facilitate a use or dealing with the asset.

The sanctions regime also imposes prohibitions on making ‘sanctioned imports’ (reg 4A) and engaging in ‘sanctioned commercial activity’ (regs 5B and 5C).

The sanctions regime applies to the Commonwealth, states and territories (Sanctions Act, s 8(1)), but the Crown is not liable to be prosecuted for an offence.

Corporate Commonwealth entities, not falling within the shield of the Crown, and public servants, or agents and contractors of Commonwealth entities are, however, liable to be prosecuted for an offence if they contravene a specified sanctions law (ss 6, 16 and the Autonomous Sanctions (Sanction Law) Declaration 2012).

Significantly, the offence for a body corporate is an offence of strict liability (s 16(8)) (i.e. there is no fault element required). However, the offence will not apply if the body corporate took reasonable precautions, and exercised due diligence, to avoid contravening a sanctions law.

The sanctions regime is also enforceable through injunctions on application of the Attorney‑General (s 14).

Conduct that contravenes a sanctions law

‘Sanctioned supply’ (regs 4 and 12)

Generally, a ‘sanctioned supply’ involves supplying, selling or transferring ‘export sanctioned goods’ which are directly or indirectly transferred to a prescribed country, or for use in or the benefit of that country.

Example: for Russia, the prescribed goods currently include arms or related matériel, certain items used for oil exploration, and aluminium ores and oxides. The Sanctions Regulations also prescribe ‘export sanctioned goods’ in relation to ‘specified Ukraine regions’ defined to include occupied Ukrainian areas such as Crimea and Donetsk. These goods are broadly specified and include items related to transport infrastructure, telecommunications, energy, oil, gas and mineral reserves.

‘Sanctioned services’ (regs 5 and 13)

‘Sanctioned services’ include services that ‘assist with, or are provided in relation to’ either a ‘sanctioned supply’ (see above) or an activity described in reg 5 (e.g. a military activity). The types of services to which reg 5 applies include technical advice, assistance or training, financial assistance, a financial service, or another service.

Example: a person provides a ‘sanctioned service’ by providing technical advice which assists with or is provided in relation to the supply of aluminium ores and oxides to Russia.

Sanctions relevant to ‘designated persons or entities’ (regs 14 and 15)

The Minister may, by legislative instrument, designate a person or entity to be a ‘designated person or entity’ for a country, if they fall within the scope of the conditions described in reg 6 of the Sanctions Regulations.

Example: for Russia this includes a person or entity that the Minister is satisfied is, or has been, engaging in an activity or performing a function that is of economic or strategic significance to Russia.

While sanctions applied to supplies or services prohibit a narrower range of conduct in relation to a broader category of entities, the sanctions applicable to ‘designated persons or entities’ prohibit a broader range of conduct but only in relation to a specific list of persons and entities (and persons or entities acting for their benefit) – see the Department of Foreign Affairs and Trade Consolidated List.

• Regulation 14(1) prevents designated persons and entities from obtaining additional assets, by prohibiting a person from ‘directly or indirectly’ making an asset ‘available to, or for the benefit of’ a designated person or entity. ‘Asset’ is defined broadly to include ‘an asset of any kind or property of any kind, whether tangible or intangible, movable or immovable, however acquired’ (s 4).
• Regulation 15(1) requires the existing assets of designated persons or entities to be ‘frozen’ by those who hold them (e.g. a bank with an account in the name of a designated person). It does so by prohibiting a person who holds a ‘controlled asset’ from using or dealing with that asset, or allowing or facilitating that asset to be used or dealt with. A ‘controlled asset’ is ‘an asset owned or controlled by a designated person or entity’ (reg 3).

Permits

The Minister for Foreign Affairs can grant a permit to allow a person to make a sanctioned supply, provide a sanctioned service, make an asset available to a designated person or entity, use or deal with a controlled asset, make a sanctioned import, or engage in sanctioned commercial activity (reg 18). To grant a permit, the Minister must be satisfied that the grant of such a permit would be in the national interest. The Department of Foreign Affairs and Trade administers the application process for sanctions permits.

Impact of sanctions regime highlighted by response to Russia’s invasion of Ukraine

The Sanctions Act and Regulations have been in force since 2011. However, the current significant and continuing expansion in the scope of sanctions being imposed, in response to Russia’s invasion of Ukraine, has increased public awareness of how these laws operate. It is, therefore, opportune for Commonwealth entities to consider whether they have in place appropriate processes to identify the risks associated with, and avoid contraventions of, the sanctions laws.

Such risks can arise in the context of:

• government procurements, contracts and major subcontracts (including loans, grants, investments, financing and other arrangements)
• payment of government benefits or tax refunds
• the granting of permits, licences or other statutory rights, or
• the provision of goods and services by Commonwealth entities.

AGS has expertise in, and can provide advice on the application of, the autonomous sanctions where such risks arise.