UK Law and Practice Contributed by: John Binns, BCL Solicitors LLP
7. Designation, Compliance and Circumvention 7.1 Executive Body
UniCredit was entitled to rely on Section 44 until it received licences from the relevant authorities, since it was required to form a view about new legislation at short notice and the literal words of that legislation appeared to catch payments under the LoCs. The Court of Appeal’s Decision However, the CoA observed that, if it had found that Regulation 28 (3) did not apply, it would have held that Section 44 did not protect UniCredit against an award of costs and interest. The CoA stated that Section 44’s purpose is to ensure that a person is not pressured into doing something that risks breaching sanctions due to a fear of being exposed to civil claims. The section seeks to protect against liability arising from an act or omission made in good faith, with the reasonable belief that it com - plies with sanctions regulations. It is not intended to protect against pre-existing liabilities. So, Section 44 did not prevent an award of interest on a claim for debt.
The Foreign, Commonwealth, and Development Office (FCDO) is responsible for making designation decisions. 7.2 Scope of Designation Financial sanctions (specifically, the “asset freeze” and related provisions) apply not only to DPs them - selves but also to entities that are directly or indirectly owned or controlled by a DP. 7.3 Circumvention 7.3.1 Prohibiting Provisions In addition to the direct prohibitions they impose, sanctions regulations also prohibit intentionally partic - ipating in activities knowing that their object or effect is (directly or indirectly) to circumvent any of those prohibitions or to enable or facilitate their breach. 7.3.2 Criminal Penalties Breach of these prohibitions also constitutes a crimi - nal offence. Where the breach relates to financial sanctions, the maximum term of imprisonment is seven years; where it concerns trade sanctions, the maximum term is ten years. Unlimited fines can also be imposed.
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