21 July 2015

An amendment to Australia’s export sanctions regulations will give the Minister for Foreign Affairs greater flexibility in amending the scope and application of autonomous sanctions. For businesses doing business in or with any of the 10 regions to which Australia has currently applied autonomous sanctions, these new powers mean that certain actions and activities potentially can be withdrawn from the scope of the existing sanctions regime.

Moulis Legal’s Alistair Bridges reports on this new development, warning that businesses that decide to proceed with international transactions under the terms of a suspension do so at some peril.

Alistair advises:

'The best protection from prosecution under the sanctions regime continues to be legal advice which can soundly differentiate between what is and what is not illegal in your international dealings, and to utilise the Ministerial permit system in cases where a complete exculpation is needed'.

In this Trade Law Bulletin, we explain the new powers and their implications for the international operations of multi-national businesses with an Australian presence and for solely Australia-based companies and individuals.

Suspension power will open the door for renewed dealings

The Explanatory Memorandum for the amendment explains that the Minister’s new power is to be used to:

…temporarily suspend autonomous sanctions and to re-impose sanctions, should this be required, to influence a foreign government entity, a member of a foreign government entity or another person or entity outside Australia. This will provide the Minister with additional flexibility in the conduct of Australia’s international relations.

The amendment means that the Minister will now be directly empowered to order a suspension, bypassing the more unwieldy process whereby the Governor-General would have to be asked to do this in a more formal and technically complicated way. An exercise of the Minister’s suspension power must be based on the Minister’s view that it is ”in the public interest” that the activities to which the suspension is to apply no longer be subject to sanctions.

Accordingly, we may soon see carve-outs from Australia’s autonomous sanctions regimes. For businesses conducting trade with any region subject to one of those regimes, it is now possible that an activity that seems to be sanctioned – because it is listed as being sanctioned in a Regulation – may not be sanctioned – because it has been suspended by the Minister in an ancillary instrument.

But the door could close suddenly

The suspension power is targeted towards issues of statehood and diplomacy. We do not see it as being a sanctions work-around for the individual circumstances of a particular transaction or dealing. Businesses that might seek to rely on a suspension to go ahead with what would otherwise be a sanctioned activity need to exercise caution.

This is because the rules and the process that will be adopted for the “reimposition” of suspended sanction measures are not clear. Presumably, the Australian Government will use the suspension power as a both a carrot and a stick when dealing with troublesome foreign governments or persons. But what if the Government unceremoniously revokes a suspension – where it considers that to do so would meaningfully influence that government or person? In such a case a business that has relied on a suspension to go ahead with a transaction with a sanctioned entity may suddenly find itself exposed to criminal liability under the Autonomous Sanctions Act 2011 for continuing with that transaction when the sanctions snap back into place.

Due diligence on your proposed transaction, and activation of the official Australian Government permit system where necessary, continue to be the most important safeguards against prosecution and penalty.

Moulis Legal advises Australian and multinational corporations on cross-border matters including trade in goods and services, investment and export/import controls.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2015