The UK regime
Since Brexit, the UK runs its own autonomous sanctions regime under the Sanctions and Anti-Money Laundering Act 2018. Financial sanctions - asset freezes and prohibitions on making funds or economic resources available to designated persons - are administered and enforced by the Office of Financial Sanctions Implementation (OFSI), part of HM Treasury. Trade sanctions - controls on goods, technology and certain services - sit with the Department for Business and Trade, with civil enforcement since 2024 handled by the new Office of Trade Sanctions Implementation (OTSI).
UK sanctions bind UK persons wherever they are in the world and any person (of any nationality) for conduct in the UK. A licence regime allows otherwise-prohibited acts to be authorised, and - as the case law shows - the availability of a licence is often decisive in whether non-performance is excused.
The US regime is the widest
US sanctions, administered by OFAC, reach further than any other regime. Primary sanctions bind US persons (US citizens and residents, US-incorporated entities and their branches, and anyone physically in the US) and any transaction with a US nexus. The critical trap for non-US businesses is the US-dollar nexus: a USD-denominated payment usually clears through a US correspondent bank, which can give OFAC jurisdiction over a transaction between two non-US parties under an English-law contract.
On top of that sit secondary sanctions, which target non-US persons for dealing with sanctioned parties even where there is no US nexus at all - the penalty being exclusion from the US market or financial system. Executive Order 14114 (December 2023), for example, authorises secondary sanctions against foreign financial institutions that facilitate transactions supporting Russia's military-industrial base. For a non-US business, secondary sanctions are a commercial threat even when US law does not formally bind it.
The EU regime and the Blocking Statute
The EU operates sanctions through directly-applicable Council Regulations, binding EU operators and conduct within the EU. Its distinctive feature is the Blocking Statute (Council Regulation (EC) No 2271/96), which prohibits EU operators from complying with certain listed US extraterritorial sanctions. This creates a genuine conflict of laws: complying with US secondary sanctions can breach EU law, while ignoring them can trigger US penalties.
The Court of Justice confirmed the bite of the Blocking Statute in Bank Melli Iran v Telekom Deutschland AG (Case C-124/20), holding that the prohibition applies even without a specific US order to comply - although an EU operator may still terminate a contract without giving reasons, and the consequences are worked out by the national court. The conflict is real and is covered further in the enforcement article.
Why all three usually apply
These regimes are not mutually exclusive, and a single contract is routinely caught by more than one. An English-law supply contract between a UK seller and an EU buyer, paid in US dollars, for goods sourced from a third country, can simultaneously engage UK sanctions (the seller), EU sanctions (the buyer), and US sanctions (the dollar clearing and any US-origin content).
The lesson is that sanctions risk cannot be screened against a single regime or assumed away by the governing-law clause. It has to be mapped across every party, every currency, every jurisdiction of performance, and every category of goods - which is why a standalone sanctions clause and live screening are both needed.
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Practical checklist
- Identify which regimes apply by party nationality and residence, not just the governing law.
- Treat US sanctions as a live risk whenever there is a US person, US-origin content, or USD clearing.
- Watch for secondary sanctions exposure (e.g. EO 14114) even where US law does not formally bind you.
- Where EU operators are involved, check the Blocking Statute conflict before agreeing to comply with US measures.
- Use the UK and EU licence regimes - the availability of a licence often decides whether non-performance is excused.
- Map the full risk: every party, currency, jurisdiction of performance, and category of goods.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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