Beyond Borders: Samla’s Extraterritorial Application And The India-Russia Energy Trade Dilemma

On Oct. 15, the UK’s Foreign, Commonwealth & Development Office expanded its sanctions regime with ninety designations against entities allegedly facilitating Russia’s energy operations, including a prominent Indian petroleum refinery, demonstrating the extraterritorial reach of unilateral economic measures on sovereign commercial enterprises. The UK asserted these enterprises perpetuate Russian petroleum circulation, allegedly sustaining Moscow’s military operations. The Ministry of External Affairs, Government of India categorically rejected these unilateral measures, reaffirming its principled non-recognition of extraterritorial sanctions while expressing concerns about discriminatory standards in global energy commerce.

Within this evolving landscape of unilateral economic statecraft, enterprises (both designated and non-designated) confront unprecedented jurisdictional complexities demanding sophisticated legal navigation. The regulatory architecture necessitates comprehensive reassessment of operational frameworks, requiring evaluation of legal remedies and strategic repositioning within an increasingly fragmented international compliance environment.

The UK derives its sanctions authority from the Sanctions and Anti-Money Laundering Act, 2018 (‘SAMLA’), empowering appropriate Ministers to impose sanctions regulations for compliance with UN obligations or for the purposes enumerated in Section 1(2) of SAMLA, including furthering foreign policy objectives and promoting international peace and security. These statutory instruments impose financial, immigration, and trade sanctions against designated persons and entities.

The UK enacted autonomous sanctions through the Russia (Sanctions) (EU Exit) Regulations, 2019 (“Russia Regulations”), independent of UN authorisation. This regulatory framework operates under the stated purpose of compelling Russian compliance with Ukraine’s territorial integrity and securing reparations for the 2022 military intervention. Under SAMLA’s regulatory framework, sanctions target “involved persons” as defined in Section 11(3) of SAMLA, meaning persons involved in specified activities, owned or controlled by such persons, acting on their behalf, or associated with them.

UK sanctions impose extraterritorial compliance obligations on Indian businesses through comprehensive asset-freeze provisions, prohibiting dealings with designated persons’ funds and economic resources. The Russia Regulations categorically prohibit trust services provision and mandate reporting obligations. Contraventions constitute criminal offences punishable by imprisonment not exceeding seven years for financial offences or ten years for trade offences, alongside civil monetary penalties.

These sanctions potentially conflict with the India-UK Comprehensive Economic and Trade Agreement provisions for capital transfer liberalisation. Security-based exceptions permit restrictions only for narrow military-purpose cases, creating legal ambiguities regarding the current sanctions’ scope and application to commercial enterprises.

Indian enterprises in petroleum sectors and dual-use technology (as defined in the Russia Regulations by reference to the Dual-Use Regulation) face heightened compliance exposure and secondary sanctions risks, necessitating comprehensive legal risk assessments and strategic commercial reorientation.

Designation generates cascading effects within domestic markets and disrupts supply chain architectures with third-country jurisdictions that may elect voluntary compliance with UK sanctions, necessitating comprehensive commercial contingency planning and evaluation of alternative arrangements with UK counterparts. Enterprises pursuing alternative commercial methodologies to maintain legitimate Russian trade relationships must conduct comprehensive legal assessments of regulatory feasibility, commercial impact, and requisite compliance safeguards within the evolving sanctions architecture.

Sanctioned entities possess statutory entitlements to request variation or revocation of their relevant designation from the appropriate Minister. Subsequent requests must demonstrate “a significant matter which has not previously been considered by the Minister,” establishing a heightened evidentiary threshold for iterative proceedings.

Designated entities may invoke the statutory court review mechanism, empowering “the appropriate person” to apply to the High Court or Court of Session for judicial determination that the designation decision should be set aside. The Court must apply judicial review principles, with remedial powers, which preclude damages awards absent demonstration of bad faith by the decision-maker.

The strategic imperative for proactive legal intervention has been materially heightened following the 2022 legislative amendments that eliminated mandatory periodic review obligations previously imposed upon the appropriate Minister. The coming into effect of the Economic Crime (Transparency and Enforcement) Act, 2022 has effectively transferred the burden of initiative to designated entities, necessitating sophisticated legal advocacy to secure variation or revocation of designations. Absent such proactive engagement, designations may persist indefinitely, thereby perpetuating commercial and reputational consequences attendant to sanctions listing, including the preservation of asset freezes and the continuation of prohibited person status.

Within the contemporary landscape of intensifying economic statecraft, Indian commercial enterprises in petroleum and petrochemicals sectors confront unprecedented complexities demanding sophisticated legal navigation. These enterprises must reconcile their legitimate commercial imperatives with evolving regulatory architecture while preserving operational sustainability, safeguarding revenue streams, and maintaining adherence to international commercial law and human rights obligations.

Navigation of this sanction’s architecture necessitates nuanced comprehension of overlapping legal regimes and available statutory remedies. Commercial enterprises confronting designation or operating within susceptible sectors require sophisticated legal counsel specializing in sanctions law and international trade regulation. Such guidance becomes indispensable for evaluating statutory review mechanisms under SAMLA, assessing bilateral trade obligation conflicts, and formulating compliance strategies preserving legitimate commercial interests. The stakes (encompassing asset preservation, operational continuity, and reputational integrity) underscore the imperative for proactive legal measures within this evolving landscape.

This article is authored by Nikhil Varshney, partner and Ishu Gupta, associate at Cyril Amarchand Mangaldas.

The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.