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Financial Sanctions and Embargoes in the U.S. Virgin Islands: Navigating the Complexities

In a move with significant implications for law firms and litigants operating in the British Virgin Islands (BVI), the UK’s sanctions regime has been extended to the territory, targeting Russian individuals and entities.

Key Provisions of the Russia (Sanctions) (Overseas Territories) Order 2020

  • Persons in the BVI are prohibited from dealing with funds or economic resources owned, held, or controlled by designated individuals or entities.
  • Since February 22, 2022, over 1,200 new designations have been introduced under the Russian sanctions regime.

Impact on Law Firms and Litigants

  • Law firms have been unable to charge designated persons for legal services without a licence from the Office of Financial Sanctions Implementation (OFSI).
  • In one of the first judgments on this issue, Jack J refused an application by a BVI law firm to come off the record for JSC VTB Bank, a designated entity.

Obtaining Funds from Designated Entities

  • To obtain funds from a designated entity, a BVI law firm must apply for a specific licence from the Governor’s Office.
  • At least one such licence has been granted to allow a designated person to pursue legal proceedings.

Recent Developments and Concerns

  • The OFSI issued a general licence permitting payment of legal fees owed by individuals and entities designated under the Russian sanctions regime, but this licence does not extend to the BVI.
  • UK practitioners are uncertain about how to proceed in light of this development.

Judicial Ruling Raises Further Questions

  • Foxton J raised several issues with the general licence, including concerns over its applicability to payments made to meet costs orders or comply with security for costs.
  • The Judge also questioned whether the limits on professional legal fees could be combined and expressed doubt over the licence’s reporting requirements.

As the situation continues to evolve, it remains unclear how law firms and litigants in the BVI will navigate these complex financial sanctions and embargoes. For further information, please reach out to your usual contact or one of the persons listed below.

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