Sanctions 2024 Comparisons

During the past 12 months, there has been a steady deceleration in Australia’s use of sanctions overall and peripheral tinkering on the edges of the Australian framework as multiple reviews are underway. It remains to be seen whether this signals a long-term shift in Australia’s formal approach to sanctions (reflecting a change in guard with the Labor Party being elected in 2022), merely a pause for review, or the result of other external factors.

Although COVID-19 impacted the primary regulator’s co-operative and educative regulatory approach in conducting traditional outreach sessions, no further reports have been made to this effect and many consider the Australian sanctions sector to have returned to normal operations.

Further details on the 2023–24 trends are canvassed in 1.2 Key Trends.

Statistics on the Use of Sanctions

As of July 2024, approximately 3,052 individuals and entities were designated under Australian sanctions regimes according to the Consolidated List. From an examination of the Consolidated List, the following observations can be made.

• There has been a deceleration of sanctions use – of the sanctions still in force, the majority have been imposed in the past three years, with the largest portion (40%) being issued in 2022, followed by 27.2% in 2023 and 14% in 2024. This aligns with the Global Sanctions Index, which records sanctions use in Australia as decelerating to (but still growing at) a rate of 7.7% between 2023–24, where it had been increasing by 26.6% between 2022–23.
• Australia’s overall focus with sanctions remains on the Russia–Ukraine conflict ‒ almost 50% of in-force sanctions (from 2003 to 2024) relate to the autonomous sanction regimes concerning Russia and Ukraine.
• Australia’s 2024 focus is shifting – since the beginning of 2024, an almost equal amount of individuals and entities have been designated under the autonomous sanctions regimes relating to Syria (25.3%), Russia (24.1%) and Iran (23.2%).

• There has been an incremental increase in the use of Magnitsky-style sanction instruments – since the introduction of the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Regulations 2021 (Cth) (the “Magnitsky-style Regulations”) in December 2021, Australia has been incrementally using these powers, with five of the nine instruments being issued in the past eight months. Notably, these sanctions include Australia’s first use of the Magnitsky-style Regulations for malicious cyber-activity (against Aleksandr Ermakov), soon followed by its second use (against Dmitry Yuryevich Khoroshev), as well as Australia’s designation of seven Israeli citizens and one entity in respect of violence in the West Bank as part of the ongoing Israel‒Palestine conflict.

Statistics on Permits

Statistics on reports, contraventions, enforcement action and permits are largely undisclosed to the general public. In July 2021, the Department of Foreign Affairs released a “Sanctions Regulator Performance – Self-Assessment Report” disclosing that in 2020–21 there were 55 permit applications finalised (where the Australian Sanctions Office (ASO) assessed that a sanctions permit was required).

Co-ordinated Sanctions

Australia continues to impose sanctions in co-ordination with the UK and the USA. All three governments have sanctioned key figures in cybercrime networks and the financial networks of Hamas and Palestinian Islamic Jihad.

Court Proceedings and Enforcement Action

The slow trickle of judicial decisions on Australia’s sanctions regimes has begun to pick up pace, with judgments being released concerning both contractual law and administrative law. However, there remains a distinct lack of enforcement cases commencing, or enforcement action being publicly announced. This absence may be a result of the enforcement agencies’ co-operative approach, working with public and regulated entities to ensure compliance. The Australian government may be looking to change this approach, as it asked for public consultation on whether civil penalties would be a suitable enforcement mechanism in the sanctions context in the review of the autonomous sanctions regime between January and February 2023.

Funding

On 14 May 2024, the Australian government announced their Budget 2024–25, which included increased funding to strengthen the capability of the Department of Foreign Affairs and Trade (DFAT) and specifically allocating AUD26.4 million over 2024–28 (with AUD6.6 million per year ongoing) to strengthen monitoring and enforcement of Australia’s sanctions regimes, building on the 2023‒24 measures.

Sanctions can be imposed on individuals irrespective of their industry, which in turn impacts how other individuals and entities can interact with the designated. Commonly, financial industries are particularly affected by any sanction, given the requirement that assets of designated individuals must be frozen.

Australian sanctions can be targeted towards specific industries. By way of example:

• the sanctions concerning Syria have an express focus on the oil and gas industry or the petrochemical industry; and
• the sanctions concerning the Democratic People’s Republic of Korea (“North Korea”) expressly sanction any service that assists with or is in relation to an “extractive or related industry”.

Recent judgments have shone a spotlight on the application of Australian sanctions on the resources (coal, alumina and bauxite) and transport industries. The ramifications may be felt throughout many global industries with complex and intersecting operations.

The DFAT is broadly responsible for administering and enforcing the set of sanctions under the COTUNA as well as the Sanctions Act and the Sanctions Regulations. To this end, the DFAT established the ASO on 1 January 2022 to sit within the DFAT’s Regulatory Legal Division in the Security, Legal and Consular Group. The ASO is the Australian government’s sanctions regulator.

As the regulator, the ASO:

• provides guidance on Australian sanctions law to regulated entities and to the public, government and relevant parties;
• processes applications for, and issues, sanctions permits (see 2.3 Licensing);
• works with the public to promote compliance and help prevent breaches;
• works in partnership with other government agencies to monitor compliance; and
• supports corrective and enforcement action by law enforcement agencies in cases of suspected non-compliance (see 2.2 Enforcement).

There are no continuous reporting obligations under Australian sanctions law. However, there are record-keeping obligations and certain government officials have information-gathering powers.

Record-Keeping Obligations

Two types of records must be retained, as follows.

• Any records or documents relating to an application must be retained for five years by the applicant. Importantly, this obligation remains even if the permit is not granted. The five years begins from when the permit was granted or, if it was refused, when the application was made.
• Any records or documents relating to the person’s compliance with any conditions of the permit must be retained for five years, beginning on the last day on which an action to which the permit relates was done.

Information-Gathering Powers

A “CEO of a designated Commonwealth entity” can require a person to give information or documents to determine compliance with a sanction law. A designated entity includes the DFAT, the Department of Defence, the Australian Customs Service, and the AUSTRAC. The notice will specify the information and/or documents sought, and the timing and manner in which the notice must be complied with.

Information cannot be withheld on the basis its provision will be self-incriminating. However, neither the information given ‒ nor the giving of the document ‒ is admissible as evidence against the individual in any criminal proceedings or in any proceedings that would expose the individual to a penalty, apart from proceedings for:

• providing false or misleading information given in connection with a sanction law; or
• failing to comply with the requirement to provide information or documents.

Failing to comply with the requirement is a criminal offence, with a penalty of up to 12 months’ imprisonment.

Three significant court decisions or legal developments in Australia are:

• Alexander Abramov v Minister for Foreign Affairs (No 2) (2023), which challenged the designation of an individual and confirmed that sanctions could be imposed for past actions that have been discontinued but also provided further insight into the administrative process of sanction-making ‒ this decision, in turn, led to the Australian government passing legislation to reflect the outcome of this decision and retrospectively validate past sanction decisions; and
• Alumina and Bauxite Company Ltd v Queensland Alumina Ltd (2024) FCA 43, which was Australia’s first case examining the sanctions regimes in the context of commercial contracts/force majeure and confirmed the broad scope of sanction provisions (see 6.1 Force Majeure for further details).

The enactment and use of Magnitsky-style sanctions in relation to cyber and human rights issues.

There are currently two review/reform processes on foot:

• one by the DFAT – the recommendations of which are currently being considered by the Australian government before proceeding to legislative drafting and further public consultations; and
• one by a committee of the Australian Senate, which is considering, inter alia, the effectiveness of the sanctions regime, how frozen/confiscated assets could be used, and Australia’s co-ordination with key partners and allies – public consultation is to conclude on 6 September 2024, as is the inquiry and report by 11 February 2025.

There are two general ways to “challenge” a designation ‒ namely, by requesting a revocation of the designation or by seeking judicial review of the decision to designate.

Request Revocation

The specific procedure depends on the specific case factors, including what basis a person wants to challenge the designation and under which specific regime the person was designated. By way of example, requests for delisting of:

• UNSC listings should be made to the Focal Point for De-listing or through the country of citizenship or residence;
• UNSC listings related to ISIL (Da’esh) and Al Qaeda should be made to the UN Office of the Ombudsperson or through the country of citizenship or residence;
• UNSC listings related to  the counter-terrorism (UNSCR 1373) sanctions regime should be made to the DFAT; and
• listings related to Australian autonomous sanctions should be made to the DFAT.

Importantly for requests relating to Australian autonomous sanctions, once any such request is made, the Minister is not required to review any further requests by (or on behalf of) the same entity for at least 12 months. That is to say, it is important that any initial request be properly made (with legal advice), lest there be a 12-month wait afterwards.

Judicial Review

The procedure by which to challenge the decision to list itself may be different to the foregoing (eg, through administration law) and differ from case to case.

A successful de-listing challenge can result in the removal of the designation list, as this is the primary objective of a delisting challenge.

Importantly, there is no statutory right or framework in Australia to recover financial compensation for being wrongly designated. However, there may be compensation available if the sanctions were imposed “maliciously”. This remains untested in Australia.

The time it takes to obtain a delisting may vary significantly depending on the specific circumstances. There are no statutory timeframes.

There are several – independent and overlapping – statutory regimes prohibiting, authorising or otherwise controlling the import and export of a range of services and goods in Australia.

The primary statutory instruments include the following.

• The Customs Act 1901 (Cth) and the Customs (Prohibited Exports) Regulations 1958 (Cth) ‒ these primarily deal with controls for the import and export of most goods, including defence and dual-use goods and technologies. The ABF is the primary agency responsible for enforcing this regime; however, other government agencies are involved, including the Defence Export Controls (DEC) within the Department of Defence.
• The Weapons of Mass Destruction (Prevention of Proliferation) Act 1995 (Cth) ‒ this controls any goods, technologies or services that could be used in a weapons of mass destruction programme. This regime is administered by the DEC.
• Defence Trade Controls Act 2012 (Cth) ‒ this controls the transfer of defence and strategic goods, technologies and services. This regime is also administered by the DEC. Key to this regime is the Defence and Strategic Goods List 2021, which lists the military and dual-use goods, software and technologies that are subject to export control regulations in Australia.
• Export Control Act 2020 (Cth) – this creates a framework regulating the export of all goods (including agricultural products and food). This regime is generally administered by the Department of Agriculture, Fisheries and Forestry.

The import or export of a good or service must be compliant with any applicable regime, which may require seeking authorisation under each regime from the relevant authority. By way of example, the exporting of a dual-use good to a country in respect of which there is a sanction regime may require an export permit from the DEC as well as a sanctions permit from the ASO. 

Please refer to 5.1 Services.

Australian courts have recognised that Australian-imposed sanctions can trigger a force majeure clause, allowing the contracting party to terminate the contract. This position was made clear in Alumina and Bauxite Company Ltd v Queensland Alumina Ltd (2024) FCA 43, whereby it was found that a party was entitled to cease supplying, shipping and delivering certain goods to other entities – in which the designated oligarchs held indirect shareholding interests – on the basis that such activities would breach Australia’s autonomous sanctions. This question turned on the construction of the specific sanction regime and each of the contract’s force majeure clauses. Based on this, a party would have to show only on the balance of probabilities that they would breach Australian sanctions (a breach that would ordinarily require proving beyond a reasonable doubt).

Even where there is not a suitable force majeure clause, there may be other avenues available to parties where sanctions impact the contracted obligations, such as the common-law defence of supervening illegality. This defence is enlivened where there is a change in the law ‒ after the formation of a contract – that renders the future performance of a contract unlawful. Supervening illegality is a defence to the non-performance of the contract. In some circumstances, supervening illegality may have the same terminating effect as frustration.

The impact of non-Australian sanctions on the performance of contractual obligations remains a largely untested question.

Australian courts are yet to consider key questions concerning the enforcement of Australian judgments ‒ or the recognition and enforcement of foreign judgments ‒ where sanctions are live issues.

These questions will turn on the precise sanction regimes that are at play, the role of the sanctioned person or entity (eg, plaintiff, defendant, judgment creditor or judgment debtor), and the circumstances of the matter, including the timing of the proceedings. There may be influence drawn from UK decisions such as PJSC National Bank Trust & Anor v Boris Mints & Ors (2023) EWHC 118 (Comm) and the Ministry of Defence and Support for Armed Forces of the Islamic Republic of Iran v International Military Services Ltd (2019) 1 WLR 6409.

As a starting point, a permit may be able to be issued under regulation 20(4) of the Sanctions Regulations for certain dealings required to “satisfy a judicial, administrative or arbitral lien or judgment that was made before the date on which the person or entity became a designated person or entity” where the dealing is not “for the benefit” of that designatee. It remains to be seen how courts will interpret and apply this provision, including whether it extends to foreign judgments. Regardless, the ASO has noted assets provided to a designated person or entity as a result of a legal proceeding or settlement will be frozen until the designation is removed, which is an approach that seeks compliance both with pre-designation judgments and sanctions regimes.

What is clear is that a permit basis is not expressly available for judgments secured after a designation, even where those proceedings were ongoing at the time the designation was made, further widening the impact of sanctions.

The Minister of Foreign Affairs is responsible for making designation decisions.

Strictly speaking, only those who are expressly designated are formally designated. However, Regulation 14 of the Sanctions Regulations prohibits indirect facilitation of providing sanctioned assets to a designated person. That is to say, it is an offence if one “indirectly makes an asset available to or for the benefit of a person or entity” without a permit. Australian courts have stated that this regulation should be given “the full meaning that is open from the words”, so as to include provision “through interposed corporate entities” and “where the benefit is either the object, effect or likely effect of making the asset available”.

There are also additional offences that extend prohibitions to entities or bodies “owned or controlled” by or those “acting on behalf of” (and similar language) sanctioned governments, individuals or entities.