New Legal Services General Licence
Posted by: OFSI, Posted on: 2 May 2023 – Categories: Compliance, Financial Sanctions, Licensing, Russia
The Legal Services General Licence (INT/2022/2252300) expired on 28 April 2023 and is no longer valid. All reported use of General Licence INT/2022/2252300 should be sent to OFSI by 5 May 2023.
OFSI has reviewed the reported use of this licence and in view of stakeholder feedback and continuing high volumes of applications associated with the payment of legal fees, has taken the decision to issue a new licence.
The replacement, Legal Services General Licence INT/2023/2954852, has a term of 6 months. It took effect from 00:01 on 29 April 2023 and will expire at 23:59 on 28 October 2023.
As with the previous Legal Services General Licence, new General Licence INT/2023/2954852 will mean that a UK legal firm or UK counsel who has provided legal advice to a person designated under either the Russia or Belarus regime will not require an OFSI specific licence to receive payment from that designated person (DP), provided that the terms of the General Licence are met. Similarly, if expenses are required for a DP under either the Russia or Belarus regime, a provider of expenses will not require an OFSI specific licence to receive payment from that DP, provided that the terms of the General Licence are met.
Anyone wanting to make use of the new General Licence should carefully consider its terms before doing so as it is not an extension or duplicate of General Licence INT/2022/2252300. The key changes made to the General Licence are detailed below.
Changes to caps:
- The professional legal fees caps and expenses caps of the General Licence have been reset. Users will be able to make use of the legal fees caps (£500,000 inc. VAT) and the expenses caps (5% of legal fees, up to £25,000) under Parts A and B of the General Licence. Legal fees and expenses paid under General Licence INT/2022/2252300 will not count towards these caps.
- The General Licence has been drafted to make clear that it may be used to start paying/receiving fees and/or expenses in cases where the total fees and/or expenses exceed the legal fees and/or expenses caps. Where fees and/or expenses exceed the relevant cap(s), then applicants will have to submit specific licence applications requesting OFSI license the balance of fees and/or expenses.
- The General Licence also makes clear that the two legal fees caps can be combined, subject to the terms of the licence being met. This means if work is undertaken for a DP that involves fees for legal work carried out in satisfaction of a prior obligation (£500,000 limit) and work undertaken post-designation (£500,000 limit), up to £1 million (inc. VAT) could be paid. Similarly, if expenses are required for work carried out in satisfaction of a prior obligation (£25,000 limit) and for work undertaken post-designation (£25,000 limit), up to £50,000 (inc. VAT) in expenses could be paid. Part A may still only be used for work which was commenced pre-designation.For example, a law firm commences work for a DP relating to a divorce pre-designation, where legal fees eventually amount to £400,000. The same law firm later starts work post-designation on various property matters for the same DP, in relation to which legal fees eventually amount to £650,000. The full fees for the divorce proceedings may be claimed under Part A. In addition, the firm may claim the first £500,000 for the property work under Part B, but must (because the cap has been reached) apply for a specific licence for the final £150,000 in relation to the property work. The remaining part of the unused cap under Part A cannot be put towards the property work as the property work was started post-designation.
The caps apply to a DP and all the entities owned and controlled by that DP unless those entities are designated in their own right.
Changes to the definition of Legal Services:
In line with the policy position set out in HM Treasury’s Written Ministerial Statement of 30 March, professional legal fees and expenses for cases involving defamation or malicious falsehood are not permitted to be paid under new General Licence INT/2023/2954852. Decisions on specific licence applications submitted for this category of cases will be considered on a case-by-case basis (for both appropriateness and compliance with the right to a fair hearing), but it is OFSI’s starting position that payment of legal fees in such cases would not be appropriate.
Those who use the General Licence must provide a report to OFSI. Reporting is due within 7 days, at the earliest point of either the services being completed, or the licence coming to an end. Those using the General Licence must keep records of its use for 6 years.
You may also be interested in:
Categories: Belarus Sanctions Blogs Legal Aid Licenses OFSI Updates Online Resources Russia sanctions
Leave a Reply