Freshfields’ response to the UK Government’s proposals on potential powers to protect the UK from adverse economic pressure

The global trade landscape has deteriorated markedly in recent years, forcing open trading economies to fundamentally reassess their defensive toolkits. In this highly fragmented and increasingly weaponised geopolitical environment, the UK Department for Business and Trade (DBT) has launched a consultation to examine potential powers to protect the UK from adverse economic pressure.

Against this backdrop, Freshfields has submitted its response to the DBT. While the case for ensuring the Government can respond effectively is clear, our analysis shows that the primary challenge is not a complete lack of substantive legal authority, but rather an acute need for coordination, calibration, and sector-specific legislation that respects key tenets of public international and World Trade Organization (WTO) law.

Defining the threat

A foundational concern in designing an instrument to protect against adverse economic pressure (or ‘anti-coercion’) is the legal threshold that triggers a government response. The Government’s consultation defines ‘adverse economic pressure’ as the threat or use of economic measures by a foreign state designed to force a change in UK policy, law, or action, or to otherwise damage the UK’s economic interests. Crucially, the DBT notes it would consider not only the measure but also its aim to determine whether an act has occurred.

From an international trade perspective, this raises an significant distinction: an act of adverse economic pressure is not necessarily an unlawful act under international law. This carries important consequences for legal design:

• Retorsion (lawful but unfriendly conduct): Where a foreign state’s pressure does not breach a specific international obligation owed to the UK, any responsive action is strictly confined under public international law to ‘retorsion’ – intrinsically lawful, discretionary measures such as the withdrawal of voluntary benefits or adjustments to cooperation.
• Countermeasures (responding to wrongful acts): If the triggering conduct constitutes an internationally wrongful act breaching an obligation owed to the UK, the Government can theoretically respond with countermeasures – conduct that would otherwise be unlawful but is rendered lawful as a proportionate response under the Articles on State Responsibility for Internationally Wrongful Acts (ARSIWA).

We recommend that any future legislation establish clear, objective thresholds that separate these two categories. Measures that would otherwise breach the UK’s international commitments must require an objective, evidence-based determination of an internationally wrongful act, rather than relying on political judgment alone.

The UK’s existing toolkit: the goods vs. services divide

A key finding of our submission is that the UK’s existing position is asymmetric across sectors. In relation to trade in goods, the UK already possesses robust tariff-raising powers under the Taxation (Cross-border Trade) Act 2018. We agree with the Government’s assessment that additional tariff-raising legislation is largely unnecessary – the gap here is not a lack of power, but the absence of a unified, cross-departmental framework to coordinate and calibrate these powers.

Conversely, the services, investment, intellectual property (IP), and government procurement sectors represent a significant regulatory gap. For a service-oriented economy where international trade accounts for roughly 60% of GDP, this gap is critical. Unlike the tariff-raising framework for goods, there is no standalone, general statutory power to restrict services trade in response to a coercing state.

Furthermore, existing cross-sector tools are constrained:

• Sanctions: While the Sanctions and Anti-Money Laundering Act, 2018 offers broad trade and financial powers, its application in a targeted, anti-coercion context remains untested and uneven.
• Intellectual Property: Current IP statutes lack mechanisms for geopolitical leverage or TRIPS cross-retaliation (which is rarely authorised and exceptionally difficult to deploy).
• National security and investment: The National Security and Investment Act, 2021 provides robust screening powers, but operates strictly on an individual transaction-by-transaction basis and cannot function as a general countermeasure framework.
• Procurement: Although the Procurement Act, 2023 allows for the exclusion of suppliers on national security grounds, international agreements like the WTO Government Procurement Agreement prohibit discriminatory treatment of foreign suppliers, subject only to narrow security exceptions.

Therefore, a legislative priority must be establishing a clear, express basis for calibrated responses in services, investment, IP, and procurement, alongside a unified decision-making architecture.

Re-evaluating alternative defensive instruments

Our submission also highlights a range of existing non-trade-specific tools that the UK can deploy as part of a wider response framework. For example:

• FCDO travel advice: Discouraging business travel to a coercing state via FCDO travel warnings is a low-cost, diplomatically flexible tool that could stop business travel almost entirely.
• Visa and immigration restrictions: Calibrated visa restrictions targeting officials or state-linked executives are rapid and flexible, provided they comply with the UK’s trade commitments on Mode 4 supply of services.
• Export controls: Tightening licensing criteria under the Export Control Act, 2002 is theoretically possible, but the regime is legally tied to security and non-proliferation rather than economic retaliation Moreover, retaliatory export controls would likely breach WTO prohibitions on quantitative restrictions unless covered by the narrow security exception.

Essential design principles

If the Government proceeds with a dedicated ‘anti-coercion’ instrument, its design must reflect the realities of the UK’s position as a mid-sized open economy. Unlike larger trading blocs, the UK does not possess ‘escalation dominance’. A poorly calibrated, heavy-handed tool carries severe risks of triggering a destructive cycle of retaliatory economic pressure.

To mitigate these risks, any new framework should embed three core principles:

• Proportionality: In international law, proportionality is a strict requirement of commensurability between the response and the injury. Under ARSIWA and the WTO Dispute Settlement Understanding, retaliatory action must be equivalent to the nullification, impairment, or gravity of the wrongful act. The instrument should legally restrict responses to what is commensurate with the economic damage, requiring the consideration of less restrictive alternatives first.
• A ‘diplomacy first’ approach: To comply with customary international law, any countermeasure must be preceded by notification, a detailed specification of claims, and an offer to negotiate. Embedding these procedural prerequisites in primary legislation aligns with the Government’s stated ‘diplomacy first’ policy and prevents overreach.
• Mandatory de-escalation review and suspension: The instrument should feature a mandatory de-escalation review period, alongside explicit provisions to suspend countermeasures if negotiations proceed in good faith.

In addition, the Government should consider an ‘emergency economic powers’ model as a complement to a conventional anti-coercion framework. By focusing on objectively verifiable adverse economic effects (such as acute domestic shortages of critical supplies) rather than the subjective intent of a foreign state, this framing sidesteps sensitive diplomatic confrontations and provides a more predictable standard for intervention.

What this means for businesses

For UK and multinational businesses, the introduction of a formal anti-coercion framework will have significant strategic implications.

First, businesses operating in the services and technology sectors must prepare for a more active regulatory environment. If the UK establishes express powers to restrict service-sector licences or digital authorizations in response to foreign economic pressure, companies involved in cross-border financial, banking, and digital services will need to factor geopolitical escalation directly into their risk assessments.

Second, the UK’s approach highlights its distinct position compared to the European Union. While the EU relies on its standing Anti-Coercion Instrument to coordinate the diverse interests of 27 Member States, the UK retains the structural capacity to legislate and act swiftly through secondary legislation. This agility could lead to more rapid, targeted interventions but also demands that businesses maintain highly flexible supply chains capable of adapting to sudden regulatory changes.

Finally, because economic coercion rarely occurs in a bilateral vacuum, the emphasis on coordinated action with like-minded partners means that regulatory changes in the UK may be mirrored across key allied markets.

Looking ahead

The DBT’s call for input represents a pivotal step in the evolution of the UK’s post-Brexit trade policy. Achieving a framework that effectively deters hostile economic measures without violating the UK’s WTO and customary international law commitments is a delicate balancing act. Ensuring that any future powers are governed by strict proportionality, objective evidential standards, and a robust procedural architecture will be essential to maintaining the UK’s standing as an open, rule-of-law-abiding trading nation.