Upvote:3
I believe you are either referring to a "September 28th 1954 Convention" Travel Document for Stateless or "July 28th 1951 Convention" Travel Document for Refugees. These are the only German passport like documents which are blue in color.
The UK are not part of Schengen, thus implementing their own immigration policies. A quick look on gov.uk tells you, that unless your sister-in-law holds an Article 10 residence permit ("Residence Card of a Family Member of a Union Citizen") or is being sponsored by her partner or other family member, she is required to obtain visa to enter the UK for tourism. 1
1 https://www.gov.uk/check-uk-visa/y/stateless-or-refugee/tourism