Draft Sanctions (Damages Cap) Regulations 2022

(Limited Text - Ministerial Extracts only)

Tuesday 18th October 2022 General Committees

[The Minister of State, Foreign, Commonwealth and Development Office (Jesse Norman)]

I beg to move,

That the Committee has considered the draft Sanctions (Damages Cap) Regulations 2022.

What a delight it is to see you in the Chair, Mr Stringer; a sagacious and calming presence on a late autumn morning.

The instrument, which is subject to the affirmative procedure, was laid before Parliament in draft on 20 July 2022 under section 55(5) of the Sanctions and Anti-Money Laundering Act 2018, otherwise known as the Sanctions Act. It will be made once it is approved by both Houses.

The instrument represents further action to strengthen the UK’s sanctions regime in response to President Putin’s illegal and abhorrent war against the people of Ukraine. Since the invasion, the UK has worked with international partners to deliver an unprecedented package of sanctions against Putin’s regime and his allies who are complicit in its brutality.

As the Committee will be aware, the Economic Crime (Transparency and Enforcement) Act 2022 proceeded quickly through Parliament following Russia’s invasion and received Royal Assent on 15 March. That Act amended the Sanctions Act to reform how sanctions are imposed and reviewed, and how challenges to them are dealt with. Those amendments received cross-party support, including across the Benches in the House. The Act created a power for the Government to set a limit on the amount of damages a court can award for designations made in bad faith. In exercise of that power, the instrument before us now introduces a cap of £10,000. That cap will apply to any proceedings challenging the Government’s use of designation powers under the Sanctions Act, issued on or after 4 March 2022.

The instrument is designed to minimise the risks to His Majesty’s Government of spurious or vexatious litigation from deep-pocketed oligarchs and others, in particular as the UK continues to rachet up the pressure on President Putin. It is right and proper that the Government protect public funds in that way. To be clear, it will not affect the right of a designated person to challenge their designation in a court, nor, if appropriate, to have that designation lifted. Furthermore, the courts will have the power to disapply the damages cap to avoid any potential breaches of human rights where necessary in individual cases. But the cap is designed to send a strong signal that Putin’s oligarchs and kleptocrats cannot draw on the public purse in this country to boost their coffers, that the UK will not be distracted from the task in hand by endless litigation and that this Government will not be knocked off course by the risk of damages claims.

Let there be no mistake: this is not about protecting the Government from acting in bad faith; it is about sending a clear message to friends of Putin who are tempted to bring claims without merit.

The Government will not hesitate in bringing forward further sanctions to target those who participate in or facilitate Putin’s illegal war of choice. On 26 September, the UK announced further sanctions targeting those responsible for Putin’s sham referenda. They included four Russian Government officials, four further oligarchs, 55 state oil executives and 29 individuals and organisations working for illegitimate proxy groups in Donetsk, Luhansk and Zaporizhzia. On 30 September, the Foreign Secretary announced a new set of sanctions that further limited Russia’s access to the foreign services on which it depends. Taken alongside previous action, the UK is now preventing Russian access to UK advertising, architectural, auditing, engineering and IT consultancy services, as well as to various commercial legal services. The announcement included a new ban on the export of nearly 700 goods deemed to be crucial to Russia’s industrial and technological capabilities. It also included new sanctions on Elvira Nabiullina, the Governor of the Central Bank of the Russian Federation, who has been instrumental in managing the Russian economy throughout the war and instrumental in the rouble being imposed on Ukrainian territories that have been seized by Russia.

I trust the Committee will support the instrument. It strengthens the UK’s ability to sanction those responsible for this illegal and brutal war. I commend the regulations to the Committee.

--- Later in debate ---

[Jesse Norman]

I am very grateful to both hon. Gentlemen who have spoken. Let us be clear that there has been a very broad sense of unanimity across the House on the issue. We very much welcome that support and the scrutiny offered by the Opposition parties, which can only make the legislation better and keep Government properly on our toes.

Let me start by thanking the hon. Member for Argyll and Bute who pointed out the importance of closing loopholes—he is absolutely right about that. As the hon. Member for Cardiff South and Penarth said on behalf of the official Opposition, there has been a constant process of introducing measures and then infilling, in response to a dynamic and evolving situation, precisely to address those loopholes. The regulations we are talking about in relation to Russia and Belarus apply to conduct by UK persons including not just anyone in the UK but UK nationals outside the UK and businesses incorporated or constituted under the law of any part of the UK. Of course, it is Government policy for those measures also to be given effect in overseas territories and Crown dependencies. As the hon. Member for Argyll and Bute will he aware, a lot of work has been done in relation to Companies House to track asset movements and give the enforcement authorities extra powers and speed to crack down on some of the loopholes he mentioned.

The hon. Gentleman said that the regulations are not before time, but if I may say so, I think that is incorrect. The Government brought forward this legislation before the summer recess, and the present cap that we are discussing will apply to all proceedings brought from 4 March. There has been a staggering level of sanctions introduction over the past few months, and I could show him four or five pages of specific measures that we have introduced. Those are targeted at a large number of individuals.

The hon. Member for Cardiff South and Penarth was absolutely right to ask about the question whether this was just about Russia. Of course not; he is absolutely right—it applies across the board. But even in relation to Russia we are talking about sanctioning more than 1,200 individuals and more than 120 entities. As my remarks about Elvira Nabiullina made clear, we are continuing to push down on designations in order to pick up people who have emerged as significant actors, or who are otherwise culpable and complicit in this dreadful invasion.

I am very grateful to the hon. Gentleman for his comments on behalf of the official Opposition. He is absolutely right that the recent use of unmanned drones is abhorrent and he will know that the Government and their allies are doing everything they can to support Ukraine militarily and in the field. I thank him for the questions he raised to which I responded in respect of the previous debate conducted by my colleague, the Minister for Europe. Of course, as the hon. Gentleman understands, I cannot comment, however one would like to, on specific entities, but the points he raised are absolutely well taken. His energy in pressing them is a constant source of active encouragement and support for the work we are doing and that which we have in hand.

The hon. Gentleman asked whether the Government will look at wider measures in relation to SLAPP suits. He is absolutely right to target that question, and of course we are reviewing the matter very closely. He also asked about the question of legal architecture. He will understand that the measures we have brought in are moving towards quite a calibrated restraint on the use of legal services for commercial purposes by oligarchs and other designated persons. But it is important to preserve access to rights legal advice, because however individuals might dislike the fact, it has always been our way in this country for hundreds of years that people are allowed to have, subject to law, their day in court, and proper representation. The cap seeks to limit the effects of that, but the principle is clear.

[Stephen Doughty]

I spoke about the scope of individuals to take legal action across the EU against their designation. Can he tell me, or write to me, about the numbers involved who have attempted to take action against the UK Government for being sanctioned? That would give us an idea of the scale of attempts to undermine the sanctions regime.

[Jesse Norman]

If I may, I will discuss and consider with officials whether we can properly respond, or whether, for reasons he will understand, that information has to be retained for present purposes. I can assure him that we are not seeing a large amount of litigation at the moment, but there obviously is the potential, and that is why it is prudent to introduce a cap. As I have said, that cap is backdated. I take the point that he has raised, and let me consider it with my officials.

Unless there are any other questions, I commend the regulations to the Committee.

Question put and agreed to.