The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2024
(2 months ago)
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The Minister for Development (Anneliese Dodds)
I beg to move,
That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2024 (S.I., 2024, No. 900).
It is a pleasure, Mr Betts, to take part in this debate representing the Government. I can genuinely say that many of my happiest hours in opposition were spent in Committee Rooms such as this, talking about statutory instruments and delegated legislation with the then Government. As one of my hon. Friends has said, now may be the time for karma—we shall see. It is genuinely a privilege to be here.
The SI amends the Russia (Sanctions) (EU Exit) Regulations 2019. To provide some explanation to the Committee, this instrument was laid before the House on 5 September 2024 under powers in the Sanctions and Anti-Money Laundering Act 2018. The new provisions entered into force on 6 September as a made affirmative measure.
In recent years, the UK has transformed its use of sanctions. We have deployed sanctions in an innovative and impactful way, including in our response to Russia’s illegal invasion of Ukraine. That includes our prohibitions on the legal sector. We take a rigorous approach that is carefully targeted to deter and disrupt malign behaviour and to demonstrate our defence of international norms.
In June 2023, a prohibition on legal advisory services, regulation 54D of the 2019 regulations, was introduced to prevent UK lawyers from providing their services to those seeking to continue trading with Russia in goods or services that the UK had sanctioned. This was a unique prohibition. It sought to prevent access to our world-renowned legal services market, while retaining and upholding the UK values of access to justice and representational advice.
Once introduced, however, it became clear that the sanction had the unintended effect of preventing the legitimate provision of advice on non-UK sanctions compliance. For example, there was an impact on advising companies on compliance with US or EU sanctions on Russia. A general licence was therefore rapidly implemented in August 2023, as a temporary fix to enable UK lawyers to continue to provide such advice.
This statutory instrument provides the permanent solution and clarifies in legislation the kinds of legal advice that the Government intend UK lawyers to be able to provide. For example, it ensures that advice can be given on compliance with non-UK. sanctions, Russian counter-sanctions and global criminal law. Receiving that advice is paramount for the functioning of an effective international sanctions response to Russia.
While amending the legislation, a full and thorough review was undertaken, including engaging with esteemed stakeholders in the legal and financial sectors. That engagement assured us that the amendment will ensure greater clarity for the sector, and will continue to support our robust and unwavering commitment to cutting off access to our world-leading legal sector from those wanting to advance the interests of Russia.
The review also highlighted a number of other areas for improvement, which have been reflected in the instrument. That includes amending regulation 54D to align more closely with the way in which the existing circumvention regimes work, creating greater parity between the legal advisory services that can be provided to a UK person and to a non-UK person.
The amendment clarifies expressly that regulation 54D covers activity outside the UK, meaning that it more clearly operates alongside the existing circumvention regulations, avoiding overlapping offences. We have also worked with the sector to ensure that the language in the statutory instrument is as clear as possible regarding the provision of those services. By ensuring that legal advice can continue to be provided for the purposes of non-UK sanctions compliance, we enhance the effectiveness of the sanctions that the UK and our allies have placed on Russia and so intensify the pressure on Putin.
As well as ensuring that advice can be given on compliance with non-UK sanctions and on Russian counter-sanctions, we have ensured that advice can continue to be provided on compliance with global criminal law. By protecting the fundamental right to legal representation, we continue to distinguish ourselves from Putin’s oppressive regime.
Finally, some clarifications have been made to ensure that regulation 54D does not capture services in connection with the management of claims under the contract of insurance or reinsurance. The Government are committed to enforcement, and it is right that we ensure that we have the necessary powers, tools and capacity to implement and enforce our sanctions regimes effectively. That is why, on 10 October, the new Government launched the Office of Trade Sanctions Implementation, or OTSI, with enhanced civil enforcement powers to maximise the impact of the UK’s trade sanctions against Russia. Those powers include the ability to issue civil monetary penalties for breaches and to make public details of breaches. There are also new reporting requirements on sectors well positioned to find evidence of trade sanctions breaches.
To conclude, sanctions continue to play an important part in the UK’s response to Russia’s invasion of Ukraine. The amendments introduced by this statutory instrument strengthen our commitment to an effective sanctions regime by making the regulations clearer and therefore more effective. That will continue to deter and disrupt Russia’s aggression against Ukraine. I therefore commend the amending regulations to the Committee.
Alicia Kearns (Rutland and Stamford) (Con)
It is a pleasure to serve once again under your chairmanship, Mr Betts. I thank the Minister for her remarks. I shall keep my own brief, because the Conservative party supports these regulations and the technical and clarificatory amendments that they seek to make to the existing Russia sanctions regime.
As I am sure the Committee is aware, asset freezes are a cornerstone of our sanctions regime and of the Russia one in particular. The Conservative Government rightly targeted asset freezes at oligarchs and the circle of people closest to the Kremlin, stopping their significant and valuable assets being sent back to Russia and ultimately undermining Putin’s ability to prosecute his barbaric, renewed illegal invasion of Ukraine. I acknowledge —and am grateful, too—the fact that the Minister recognised that the UK took an innovative approach and that we were the first country to put in place such a sanctions regime with the new freedoms that we had to be able to pursue that.
According to the Office of Financial Sanctions Implementation, about £20 billion-worth of assets have been frozen since February 2022, following the renewed illegal invasion. Regulation of legal advisory services is a crucial buttress for ensuring that those asset freezes work and that the system in general is watertight. It is right that we should continue to ensure that our sanctions package and accompanying regulations, including those regarding legal advisory services, are as effective as possible.
What is also important, however, is that the guidance to the legal profession is as clear as possible, and that the changes are communicated effectively. It continues to be an issue that some parts of the legal profession seek to provide opportunities to support those who are sanctioned. Therefore, we must be clear, so that we can prosecute those who breach the sanctions.
The Government must use the Russia sanctions regime to its fullest extent, because we must constrain Putin’s war machine by targeting not just individuals, but entities and businesses helping to fuel it. I was pleased that we established OFSI, which is a vital part of the process, but it is of concern that OFSI has yet to fine any individual or entity for sanctions evasion. I understand the complexities in issuing fines, but I would be grateful if the Minister expanded on how the Government intend to ensure that those who breach our sanctions face the proper consequences, and on what scrutiny is being placed on OFSI, because there is a gap in how Parliament can scrutinise that individual body.
As the Minister will know, the Conservative Government sanctioned a number of companies in China which had been feeding supplies to Russia’s military-industrial complex. We should be targeting entities actively helping to prop up Putin’s war wherever they are in the world. I am concerned that we have yet to see a statement from the Foreign Office following recent significant reports about Chinese support to Russia or the even more recent reports that more than half of all weapons used against Ukraine come from North Korea. I have raised both those issues formally with the Foreign Office.
Finally, the Conservative Government were a leading advocate of immobilised Russian assets being used to support Ukraine and ensuring that the Russian state pays for the destruction it has caused. When we look back in history, we must be very clear that this was Putin’s war and his renewed illegal invasion—he is responsible and he must lose. We are talking about a significant sum of money, and it is vital that the Labour Government continue that work and push our allies to coalesce around the most ambitious support solution to achieve those important aims. That money must help not just with the defence of Ukraine, but in the rebuilding of Ukraine and the delivery of compensation to all those who have lost so much.
The Chair
The motion is open to debate, and the sitting can last up to an hour and a half.
Calum Miller (Bicester and Woodstock) (LD)
It is a pleasure to serve under your chairmanship, Mr Betts. I thank the Minister for his presentation. The Liberal Democrats strongly support a robust sanctions regime against Russia to counter the illegal invasion of Ukraine. Indeed, we would support the Government were they to go further with actions in the area, specifically by starting to seize Russian assets in the UK so that they can be redirected towards Ukraine—even if our allies may waver in the implementation of that internationally agreed approach.
We support the proposals today and a set of regulations that are effective and allow British professional services firms to compete fairly on the international stage. However, I would welcome reassurance from the Minister regarding the fact that all legal advice of the type that can aid the compliance of UK and other firms can also aid them in navigating a system. Can the Minister provide assurance that the effect of the regulations will be to aid compliance with the regime and stop resources flowing to and from Russia, and not to enable clients to navigate the system to evade the sanctions regime, when it is so important for our policies towards Russia?
Peter Fortune (Bromley and Biggin Hill) (Con)
Apologies if I get the procedure wrong—it is the first time I have done this. I align myself with the comments of my right hon. Friend—
Peter Fortune
One day. I have a quick question for the Minister on the consultation. I appreciate that there is no formal consultation required, but the paper says that there has been informal consultation with stakeholders. Can the Minister tell us who those stakeholders are?
Anneliese Dodds
I am very grateful for the helpful contributions we have heard. I am particularly grateful for the support of the hon. Members for Rutland and Stamford and for Bicester and Woodstock, as well as for the question about clarifying the consultation. I will come on to all those points in a moment.
The new UK Government are absolutely determined to use every mechanism we can to ensure that UK sanctions will disrupt Russia’s illegal invasion of Ukraine and the pursuit of its illegal war. We are determined to continuously refine our sanctions, so that we are applying effective pressure on Russia, both domestically and internationally.
OFSI was rightly mentioned by the hon. Member for Rutland and Stamford; it is working at pace and we are determined to ensure that it is effective. Although we did not talk about it in this debate, and I will not go into detail, the hon. Member will have seen that the Prime Minister has been active on the question of ensuring compliance with sanctions regimes. That was a core element of what he set out to the European political community, when that meeting took place over the summer. It is a priority for the UK, both domestically, in terms of ensuring that our own regime is watertight, and multilaterally, working with partners on the aim of disrupting Putin’s war effort.
Of course, the work does not stop here. It is a continuous process of renewal to ensure that we have it right and to make it harder for entities to circumvent sanctions. In response to the question posed by the hon. Member for Bicester and Woodstock—my county colleague—the measures are precisely intended to ensure compliance. That is the entire point of their introduction. If there is a lack of clarity or overlapping legal regimes, that is the kind of situation where loopholes could be exploited. Instead, the measures are clarifying the situation, so that it can work effectively and there is compliance.
On consultation, that was with those engaged in the financial and legal sectors. Above all, we are working hard to ensure that it is an effective regime. I am strongly of the view that those working in those sectors want to ensure that there is legal clarity, and that the UK sanctions regime is held to. We need to ensure that is the case across the board, as I was saying to the hon. Member for Bromley and Biggin Hill. This SI ensures that, and the consultation was with key figures in the industries that are engaged on those matters.
We continue to be committed to making sure our use of sanctions is modern, effective and joined up with other countries, although our regimes are subtly different, which in this case reflects the different legal systems in the UK, the EU and the US. We want to make sure we are keeping pressure on Russia.
The hon. Member for Rutland and Stamford raised the issue of China. The Foreign Secretary has spoken quite a lot about the need for a joined-up UK approach to China generally. It is a priority for the new Government to make progress on that. We have not had a coherent approach previously; we think we need one. We are very clear that any evidence of Chinese companies providing military support to Russia would be damaging to China’s international reputation, given its strongly avowed position on not being involved in the conflict. We will not hesitate to take action against anyone who supplies and funds Putin’s war machine. We are very clear on that.
Alicia Kearns
The Foreign Secretary is in China this week, so I hope that he can reassure us when he returns next week that he has raised that issue directly with his Chinese counterparts during that visit. It would be unacceptable for him not to do so, given that it has been more than two months since concrete evidence came out proving that China was enabling Russia in that way. Equally, on North Korea, we have an ambassador here in London who should be being called in to answer questions on how over half of the weapons maiming and murdering Ukrainians are coming from North Korea. Can the right hon. Lady show me that the Foreign Secretary will be able to confirm, when he returns next week, that he has raised that very specific and deeply concerning issue directly?
Anneliese Dodds
The new Foreign Secretary is absolutely committed to ensuring that the House is updated on all aspects of his activities. I know the hon. Lady has seen that thus far, he has been extremely responsive, and I am sure that will be the case on these issues, as on all others. He has been incredibly active—his feet have barely touched the ground—yet he has been in the Commons quite a bit to make sure the Commons remain updated.
Alicia Kearns
My question was not about whether he will update the House, but about whether he will raise the issue directly in Beijing, because he has the opportunity to put to Wang Yi, or indeed Xi Jinping, that they should not be providing weapons to Russia. I would like reassurance that that is on his agenda while he is there. Of course, I would then expect him to update the House, but the issue is what he does while he is in China this week.
Anneliese Dodds
The Foreign Secretary has been very clear indeed about his role and his leadership in relation to the conflict in Ukraine—there is no question about that. He has been very clear on it. However, the hon. Lady has followed these issues for some time, and would surely understand that the precise content of discussions between global leaders is not something that I, as a Minister, would seek to pre-empt. I would not have expected to do so in opposition either. That is something that is determined by the global leaders themselves.
To conclude, I again thank Committee members for their very insightful contributions. It has been a brief debate, but I hope that those for whom this is their first experience of such a Committee will see many more—I am sure they will enjoy every single one. I am grateful for the continued cross-party support for strong, impactful and effective sanctions in relation to Russia’s war efforts.
The Chair
I will not ask Members whether they have enjoyed the Committee—that would not be the right question to ask.
Question put and agreed to.
Draft Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024
(2 months ago)
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The Minister for Industry (Sarah Jones)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024.
As always, Sir Edward, it is a pleasure to serve under your chairship. This statutory instrument, which was laid before the House in draft on 30 July 2024, forms an important part of the Government’s commitment to accelerate the deployment of carbon capture, usage and storage. CCUS is critical to deliver clean energy and accelerate our net zero journey. As the Government recently announced, CCUS is vital as we enter into a new era of clean energy investment and jobs. By boosting this tried-and-tested technology, the UK has the potential to become a global leader in CCUS, delivering good jobs and economic growth for decades to come.
A critical element of the CCUS mix is the successful deployment of power CCUS—gas-powered electricity generators fitted with carbon capture technology. [Interruption.] It is a bit more complicated than I just tried to indicate, but that is the gist. Power CCUS will complement the roll-out of renewable energy, providing the secure, flexible, non-weather-dependent, low-carbon electricity that is critical for a reliable energy system and for achieving our mission of clean power by 2030.
The Government are committed to incentivising the deployment of power CCUS, and this statutory instrument will enable future payments to power CCUS plants under a business model called the dispatchable power agreement. The DPA is the contract framework to support power CCUS. It has been designed especially to incentivise investment in and the deployment of power CCUS in the UK.
Dispatchable power agreements are a type of contract for difference. Like contracts for difference, they use the electricity supplier obligation to fund support payments. The levy is calculated and managed by the CfD counter-party—the Low Carbon Contracts Company—and collected from electricity suppliers such as Octopus or British Gas, which can pass the costs on to their customers if they choose to do so.
In addition to the existing renewable CfD contract design, the DPA business model will provide an alternative payment based on a power CCUS generator’s availability. This availability payment is based on a generator’s availability in respect of electricity generation and carbon capture, and associated carbon dioxide transport and storage network costs. Under the DPA terms, payments will reduce proportionately to reflect any reduction in a generator’s CO2 capture availability—in other words, its capture rate—or generation.
A payment is made whether a generator dispatches power or not. This ensures that a CCUS power plant will run in response to market signals, ahead of unabated gas plants, but will not surpass cheaper renewables. This arrangement will strengthen our security of supply and ensure that a source of reliable low-carbon energy is available, but only when the wind does not blow and the sun does not shine.
This statutory instrument enables only certain types of payments under the renewable CfD and DPA contracts to be funded by the supplier levy. Any future support offer to a project will be subject to rigorous negotiations with partners. Any decisions to award support will be subject to value for money and subsidy control tests to ensure the best value for money for consumers.
The statutory instrument amends the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. The changes will allow the payments made under the DPA to be funded by the supplier levy by changing how the supplier levy rate calculation works in the regulations.
First, regulation 4 relates to the way that an electricity supplier’s daily contributions paid to the CfD counter-party are calculated. The statutory instrument amends regulation 4 to change the definition of “generation payments” so that the supplier obligation can be charged for payments relating to the activities of a dispatchable power plant fitted with CCUS technology—I hope everyone is still with me.
The statutory instrument includes amendments to take into account the electricity generation capacity made available by a generating station on a given day; a generating station’s achieved carbon dioxide capture rate or capture capacity on a given day; the CO2 transport and storage capital costs incurred from transporting such captured carbon dioxide; and, if required, the associated carbon dioxide transport and storage network shortfalls, proportionate to a DPA-supported generating station, that arose on that day.
Secondly, regulation 7 of the 2014 regulations sets out how the CfD counterparty estimates the quarterly obligation payment that electricity suppliers will be required to provide to the counterparty. The statutory instrument amends regulation 7 to ensure the consideration of matters related to a DPA-supported generating station, including the carbon dioxide transport and storage network capital costs and, if required, revenue shortfalls, and the amount of carbon captured.
Together, the changes allow a CfD counterparty to estimate and raise funds, and ultimately to pay a DPA-supported CCUS-enabled power plant. The existing payment calculation, based on the amount of electricity generated by renewable CfD-supported generating stations, is retained and unaffected.
In summary, the statutory instrument represents a positive step forward in the delivery of the Government’s ambitious CCUS programme and 2030 clean power mission. It will lay the regulatory groundwork to encourage the deployment of power CCUS and begin to unlock the great economic and jobs opportunities. I commend the draft regulations to the House.
Mark Garnier (Wyre Forest) (Con)
You will be delighted, Sir Edward, to hear that I do not intend to keep the Committee for long. [Hon. Members: “Hear, hear!”] I am going to be popular.
I thank the Minister for her introduction of the regulations; this is quite a technical issue and she did well in introducing it. I am delighted, because on both occasions when we have got together in Committee it has been terrific, from our point of view, to see that the new Government are carrying on the hard work done by the previous Government and, indeed, endorsing all our good policies.
CCUS is an exciting technology, and it was the announcement in last year’s Budget by the former Chancellor, my right hon. Friend the Member for Godalming and Ash (Jeremy Hunt), on the delivery of £20 billion of investment that led us here. It is worth mentioning that that is reinforced in paragraph 5.4 of the explanatory memorandum, which says that
“the HMT Budget 2023 confirmed government’s intention to make up to £20 billion available to support the early deployment of CCUS”.
When he gave the recent statement on CCUS, the Secretary of State said that that money had not been allocated; it would be helpful if the Minister could confirm the Government’s position. All the evidence seems to suggest that it was allocated, so the Secretary of State may have misled the House when he said it had not been.
Much work has gone into getting everything moving forward and making CCUS a reality. I thank officials for the huge amount of work they have done to get these technical regulations over the line. As the new Government are agreeing to continue to support CCUS, we hope that means we will hear more about the track 2 clusters, Acorn and Viking, which were due to make progress over the summer. Again, we asked in the exchanges on the recent statement for a progress report on track 2 clusters; it would be helpful if we could have one.
I will leave it at that, Sir Edward. The Opposition are happy to support the policies that we introduced, and we are delighted that the new Government are so enthusiastic to do likewise.
Sarah Jones
I have a couple of points to make. The first carbon capture and storage commitment was made in 2009, I think, but cancelled in 2010. It was then set up again at some point in the mid-2010s and cancelled again. The shadow Minister referred to the explanatory notes; the key word there is “intention”. The intention was announced, but whether the actual funding behind it was available is a different point. That is where we disagree, so I say very strongly that the Secretary of State certainly did not mislead the House. I am glad to clear that up.
On track 2, we are working at pace to get things done. The costs of carbon capture are significant, as the shadow Minister knows, and we need to make sure that we spend money in exactly the right way and are as careful as we can be with what is public money. We are working with both projects—indeed, we are working on expansion in the existing track 1 allocations and on track 2—and trying to get to a point at which the cost of carbon capture comes down and we have a market that becomes self-sustaining over time. But that will take some time.
I thank the shadow Minister for his comments and hon. Friends and other Members for being here. The statutory instrument before us will incentivise the deployment of power CCUS and make a significant contribution to our CCUS programme and 2030 clean power mission. I commend the draft regulations to the Committee.
The Chair
Sorry, I should have asked the Liberal Democrat spokesperson whether she wished to contribute.
The Chair
She is happy; everybody is happy. That is how we like it to be.
Question put and agreed to.