Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2024

Lord Callanan Excerpts

Tuesday 15th October 2024 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, following the very valid points made by noble Lords in this short but important debate, I offer the Government support for this. The Government were caught by a timetabling aspect, with the Summer Recess and then the conference break, so it is positive that they have ensured that there will be some parliamentary scrutiny and the ability for Members to ask questions on these matters. We have just seen the value of raising these pertinent points.

The Minister will not be surprised that I support these measures. He and I have been in many debates—in fact, all the debates on the Russian sanctions when the noble Lord, Lord Ahmad, was the Minister—and there was consensus across the Committee. I will ask a few further questions that have not been asked so far, and will perhaps emphasise some of the points that have been made.

First, I return to the issue of enforcement. Not for the first time, the noble Lord, Lord Alton, asked questions that I was going to ask. I would be grateful if the Minister could give an update on the securing of frozen assets that could be put to good use by Ukraine in this conflict. The Minister was a doughty campaigner on Chelsea when he and I were asking the noble Lord, Lord Cameron, about this in the Chamber. An update would be very useful. Is it still the case that we need to change any of the legislative or administrative processes in the UK so that we can carry out the repurposing of frozen assets into secured assets that can be put to use, around which consensus was sought in the G7? Or is it the Government’s position that we look purely at the EU proposals on the interest of assets—or, if assets are sold, that we use some of that? An update would be useful.

I periodically monitor the website of the Office of Financial Sanctions Implementation, which is tasked with ensuring that the sanctions regimes we put in place in the UK are properly enforced and policed. It is interesting that only one enforcement for circumventing UK sanctions has been carried out this year, to the tune of £15,000; since 2022 and the full invasion of Ukraine, there have been only four, totalling £60,000. Given the scale of the impact of the sanctions regime that the previous and current Governments have indicated, is it the Minister’s view that this is an accurate reflection of how the sanctions are being enforced?

We could look at it in two ways: either there is circumvention and the enforcement is not effective; or the UK is remarkably good at getting all our businesses to adhere to all of the sanctions. There may be an element of truth in both, but what is the Government’s assessment? That speaks to the valid point made by the noble Lord, Lord Alton, about the opportunity for a fundamental review not just of the overall impact of the sanctions—including an assessment of the impact of the sanctions, given the fact that they are in place until we rescind them—but of their enforcement.

The second aspect I wish to ask about is the services provided, either those in the shadow fleets or those that can now be determined under the sanctions regimes. I strongly support the Government with regard to not only persons who are directly or indirectly in the enterprises or linked with the fleets but those providing financial services to them. Why have the Government taken the view that legal services are not included in that? We all know that London in particular is the home of many legal services that have been part of the grey area of advice when it comes to these sanctions. I would be grateful to hear whether the Minister has any comments on that. We would certainly be supportive of ensuring that there is no loophole when it comes to financial services that can be masked as legal services; we need to ensure that there is no loophole for that.

I also wish to pick up on the point about our support for those in the fleets as far as the oil or dual-use goods on the shipping are concerned, as well as with regard to our position on the countries where they are landed. The point was made eloquently that many of those are our trading allies. I know that the Government have previously had frank—I hope—conversations, but surely we are now beyond the point of having frank conversations; we need to be considering actions.

In that regard, I would be grateful if the Minister could comment on the news from the end of August that the United States is moving towards secondary sanctions on those operating on financial services in jurisdictions where it believes that the sanctions regimes are being circumvented. I believe that secondary sanctions on financial institutions would be effective; I would be grateful if the UK were part of that. Indeed, what is the Government’s current position on considering secondary sanctions? This is obviously a sensitive diplomatic area, but I believe that it is important.

Can the Minister address a question that I asked his predecessor on jurisdiction? I acknowledge that these measures are UK-wide but I asked previously about the overseas territories when it comes to shipping and potential licences that are exemptions to them. We know that, when certain tankers land in overseas territories, they can operate under a different regime. I would be grateful for clarification that they are also covered by these sanctions.

I wish to ask a minor question regarding limited exemptions. Obviously, we know that there should be the capacity for some kind of exceptions in the regulations, but, to prevent an exception becoming a loophole, can the Minister confirm that the exceptions in these sanctions are defined across the G7 and our partners, so that there is no distinction between exceptions under these sanctions and those in the United States or the European Union? If the Minister could respond to these points, I would be grateful.

My final point is that the Government have our full support in ensuring that there is as much consequence for the Russian war economy as possible. No UK entities, whether in the City of London, finance, shipping or insurance, should have any part in supporting the Russian war regime. We continuously support the Government to ensure that there are no limits to what we can do to ensure Ukraine’s support.

[Lord Callanan (Con)]

My Lords, there is a great degree of unanimity on this subject because I, too, very much welcome these regulations. I particularly welcome the Minister’s assurance that the United Kingdom will continue to stand with Ukraine. These sanctions will clamp down on Russia’s so-called shadow fleet by targeting 17 Russian oil tankers. I very much welcome this action because, no matter how sly and cunning Russia may seek to be, I am pleased to see that the United Kingdom and its partners will continue to sanction Putin’s Government appropriately.

However, this is, of course, very much a game of legislative whack-a-mole: every time we clamp down in one area, another seems to pop up. I am particularly interested in hearing the Minister’s reply to the excellent questions from the noble Lord, Lord Vaux. It seems blindingly obvious that India and Turkey, in particular, are circumventing these sanctions by helping Russia to “launder” its oil into the rest of the world. I hope that His Majesty’s Government are raising these matters at the highest level with the Indian and Turkish Governments. I would certainly be supportive of any further action that the Government take because it is very important that the Russian war machine, as the noble Lord, Lord Purvis, correctly described it, is clamped down on. We should target any entities in the UK or the overseas territories that are helping it to do this, either in these regulations or in future ones.

Having said that, although we fully support these regulations, I want to ask the Minister a couple of questions in consequence. The regulations allow the Government to take a similar approach to that of the US Government and implement asset freezes against actors engaging in what is otherwise lawful activity. The law firm Eversheds Sutherland has claimed that the expansion of the designation criteria

“has the potential to create a considerable burden on entities from a due diligence perspective”.

That could just be special pleading, but I would be interested to hear the Minister’s response. Eversheds Sutherland also claims that it

“will not be enough to rely on sanctions screening”

to comply with these regulations, and that the UK Government have

“potentially created significant challenges for UK … businesses”.

Can the Minister inform the Committee as to what steps have been taken to help UK businesses comply with the regulations? What level of due diligence is required?

On this point, a briefing published on 28 August by Eversheds Sutherland stated that no persons have been designated under the regulations, as has been made clear. Can the Minister confirm whether that is still the case?

As I said, we fully support these regulations. I ask these questions purely in the nature of wanting to see their enforcement be as effective as possible. I will continue to support the Government and to hope that they will go further, if necessary, so that any UK entities, companies or businesses involved in helping the Russian war machine face the strongest possible action. We support the Government in this, but I would welcome the Minister’s assurances and answers to some of the questions that have been asked.