Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023

Lord Collins of Highbury Excerpts

Wednesday 19th July 2023 Grand Committee

[Baroness Lawlor (Con)]

I am grateful to my noble friend the Minister for discussing the proposed statutory instrument so thoroughly. I want to follow the noble Lord, Lord Purvis of Tweed, in what he picked up from the Law Society’s briefing. It is certainly the case, as the statutory instrument is framed, that a lawyer who works for an international firm but may be based in New York cannot advise an international client on EU or US law in respect of, say, divesting from activities in Russia. It is really quite important to know how he can be compliant with the law. I note the intention to have general guidance but will it be such that there will be a lack of clarity and a concern that overseas clients consulting UK lawyers will not be able to get advice at the same time about where the law stands in respect of US and EU law?

[Lord Collins of Highbury (Lab)]

My Lords, one of the issues we need to address is that Russia is highly dependent on western countries for legal expertise. As a country, we previously exported £56 million in legal services to Russian businesses every year, so it is important that we address this issue.

I also welcome the fact that we can use this debate to reiterate our cross-party support for these measures to show our unwavering commitment to and solidarity with Ukraine, its people and its sovereignty. Following last night’s Statement repeat on NATO’s Vilnius summit, I underscored the strength of feeling across our diplomatic and military alliance that we must stand with Ukraine until the war is won. It is vital that Parliament speaks with one voice.

The Opposition fully support the steps that the Government are taking to further strengthen our sanctions regime, prevent evasion and ensure that the Kremlin’s capacity to conduct this war is undermined. I stress that we recognise that this statutory instrument is common sense and prudent. It clearly should not be permissible that, more than 500 days into this conflict, it would be potentially lawful for a UK legal services provider to support commercial activities that advanced Russian interests because said activity did not have a sufficiently tangible connection to the UK, due to the territorial application of the 2019 regulations.

I hope the Minister can tell us what assessment the Government have made of how effective the 2019 regulations were and how we discovered any potential loopholes that people could get through. This leads on to my major point about this: can the Minister account for the delay in addressing these issues from the application of the regulations in 2019? If this loophole has been exploited, why has it taken us so long to address it?

I have read the Law Society’s letter and I appreciate the Minister’s response. I welcome the fact that the law officers and other departments are meeting with the Law Society but, to echo the point from the noble Lord, Lord Purvis, I am keen to support the Government in strengthening these sanctions. I do not want to see any further escape routes for people. It is important that we hear the Minister’s view on how effective these new regulations will be at imposing the sort of sanctions that we believe are necessary to limit Russia’s ability to wage war.

I know that the Minister has heard me say before that it is one thing to adopt particular regulations on sanctions, but how we resource them and how we are satisfied that they can be implemented and monitored is another. Can he tell us how the Office of Financial Sanctions Implementation is resourced? Will it be able to police these regulations? If our sanctions regime truly is a work in progress, we must be capable of reflection and improvement. If exemptions are causing more issues, we need to know about them; the assessment must be based on that.

There is one other question I will briefly raise, which is that the regulations provide exceptions when the Act relates to diplomatic missions or consular posts. Can the Minister give me a practical example of that? I am not sure I understand the purpose of it.

I have addressed the point about the Law Society. Of course, this was also raised with the Secondary Legislation Scrutiny Committee, which expressed the view that this issue needs to be addressed. The committee was approached by an international law firm.

I conclude by saying that we once again fully support the Government’s actions. We want to see the Russian regime sanctioned. The news I have just seen on the BBC website about not only breaking the agreement but bombing the very facilities that could feed Africa is absolutely atrocious. The sooner we bring this regime to account, the better. We fully support the Government in their actions.

[Lord Ahmad of Wimbledon (Con)]

My Lords, I put on record my thanks to the noble Lords, Lord Purvis and Lord Collins. I am sure I speak for all three of us in saying that, when we embarked on this journey of sanctions, we hoped that our debates and discussions would be limited. However, it is a real tragedy of the consequences of the war on Ukraine that we are continuing to have these debates. As I said in my opening remarks, and as was acknowledged by the noble Lords, Lord Purvis and Lord Collins, the fact that, even as we speak, there continue to be not just acts of aggression but pure violations of international law shows the nature of this war.

One point I would raise is how we amplify these points to the sorts of countries that still sometimes challenge us directly. I was delighted to see the noble Lord, Lord Wallace—I am not tempting him into the debate, but I am sure he will have a view on how we address the issue of influence directly. Quite often on the world stage and as I have travelled, it has been said to us that our sanctions are causing problems of food insecurity. Russia’s actions today demonstrate what is causing the challenges to food security. We have always worked with the UN and other key countries to ensure that the Black Sea grain initiative is kept on the front burner. It is regrettable and tragic that it was not. Further, it is tragic that we have seen the consequences culminating in this Russian aggression on the very areas that store the grain.

That said, I thank noble Lords for their specific contributions. To clarify the point made by my noble friend Lady Lawlor, whose intervention I welcome, what we are seeking to introduce—we have identified this issue—is a general licence as an immediate first step. We are working directly with the legal profession, including the Law Society, to ensure that any other unintended consequences and any other loopholes that we can address directly can also be met first hand. As I said in my opening remarks, we will seek to bring legislation forward at the earliest opportunity. It is important that we continue to do so.

The noble Lord, Lord Collins, raised the issue of identifying, as things are, how we have been working to address particular issues and the delay. As I am sure he would acknowledge, legal services are distinct from other professional services in the constitutional role they play within our country in supporting and upholding the rule of law. Therefore, we carefully consider the implications of different policy options. This is ever evolving. In collecting an evidence base, we also work with legal services to ensure that, as far as possible, the measures we lay have the desired effect.

I am not saying that this is the last time we will have this conversation. As we are imposing these sanctions and taking further steps to restrict Russian activities, I am sure that we will identify areas, as we have on this occasion, that will further address those very issues. As a former person of the City myself, I fully understand the comprehensive scope of not just the banking services but the services industry around them. We have previously addressed consultancy and accountancy firms and today, in conjunction with legal representatives, we have worked through the implications for the legal industry.

--- Later in debate ---

[Lord Collins of Highbury (Lab)]

I am sorry to interrupt but regarding the exemptions, I was going to ask about the provision of professional business services, specifically related to auditing services. I cannot understand why there is an exemption for that.

[Lord Ahmad of Wimbledon (Con)]

As I understand it, the auditing element of it is a professional and legal requirement, but if I can amplify that further I will of course write to the noble Lord.

The noble Lord, Lord Purvis, and my noble friend Lady Lawlor raised the issue of the general licence and its application. Under the general licence, UK persons will be able to advise on global sanctions regimes, including but not limited to the United Kingdom, USA and EU. In response to my noble friend, the same applies to the scenario she illustrated of a UK person working in the USA. However, I will take all these elements and ensure that there is a specific response because these are understandably issues of concern.

At this juncture, I also say that our rule of law and justice system allow for the provision of representation services. I am sure that the fact that I did not get a question on that means that noble Lords have acknowledged and noted that it is right that a country such as the United Kingdom continues to protect that right of legal representation. We may have our personal views on particular people who seek to take advantage of our professional services but, at the same time, every professional, including legal professionals, will now be bound by the new regulations that we are putting forward.

On the issue raised by the noble Lord, Lord Collins, specific to the Diplomatic Service, I am sure that some areas of privileges and immunities are covered in that. Again, in the interest of completeness, I will cover that in the appropriate letter.

On auditing, as I said, audits apply to the shareholders rather than the companies, in order to ensure that audits can take place where they are a statutory requirement. I have just had that confirmation from the Box—I remember some of my private sector experience quite well. It shows that when you do things off the cuff, you remember things from years past.

In all seriousness, we have sought to address some of the key areas identified as these new regulations and sanctions regimes are applied. While we have worked to ensure that Russia cannot access our legal expertise in relation to certain commercial activities, we have not hindered work that helps to provide judicial rights and access to justice.

These measures are the latest addition to our package of sanctions, which is having a damaging effect on Mr Putin’s war machine and his regime. I know that the UK Government and all Members of your Lordships’ House are united in keeping the pressure on Mr Putin until he ends this horrific and senseless war.

Finally, if, before the House rises, there are further details I can share with noble Lords on the issuance and the date of issuance of the general licences, I will do so. I will write to noble Lords on the areas that I have said I will address, particularly on diplomats. That said, I put on record my sincere thanks to all noble Lords, including my noble friend, who participated in this brief debate. Sadly, and tragically, I am sure that we will have further debates on this.