Sanctions and Anti-Money Laundering Bill [HL]

Lord Neuberger of Abbotsbury Excerpts

Ping Pong (Hansard): House of Lords
Monday 21st May 2018 Lords Chamber

[Lord Anderson of Swansea]

That may well be the case, but I pose the question again. There is this £34 billion of Russian money. We know that the oligarchs look for areas where they can usefully hide their assets. Are we prepared to continue to allow that?

[Lord Neuberger of Abbotsbury (CB)]

My Lords, I strongly support the amendment of the noble Lord, Lord Naseby. The clause which he seeks to remove from the Bill is a classic example of a proposal which may seem right to many people—for the reasons given so clearly by the noble Lord, Lord Anderson of Swansea—but, after proper consideration can be seen to be very wrong.

Unlike most countries, our constitutional arrangements are based on conventions and mutual respect rather than pieces of paper, and we break those conventions and trample on that mutual respect at our peril. As the 2012 White Paper on the territories recognised, the UK’s legislative power over the territories is in practice and by convention limited to,

“external affairs, defence, internal security (including the police) and the appointment, discipline and removal of public officers”—

and, I would add, compliance with the UK’s international obligations. Accordingly, the proposal would run contrary to the established distribution of powers—quite apart from the points made about the constitution of some of the territories.

Not only that, it would do so in a most inappropriate way. There has been no consultation with the democratically elected Governments of any of the territories about the legislation. There has been no investigation of the effectiveness of this law in relation to any of the territories. There has been no inquiry as to the economic and social consequences of the legislation on any of the territories. That is in circumstances where, to go back to what the White Paper said, the UK Government aim,

“to work with Territories to strengthen good governance arrangements, public financial management and economic planning”,

to work with the territories.

I regret to say that the proposed law appears to be old-style colonialism at its worst: damaging legislation which has no cost for the legislating country but which will cause hardship to the victim countries, and does so not merely without representation but without consultation or full investigation. But it gets worse. The law is imposed in circumstances in which it is indisputable that the BVI, Cayman and Bermuda comply with all current international transparency and taxation requirements, such as those laid down by the OECD. This was recognised by the very full and generally rather critical December 2017 EU Muscovici report, which identifies which countries are unco-operative by hiding assets, and so on, and it does not include any of the territories.

[Lord Flight]

Is it not the case that they also comply with all the FATF requirements, which the UK does not?

[Lord Neuberger of Abbotsbury]

I believe that is the case, yes. I was going on to say that in many respects it appears that all three territories which I mentioned have a regulatory regime which in many respects is stricter than that of this country.

On top of all this, this proposal imposes a financially damaging regime on at least three territories in the Caribbean area with significant financial service industries for which the UK has responsibility, while not doing so for the Crown dependencies with substantial financial service industries closer to home: Jersey, Guernsey and the Isle of Man, for example. That adds discriminatory insult to unconstitutional and unfair injury. Let me make it clear to the Crown dependencies that I say this to oppose the proposed law applying to the territories, not to support it applying to the dependencies.

Finally, what will happen if this unfair and unjustified law is brought into force, apart from leading to a real sense of grievance and of being let down on the part of small states which it is our duty to protect? It will do no good. If there is the hot money to which the noble Lord, Lord Anderson of Swansea, referred, it will quickly move away from the BVI, Cayman and Bermuda to places which do not have respected democratic Governments and independent and respected courts, where the Judicial Committee of the Privy Council, which I had the honour to chair for five years, has no power. In effect, it will not be upholding the rule of law, it will be undermining it.

It will be only when we have universal acceptance of such regulation that, I respectfully suggest, it will be appropriate to impose it on these territories.

[Lord Anderson of Swansea]

With respect, is that not avoiding the question in an Augustinian way: make me good, but not yet, not until everybody else is good?

[Lord Neuberger of Abbotsbury]

So we have to sacrifice other people many miles away who have no say in it for the purpose of feeling good and leading the way? That seems to me, if I may say so, a very selfish attitude to take. It is simply inappropriate for us to do this for other countries.

[Lord Collins of Highbury]

If there was international agreement, is the noble and learned Lord suggesting that we should then impose on the territories?

[Lord Neuberger of Abbotsbury (CB)]

Judging by how the territories have behaved in the past, it seems pretty clear that we would not need to. They would comply, as they are currently doing, as the noble Lord, Lord Flight, said, with all their international requirements—indeed, going further than what is required. I would respectfully suggest that we should be supporting the amendment of the noble Lord, Lord Naseby.

[Lord Beith (LD)]

We should surely consider very carefully when what seems like a very necessary measure to tackle a great evil confronts a constitutional objection; this is not the way in which such a measure ought to be introduced. There are also qualifications I might make about the potential effectiveness of the public open registers to be imposed on these territories in dealing with the evil being addressed. But there is no question that those who are advancing the case are doing so because they see an urgent need to tackle this evil and see this as likely to help.

However when it comes to a constitutional objection, we have to think carefully. There are two constitutional issues at play: one is that the elected House has made a clear decision, following debates in both Houses, that we should proceed along this road. We have to accept that, as the Government have done. But we cannot do so without reflecting on the impact this will have, and in particular on the constitutional status of the territories concerned. They are, of course, a wide variety of territories, defined in Schedule 6 to the Nationality Act. That includes not just the British Virgin Islands, the Cayman Islands and Bermuda but the British Antarctic Territory, the British Indian Ocean Territory and the Pitcairn Islands, with about 50 inhabitants. It is not entirely clear how the Minister with responsibility—the noble Lord, Lord Ahmad, of course—will deal with the situation as it will affect some of those territories.

That variety also illustrates that there is a range of democratic and other development in this list of territories which includes many at different stages. The territories that have attracted most attention are those which, by and large, have well-embedded constitutional arrangements, introduced by this country, of which a major component is legislative autonomy. The question that we now have to answer is: what do we do about the legislative autonomy that we purport to have given to people, if outside the parameters set when we gave that autonomy we then seek to legislate for them? That question remains unanswered in this process.

When Britain decided what its policy towards former colonies would be, it did not take the French approach. The French approach, in relation to a number of territories, including neighbours of the territories we are talking about today, was to treat them as integral parts of France and give them representation in the National Assembly. We are having this argument and nobody from any of the overseas dependent territories is able to take part in the debate; it is all being done by people who, for different reasons, are aware of them, friendly towards them or simply, in my case, see it as a constitutional issue for them.

We did not take that approach. Are we now saying that the idea of developing them as separate democracies through legislative autonomy is not one that we will pursue any more? We will have to give them some kind of assurance if they are to understand what their constitutional relationship is. Britain is not just a franchise brand that we offer and take away at a moment’s notice. It is a country which has promoted the democratic development of its former colonies and we have to ask whether we can really do that if we insist on legislating for them in areas for which we have given legislative autonomy.

There was a question from the Labour Front Bench a moment ago about what would happen if there was an international standard and one of the territories declined to implement it which, as has been pointed out, has not been their practice up to now. They have implemented all the international standards. However, it is a perfectly legitimate question and the answer is that this is an area in which we have not given legislative autonomy to those territories. We have retained UK responsibility to deal with their international relations and their compliance with international treaties. We would indeed impose, in those circumstances, exactly within the parameters of legislative autonomy that has been given.

I pay tribute to the efforts devoted to this subject by the Minister, which I think are partly motivated by the fact that he has to deal with the consequences. He is the person who is responsible for our relations with these territories. But how can we reassert the constitutional relationship between the United Kingdom and those territories to which it has given legislative autonomy in the context presented by the decision that the House of Commons has taken?