Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

[Lord Pannick (CB)]

My Lords, the Minister said in his opening remarks that this is a “technical Bill”. However, it raises a number of constitutional issues and concerns which flow from the fact that the imposition of sanctions on an individual has a very adverse impact on the person designated, as the noble and learned Lord, Lord Hope of Craighead, rightly said. The noble and learned Lord mentioned the Supreme Court case of Ahmed, in which he was a member of the Appellate Committee. He rightly said in that case that an order freezing the assets of an individual makes such persons,

“effectively prisoners of the state”.

He added that these orders are,

“intrusive to a high degree”,

and have an adverse effect on not just the individual but members of their family.

My first concern is that the Bill states, at Clause 10(2)(b) and Clause 11(2)(b), that if there are “reasonable grounds to suspect”, then the question for the Minister is whether it is “appropriate” to designate. The current legal test applied by the courts here and in the Court of Justice in Luxembourg, in part by reference to the European Convention on Human Rights, is to ask whether designation is proportionate in all the circumstances, including the impact on the individual. Can the Minister say whether the Government accept that a proportionality test will continue to be applied under the Bill? If so, will the Government accept that it would be highly desirable for this to be stated in the Bill?

My second concern is that Clause 11 allows for designation of persons by description. Currently, EU law requires that persons or entities must be expressly named if sanctions are to be applied. That is for a very good, practical reason. For a person to be designated other than by reference to their name will inevitably cause uncertainty not just for the persons concerned but for those who have to apply these provisions-in particular, banks required to freeze the assets of persons who are designated. Will the Minister comment on these problems which will inevitably arise if persons are designated by description?

My third concern is that Clause 2(1) will allow for financial sanctions to be imposed not just on designated persons but also on persons,

“connected with a prescribed country”.

Clause 50(4) will allow the Minister to make regulations specifying the relevant connection. Can the Minister explain why sanctions should be imposed on a person simply because they are connected to a specified country as opposed to misconduct by that person or their personal responsibility for the decisions of a repressive regime or a regime which otherwise justifies a sanctions border?

My fourth concern is procedural fairness. I think the Minister accepted in his helpful opening remarks that one of the vital safeguards in this context is the right of the individual to know the case against them and to have the opportunity to answer it. The European Court of Justice has recognised that procedural rights are vital to the integrity of any sanctions regime. The Minister said that the Bill contains “robust” provisions to protect procedural rights. In fact, the Bill contains very little indeed on the subject of procedural fairness. I well understand that a person cannot be told anything before listing occurs, as there will be too great a risk that funds may be dissipated, but once listing has occurred, the individual must have a right to be told why listing is taking place and by reference to what evidence so that he or she has a fair opportunity to respond—subject, of course, as the Minister mentioned, to retention by the state of security-sensitive details, but even then the individual must be told the essence of the case against him or her, as the case law requires.

It is striking that this Bill does not include any provisions setting out such a basic requirement of fairness at the stage after a designation order is made—neither a detailed code nor even a statement of principle to be developed in secondary legislation. There is only a requirement of disclosure if and when a case comes to court; that is, Clause 34(1), which refers to Sections 66 to 68 of the Counter-Terrorism Act 2008 and which incorporates the special advocate procedure for sensitive material. Even then, there is no recognition that individuals must be told the essence of the case against them.

I would like to see a duty to disclose at the earlier stage; that is, when or soon after the designation is made. The reason why it is essential that the individual is told at least the essence of the case against them at the designation stage is that you cannot start court proceedings under Clause 32(1)(d), read with Clause 33(5), until you have sought a review by the Minister and received a decision on that review from the Minister. That may take months—one hopes that it will be speedier than that, but, being realistic, it is bound to take time. There are no requirements on Ministers as to the timetable for conducting reviews. Unless you know the case against you, it is impossible effectively to present your arguments on the review. It is important to have clarity in this area on the face of the Bill, otherwise there will inevitably be litigation—and that litigation will lead to the courts imposing a duty to follow a fair procedure, which is my fourth concern.

My fifth concern about the Bill is in relation to the periodic review provisions in Clause 20. The appropriate Minister is required to consider any designation of a person every three years. That is far too long a period given the gravity of the consequences of listing a person. In the EU system, the periodic review sometimes occurs every six months, but in all such cases it must occur at least every year. It is true that the listed person can themselves seek a review under Clause 19, but, under Clause 19(2), once such a request has been made,

“no further request may be made … unless … there is a significant matter … not previously … considered”.

There will be cases where although there is no significant new material, the very fact of the passage of time may justify looking again at whether a listing is really appropriate. The three-year period is especially troubling because, as I said, you cannot start court proceedings until you have sought a review by the Minister and received a decision on that review. Will the Minister say why the review period of one year at the most in Europe is being increased to three years, and will he please reconsider the point?

My sixth concern is that the Bill would remove effective remedies for persons listed in the UK in order to implement a UN designation. The current position under EU law is that it is contrary to the rule of law for a UN listing to be implemented without procedural safeguards—that is, supporting evidence, effective judicial review, and the European court has the power to quash an order if it is not proportionate. Under the Bill, Clause 21(2) and (4), the individual would only have a right to request the Secretary of State to use his or her best endeavours to take the matter up at the UN to remove the person’s name. There is a right under Clause 32(1)(c) to seek a court review of the Minister’s decision not to use best endeavours. Can the Minister confirm that I have correctly understood that the intention of the Bill is to deprive the individual on the UN list of the rights that he or she currently has under EU law to obtain from the court, in appropriate cases, a quashing of a listing that derives from the UN?

If that is so, the individual designated in this country as a result of being placed on a UN sanctions list will have much less legal protection than a person who is listed in France or Germany as a result of being placed on the same UN sanctions list. The Minister said in his opening remarks, and he is right, that this country has an international law obligation to implement a UN listing. But can he confirm that, nevertheless, the European Court of Justice in Luxembourg requires the rule of law to be satisfied and has a power to give effective judicial remedies in appropriate such cases?

My seventh and final concern is the very broad delegated powers conferred on Ministers under the Bill, for example under Clause 39. The noble and learned Lord, Lord Judge, will address this topic, and I share the views that I know he is going to express. I look forward to hearing the Minister’s response on these points.