Terrorist Asset-Freezing etc. Bill [HL]

Debate between Lord Wallace of Tankerness and Lord Davies of Oldham

Monday 1st November 2010 Lords Chamber

[Lord Davies of Oldham]

My Lords, on behalf of the Opposition, I too would not dream of seeking to put myself in the same category of argument as the noble and learned Lord and the noble Lord who have spoken on these issues. The Minister has an argument here that he will need to respond to effectively. We in the Opposition thought that most of these issues were covered effectively on Report by the Minister. Like the noble Baroness, Lady Hamwee, who has expressed her reservations about other aspects of this Bill in the past, we see no argument for this amendment at present. Therefore, if we were to move to a Division, the Opposition would support the Government if, as I anticipate, they present an accurate and effective case for the rebuttal of this amendment.

[Lord Wallace of Tankerness]

My Lords, I am grateful to the noble and learned Lord, Lord Lloyd of Berwick, for introducing this debate. I am also grateful to other noble Lords for their contributions. I am particularly grateful to the noble Lord, Lord Davies, and my noble friend Lady Hamwee for indicating that, subject to what I may say, they are generally satisfied with the position which the Government have adopted.

This amendment goes back to the debate we had on Report about the scope of Clause 2 and whether it should allow the Treasury to designate non-UK persons who are outside the United Kingdom. We are grateful to the noble and learned Lord for having written to my noble friend Lord Sassoon, following our debate on Report, to explain his concerns with the clause as drafted, and for having taken the opportunity to discuss the matter in some detail with officials before he tabled his amendment. I readily recognise that this amendment stems from the noble and learned Lord’s very strong belief, which he clearly expressed in moving his amendment, that it is the right and responsibility of each country to make laws that affect their nationals and those within their jurisdiction. Generally, we would not dissent from this principle but, if the House will permit me, I will explain why we cannot accept the noble and learned Lord’s amendment.

The noble and learned Lord referred to United Nations Security Council Resolution 1373, which requires that states shall,

“Prohibit their nationals or any persons … within their territories from making any funds, financial assets or economic resources or financial or other related services available, directly or indirectly, for the benefit of persons who commit or attempt to commit or facilitate or participate in the commission of terrorist acts”.

I think it is clear that a key aim of Resolution 1373 is to prevent acts of terrorism anywhere in the world. To that end, the definition of terrorism in this Bill is borrowed from the Terrorism Act 2000 and is used in other legislation. The definition makes it clear that terrorist activity anywhere in the world against persons or Governments falls within the scope of the legislation.

It is also clear that Resolution 1373 puts an obligation to prevent terrorist finance not only on the state where particular terrorists and terrorist groups reside but on the states from which the funding of those terrorists may originate. If, for example, a foreign terrorist holds assets within the United Kingdom or relies on funding coming from the United Kingdom, it is not only right but essential that the United Kingdom should be able to freeze those assets and prevent funds being transferred for terrorist purposes. That is what the language of United Nations Security Council Resolution 1373, which I have just quoted, clearly requires.

Relying purely on the country where the terrorist resides to take action has two fundamental drawbacks. First, that country cannot control funds or other assets that may be available for use overseas by the terrorist. This is why the Security Council resolution is worded as it is. Secondly, we know, as was acknowledged in our short debate, that terrorists are often based in countries where the authorities cannot or will not take action: for example, in failed states or in states where the authorities turn a blind eye to terrorism.

Clause 2 therefore provides the Treasury with a power to identify those whom we consider to be terrorists, based on activities that could take place anywhere in the world. The effect of the designation is twofold. First, any funds and economic resources within the United Kingdom of such persons are required to be frozen. It will be a criminal offence for anyone in the United Kingdom to deal with such assets without licence from the Treasury.

Secondly, persons in the United Kingdom will be prevented from providing any funds or economic resources to designated persons. I shall try to make it clear; the fact that some persons designated by the Treasury are ordinarily not in the United Kingdom does not give extra-territorial effect to the provisions. The effect of listing such a person is to freeze only their United Kingdom assets and prevent persons within the United Kingdom or United Kingdom citizens abroad assisting them. It has no further effect.

The noble and learned Lord, Lord Lloyd, asked what would happen if we were to designate a terrorist who was in France. He suggested that it might lead to a breakdown of international comity. That we are taking these measures in pursuance of a United Nations Security Council resolution indicates where the balance of international comity may lie; it is in United Nations member states taking the resolution and implementing it. We have not so far designated a French national. However, if we were to do so, I would certainly expect close co-operation between United Kingdom and French authorities in such a matter. The French might indicate to the United Kingdom that a French national was a terrorist of concern to them, whose assets they wanted to freeze. Working with French counterparts, the United Kingdom’s law enforcement agencies would identify whether that suspected terrorist held assets in the United Kingdom that the French Government then wished to be frozen. The French would provide United Kingdom authorities with the relevant evidence to support a UK designation, showing that there was at least a reasonable suspicion that person X was involved in terrorism and that a UK asset freeze was necessary for protecting the public from the risk of terrorism.

Finally, a Treasury Minister will consider the case and, if the legal test that is set out in this Bill is met, will designate person X, with the Treasury taking the necessary steps to inform the financial sector and to freeze person X’s assets within the United Kingdom. We accept that other countries may use domestic asset-freezing powers to designate United Kingdom nationals, but again we would expect this to be done in co-operation with United Kingdom authorities.

The power in Clause 2 relates to designated persons, including non-UK nationals; it is not a radical departure. Sanctions legislation is by its very nature often targeted at persons outwith the United Kingdom, but the prohibitions bite only on those in the United Kingdom or when United Kingdom nationals are elsewhere. An example is the prescription regime under the Terrorism Act 2000 and this legislation. There is a list of prescribed groups, almost all of which operate outside the United Kingdom, but the effect of proscription is to prohibit persons in the United Kingdom from membership of such groups or from providing material support to such groups. As with our Bill and sanctions legislation generally, the target is outwith the United Kingdom but the prohibitions apply solely in relation to persons in the United Kingdom or UK citizens operating abroad. That accords with the fundamental jurisdictional principle that the country should normally legislate to criminalise only acts committed within its territory or by its citizens abroad. Here the acts that are being criminalised are the provision of finance for the purposes of terrorism.

I understand the noble and learned Lord to be concerned about interfering with the sovereignty of other states. I hope that he can see from an indication of how we might act in the event of getting intelligence or representations from France that this measure would not offend another state but would promote co-operation. At the risk of repeating myself, the effect of a designation is to freeze only those assets of a designated foreign national that are within the United Kingdom, and we believe that that is the sensible way in which to proceed.

Clause 1(b) refers to persons listed in Council Regulation 2580/2001. This regulation is the means by which the European Union implements Resolution 1373; it does so by requiring member states to identify persons against whom the state has taken action, for example by way of a domestic asset freeze. Persons put forward and included on the list are then subject to financial sanctions throughout the EU. The reference to “persons” here cannot be confined to those within the UK and the same term cannot have different meanings in the same clause. The EU regime emphasises, I think, the essential territoriality of an individual member state’s actions, and the need for each member state to take action against assets in their country and to prevent those in the country from providing material support to terrorists.

The noble and learned Lord referred to Clause 33, which provides for cases in which UK nationals and UK incorporated bodies commit an offence outside the UK. This is not an unusual extension of the application of a statute, and I do not think—nor did he suggest—that it is in any way controversial. The purpose is straightforward—to prohibit UK nationals and companies from committing acts abroad that would be offences under the Bill if committed here.

The noble Lord, Lord Pannick, asked whether we should be able to designate overseas persons only if they hold assets in the United Kingdom. I have answered that. The asset-freezing regime not only freezes assets but prevents persons in the United Kingdom making payments to a designated person. That is why we need to be able to designate overseas persons, even if they do not hold funds in the UK, so that we can prevent people in the United Kingdom or UK persons overseas providing designated persons with funds.

In summary, we believe that Clause 2 does not limit the Treasury to designating only persons who are in the UK, and nor should it. While we have listened carefully to the noble Lord’s arguments today, on Report and in the exchanges that he has had with my noble friend, we are satisfied that the wording of Clause 2 as it stands is sufficiently clear in this regard. It does not make the provision extra-territorial. Clause 2 merely identifies those persons involved in terrorism whose assets persons in the UK cannot deal with and whom persons in the UK cannot assist by providing funds or economic resources.

For this reason, the Government cannot support the amendment, and I urge the noble and learned Lord to withdraw it.