Sanctions

Bob Seely Excerpts

Thursday 22nd September 2022 Commons Chamber

[Jesse Norman]

The instruments before us were laid between 14 and 20 July under powers provided by the Sanctions and Anti-Money Laundering Act 2018. They make amendments to the Russia (Sanctions) (EU Exit) Regulations 2019.

As the last debate demonstrated, this House stands absolutely resolute in its opposition to the illegal and aggressive invasion of Ukraine by Russia. In co-ordination with our allies, the United Kingdom continues to play a leading role in introducing the largest and most severe economic sanctions package that Russia has ever faced. The measures that we are debating are designed to isolate Russia’s economy still further and target key industries that support President Putin’s illegal war in Ukraine. The measures are somewhat technical, so I hope that the House will forgive me if I go through them in a little detail.

The No. 11 regulations ban the export of goods and technologies related to the defence, security and maritime sectors. They also prohibit the export of jet fuel, maritime goods and technologies, certain energy-related goods, and sterling and European Union banknotes. In addition, they ban the import of goods such as fertiliser, metals, chemicals and wood, depriving Russia of a key export market. Together, those markets were worth some £585 million last year.

The Joint Committee on Statutory Instruments concluded that three provisions in the Russia (Sanctions) (EU Exit) (Amendment) (No. 10) Regulations 2022 would not be inside the powers conferred by the Sanctions Act. His Majesty’s Government have resolved that by revoking the 10th amendment and replacing it with the 11th. I thank the Joint Committee on Statutory Instruments for its continued engagement as we introduce further secondary legislation rapidly in response to this abhorrent war.

The No. 12 regulations place fresh restrictions on investments and services in Russia. They are designed to hit revenue streams of critical important to the Russian economy. The new measures prohibit persons from being involved directly or indirectly in acquiring land and entities with a place of business in Russia, in establishing joint ventures with persons and entities connected with Russia, and in opening representative offices or establishing branches or subsidiaries in Russia. The measures also restrict the provision of investment services related to these activities. There are some exceptions to the provisions to prevent overlap with existing regulations as well as licensing and enforcement powers.

[Bob Seely (Isle of Wight) (Con)]

My right hon. Friend is talking about services. Will His Majesty’s Government take further action to prevent Russian state entities such as Gazprom and VTB Bank, and the legal firms that support them in this country, from continuing to use the UK courts? I have written to the Secretary of State for Justice about the matter, because there is a long list of cases that the Russian state and Russian proxy entities are taking in the UK courts, and that money ends up back in the coffers of the Russian Government.

[Jesse Norman]

I am extremely grateful to my hon. Friend for his question, and the House recognises his great expertise in this area. He will understand that I am not going to comment on the future sanctions policy of this Government, but he can take it as read that we are looking extremely closely not just at ways of further extending this escalating programme of sanctions that has elaborated itself over the last few months, but at closing some of the loopholes. If he wishes, I will make certain that my officials have sight of the letter he has written and will write to him on the matter specifically.

I turn to the No. 13 regulations, which widen the definition of scope of activities for which a person can be designated. His Majesty’s Government have expanded the definition of destabilising, undermining or threatening Ukraine and supporting or obtaining a benefit from the Russian regime. This brings into scope many individuals and entities in the Russian Government, its agencies and its armed forces. The regulations make minor amendments to the definitions of being involved in, obtaining a benefit from or supporting the Government of Russia. These have the effect of broadening the interpretation of being associated with a designated person to include immediate family members who may, and often do, hold assets on their behalf. The regulations also provide an exception from trade sanctions for humanitarian assistance actively delivered in non-Government controlled areas of the Donetsk and Luhansk oblasts. Finally, they expand the definition of ownership in relation to ships and aircraft, and they correct errors and omissions in previous regulations.

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[Bob Seely (Isle of Wight) (Con)]

I will make a few brief points to the Minister and raise some specifics, as my hon. Friend the Member for Dewsbury (Mark Eastwood) did. It is quite clear that Russia is now actively trying to get round sanctions on an industrial scale. We are seeing that in its use of tech and microchips, in the potential sale of raw steel products to third parties, which then get re-exported back into Europe, and, as I am sure the Minister will know, in the passing of assets to wives, kids, families and in-laws of various types.

Along with the hon. Member for Cardiff South and Penarth (Stephen Doughty), I was also in Kyiv as part of that delegation and was likewise a guest of Yalta European Strategy—obviously I will declare that in due course. When we met folks in Kyiv there was a sense of urgency that, as well as all the great stuff we are doing, we need to be helping them to shut down Russia’s ability to maintain a multibillion-dollar monthly war effort. Therefore, the sanctions regime is absolutely vital in achieving that. When it comes to the specifics of the oligarchs, what they wanted was that money going back to Ukraine in war reparations.

On specific elements, I mentioned this point in my intervention, but I would just like to build on it for a couple of minutes. In UK courts, Russian state parties are still bringing cases. Is that right? If successful, the winnings from those cases go back via Russian proxies to the Russian state, where they are used to continue to fund the illegal invasion of Ukraine. As I said, I wrote to the Secretary of State for Justice, and another 10 Members of Parliament from both sides of the House have co-signed the letter. The 12th amendment to the Russia (Sanctions) (EU Exit) Regulations 2019 has already established that it is a criminal offence to knowingly provide the Russian state and other entities with funds or economic resources. I am asking for the Government to consider whether that provision can be applied to the legal winnings from ongoing litigation in UK courts.

Along with the 10 other signatories, I am asking the Government to prevent Russian state entities, such as Gazprom and VTB Bank, from using the legal system to effectively conduct a form of lawfare against Ukraine. As people may know, tackling the amoral offering of services to highly dubious characters has been quite close to my heart. It is less revolting than some of the intimidation of journalists and campaigners, but now, because of the situation with the war, it should come under the scope of Government action.

We are asking specifically for the following: the introduction of further sanctions against British law firms and banks which do not comply with existing sanctions regimes, and an amendment to hold managing partners accountable for their work should they be violating sanctions; the direct prohibition for UK-based law firms to represent entities controlled by the Government of the Russian Federation, including the Bank of Russia and entities in which the Russian state has a significant or controlling interest; and, thirdly, for His Majesty’s Treasury and the Ministry of Justice to address and tell us what they are going to do about ongoing litigation cases, of which there are at least half a dozen in English and Welsh courts, to ensure the Russian Federation is not evading the sanctions regime and is not profiting from winning those court cases. I have a list of about eight big law firms, including Freshfields Bruckhaus Deringer, VTB Bank Europe, PCB Byrne, Steptoe & Johnson and a number of Russian state entities. They are in the letter that, in the last few minutes, I have pinged to the Minister. I would be most grateful if the Government could give a considered response to those three points, but also to the current litigations as they go through the UK courts.

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[Jesse Norman]

If I may say so, I do not think that it is possible to move faster than having a debate within two days—in fact, a day and a half—of Parliament’s resumption after the interval following the unfortunate passing of Her late Majesty the Queen. The rules apply. As a further rebuttal to the shadow Minister’s point, my reply to the suggestion that something can somehow be made perfect, as though it were set in stone forever, is “Of course not.” This is a rapidly evolving situation.

My hon. Friend the Member for Isle of Wight (Bob Seely) talked about lawfare. He is exactly right that some very well-heeled and well-resourced individuals are using all their resources, as corporates and as individuals, to try to thwart us. That is why the response must continue to evolve, and it will.

On the point raised by the hon. Member for Tiverton and Honiton (Richard Foord), the Office of Financial Sanctions Implementation in the Treasury has more than doubled in this financial year. The response that is being made is being taken very seriously, and there is a continuous effort to build sanctions capability across Government.

I take the point that the hon. Gentleman made about advice for the higher education sector. I can also tell him that a very effective team in the Department for International Trade is helping businesses in this country to deal with this issue, which, again, we take extremely seriously.

My hon. Friend the Member for Isle of Wight, when referring to lawfare, mentioned Freshfields. I was sorry to hear the name mentioned, given the respect in which that firm is held across the country. I wish it were not true, if it is—I hope it is not—but it was interesting that my hon. Friend mentioned it.

[Bob Seely]

Will the Minister give way?

[Jesse Norman]

I would rather not, because I have not much time, but let me just say this. My hon. Friend talked about the extension of designation, and this makes the point about the evolving nature of the threat. It is important to get the sanctions in quickly, but as the response evolves, so we must evolve it, and that is what we have done. Being associated with a designated person now includes obtaining financial benefit or other material benefit, or being an immediate family member, which means a wife, a husband, a civil partner, a parent or step-parent, a child or stepchild, a sibling or step-sibling, a niece or nephew, an aunt or uncle, or a grandparent or a grandchild. That is an example of the response evolving as my hon. Friend would have wished.

The hon. Member for Stirling (Alyn Smith) rightly drew attention to the slippery nature of what we are dealing with. I have been highlighting that in my speech. He talked about the danger of laundering energy. There are technically difficult questions to address about how that is to be characterised, especially when, as it were, forms of energy are changed.

The hon. Gentleman talked about proper tracking through the overseas territories. He will be aware that these rules apply in the overseas territories by Order in Council, in the same way that we would apply them here. I think he erred slightly in talking about the legitimacy of sanctions in part depending on the assets seized; the legitimacy of sanctions lies in the fact that we are fighting an aggressive nation that is seeking to overturn our way of life and the foundations of liberal democracy, and I do not think any further legitimacy is required for that to be a worthwhile thing for us to do.

My hon. Friend the Member for Dewsbury (Mark Eastwood) raised the important issue of Alunet, in his constituency. I thank him for doing so, and I thank him for writing to me in advance with the details. I understand the sense of those at Alunet of the loss that they appear to have incurred, and also the concern that they are feeling. I will be writing to my hon. Friend specifically about that issue.

Let me now come to the questions raised by the hon. Member for Cardiff South and Penarth. He asked why so many changes and amendments were needed. It is, of course, because the first instinct in a war situation is to get sanctions on the books as quickly as possible. We know that they have been effective because the Treasury Committee has reminded us of that, and we have plenty of other evidence that it is the case. As I have said, however, as the situation evolves so we need to evolve the response, and as the concerns about the humanitarian impact and unfairness evolve, the sanctions picture inevitably becomes not merely more widespread and more expensive, but more complex—and it is right that that should be so.

The hon. Gentleman mentioned a letter that he had written. Obviously the process has been disturbed by the abeyance of Government and the funeral of Her Majesty, but I will ensure that that letter is sent. He also talked about resourcing. I have referred to the increase in the size of OFSI, and that is matched by the seriousness with which this issue is taken across Government. The hon. Gentleman raised a series of other, more technical issues, and I shall be happy to write to him about those in more detail.

I invite the House to support these motions.

Question put and agreed to.

Resolved,

That the Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022 (SI, 2022, No. 792), a copy of which was laid before this House on 14 July, be approved.

Resolved,

That the Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 (SI, 2022, No. 801), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.—(Jesse Norman.)

That the Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022 (SI, 2022, No. 814), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.— (Jesse Norman.)

Exiting the European Union (Sanctions)

Resolved,

That the Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 (SI, 2022, No. 850), dated 18 July 2022, a copy of which was laid before this House on 20 July, be approved.— (Jesse Norman.)