Russian Assets: Seizure

Bob Seely Excerpts

Tuesday 14th March 2023 Commons Chamber

[Sir Iain Duncan Smith]

Yes, of course. It is a disgusting organisation led by a disgusting individual carrying out disgusting atrocities in Russia. It is also using slave labour in some of these mines. Of course the Wagner Group must be proscribed, as should the Islamic Revolutionary Guard Corps and other such organisations. We should be at the forefront of this, not lagging behind.

The Government’s general belief is that seizing these central bank reserves would violate Russia’s sovereign immunity and would therefore be a breach of international law. If we think about it, Putin has redefined international crime and is now hiding behind international law. It is time for us to come together to make the modifications. That is the key.

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

I thank my right hon. Friend for securing this important debate. Does he agree that there may be something to learn from the Iraq war? Iraqi assets under Saddam Hussein’s rule were used— there was a formal legal process under which people could apply for those assets to rebuild infrastructure that had been damaged in Kuwait and elsewhere. I wonder whether the Government, when they answer the debate today, would say whether they are considering a similar process—a formal legal process under which Russian assets could be used to finance construction work in Ukraine.

[Sir Iain Duncan Smith]

I would happily welcome that. It is a very good idea.

Ultimately, the war Putin initiated on Ukraine must now be punished in a variety of ways. It is unwarranted aggression against another country, and it therefore changes how international law should be applied. We should readjust and redefine international law to the new reality that Putin’s invasion has brought about. The old order is now broken, and we need to redefine it to make sure that the lesson for any other oligarch, future leader or demagogue is that they can never again hide behind these rules.

Although international law is always evolving, we need to recognise the exceptional nature of Russia’s aggression and conduct in Ukraine, as that is critical to what we do next. Russia’s aggression and invasion are breaches of the most fundamental principles of international law and order. Russia is aware of this breach but has not stopped its conduct, and it continues to threaten international security and peace. That unprecedented conduct creates a need for all Governments in the west to amend their laws together to deter other states. These amendments should use specific and limited criteria to preserve sovereign immunity in all cases. It is possible to do both without hiding behind the idea that sovereign immunity is an absolute that cannot be breached. Putin has breached it, and in future that should be the rule.

The Economic Crime and Corporate Transparency Bill could and should be strengthened to enable the seizure of undisclosed assets—that is the key. We already have a vehicle. It is wholly possible to make that difference, and to make it quite quickly. I say to my right hon. Friend the Minister that I hope she will give that serious consideration, as it is really important.

As we know, sanctions evasion is already an offence. Embedding a new “disclosure or lose it” principle would go a long way to ensuring that sanctioned oligarchs are no longer able to conceal their dirty money here with impunity. That would help us to clean up what became a bad reputation for the City of London, whereby much of that ill-gotten money was hiding here, in one of the leading nations of the free world, and we did little or nothing to stop that.

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[Sir Iain Duncan Smith]

I agree with the right hon. Gentleman; this is beginning to sound like one of those “golden visas”. It was golden in description, but dirty and leaden in reality, and I think this is where we are again. We are going to find us all in agreement—

[Bob Seely]

Is the problem we have not shown, for example, in Abramovich’s allegedly shifting about £7 billion of assets out of the country the day before? What he did was perfectly legal, because I believe this was shifted to the United Arab Emirates or somewhere else in the middle east and his lawyers knew about it. In the United States, there is now talk about going after the law firms and the accountancy firms that help the oligarchs and that have helped these individuals to move their money around just before they have been sanctioned or to find ways around sanctions. Does my right hon. Friend agree that one way here is to go after these middlemen and women? We have not done that, but the problem is that what these people are doing is not necessarily illegal —they are shifting the money before it can be sanctioned, and money is a movable asset, unlike a house in Belgrave Square.

[Sir Iain Duncan Smith]

I agree. These individuals, Abramovich and others, may want this to be done, but somebody has to do it for them, and my hon. Friend is absolutely right to follow the chain down, because we have to capture all the individuals down the chain, not just the one at the top. That is the key, because without those, this does not happen. He rightly says that, to avoid the sanctions, three weeks before the war began Abramovich was busy restructuring radically his assets. I believe that my hon. Friend is right to say that between £4 billion and £7 billion was squirreled away as a result, and we were not able to do anything about it. But we should have been ahead of the game on that one.

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[Bob Seely]

rose—

[Liam Byrne]

I will say a word about each of those things after I have given way to the hon. Gentleman.

[Bob Seely]

Does the right hon. Gentleman have a preferred option? Although it will be legally possible to seize Russian state assets—that has arguably been done before, so there is precedent—is he concerned about the seizure of private assets? I am tempted to say that those are legal. They are seized assets from a dirty period of Russian history, so I think one could say that they are not illegal, but how legal they are is another matter. If we are seizing oligarchs’ assets, how can we do so legally without setting a more tricky precedent?

[Liam Byrne]

I will come to that now. There are three things that we will need to do. It is not just about private wealth; it is about public wealth—the assets of the Russian central bank. We know that $300 billion was held abroad. We know where about $30 billion of it is, and that money has been frozen. To seize that money, we will need to do a couple of things.

First, we will need to bring the world together at the United Nations to pass a resolution that revokes the doctrine of immunity for central banks when there has been a clear violation of the United Nations charter. I am under no illusions; we will not get 100%, but by getting a significant number of nations to sign up to that resolution, we begin to change the parameters of international law. That means that domestic law, when we move it, will be in a much safer legal space. Indeed, many international lawyers would say that seizing those assets is a legitimate countermeasure, but if there is a UN resolution, we have begun to change the concept of what is protected by immunity—such as central bank assets—and what is not.

Secondly, we then have to ensure that we do not fall foul of the European convention on human rights, particularly the first protocol, which enshrines the right to the enjoyment of assets. We have to ensure that there is no way that the Russian Government can be considered a victim. The safest way we can do that is to move quickly, as President Zelensky has proposed, to begin prosecuting Russia for the crime of aggression. If we have a UN resolution that has begun to revoke the concept of immunity in the case of aggression, and a tribunal that is prosecuting Russia for the crime of aggression, we will have begun to change fundamentally the context of international law.

[Bob Seely]

I know that the right hon. Gentleman is about the most expert person here when it comes to the workings of the international financial institutions and so on. Does he expect or think that we will be able to seize oligarch assets as part of that process? If so, do we have any idea how we will proceed down that route, or are we looking only at Russian state assets? At some point, all the oligarchs close to Putin will get their billions back.

[Liam Byrne]

I think that we can use the same tactics to seize private and public assets, but I am conscious that we have to change the context and parameters of international law first. That is how we maximise the safety of domestic legislation, which has to be the third step. We in this House are lucky that my hon. Friend the Member for Rhondda has set out precisely how to do that in his ten-minute rule Bill.

Crucially, we need to ensure that the State Immunity Act 1978, which gives immunity to central banks, is revoked or at least conditioned in a way that allow laws to be presented here so that we in Parliament can order the seizure, forfeiture and repurposing of assets.

My final point is a little more short term, meaning now. If we are to maximise the assets that we seize and repurpose for the reconstruction of Ukraine, we have to get serious about sanctions enforcement. Right now, frankly, we are not. There will be a lot more money available if we stop the nonsense that is going on in the dark at the moment. The truth is that sanctions enforcement in this country today is the proverbial riddle wrapped in a mystery inside an enigma.

As the right hon. Member for Chingford and Woodford Green said, we have been told that as of October 2022, £18.4 billion-worth of Russian assets have been frozen in this country. We then learned from the scandal exposed by openDemocracy that the Treasury has been issuing licences like confetti, even to warlords such as Prigozhin, the head of the Wagner Group—in his case, to fly English lawyers to St Petersburg to prosecute an English journalist in an English court in order to silence him because he was writing the stories that triggered the sanctions against Prigozhin in the first place. What a nonsense!

As I began to dig into this, much worse was revealed. In the last Office of Financial Sanctions Implementation report, it was revealed that the Treasury is no longer issuing licences to individuals one by one to authorise specific expenditure; it is now issuing general licences that authorise an entire category of spending. In fact, 33 general licences were issued last year, so I naturally asked what the value of those general licences totalled. I was told on 15 February in a parliamentary answer:

“The Office of Financial Sanctions Implementation (OFSI) does not disclose data from specific licences it has granted under UK sanctions regimes.”

When the Exchequer Secretary to the Treasury came to the House on 25 January, we asked him whether, if he cannot tell us what the total value of the licences is, he could at least tell us what the licences were issued for. He said he could not tell us that because

“there is a delegated framework”

and that these decisions

“are routinely taken by senior civil servants.”—[Official Report, 25 January 2023; Vol. 726, c. 1014.]

I then asked what this delegated framework was and whether we in this House might have a look at it. I first tried a parliamentary question. The answer came back on 8 February:

“There are currently no plans to publish the delegation framework.”

I then had to try a freedom of information request, and I have it here in my hand. It came back to me on 9 March, and it says:

“we can confirm that HM Treasury does hold information within the scope of your request.

The information we have identified…we believe may engage the exemption provided for by section 35(1)(a)—formulation or development of Government policy.”

We now have a situation where Ministers are saying that it is the civil servants’ job, and the civil servants are saying that it is advice to Ministers. For that reason, we cannot get to what this delegated framework looks like.

I then asked whether they could at least tell us how many people we have busted for sanctions evasion. The Office of Financial Sanctions Implementation confessed that there were 147 reports of a breach last year, but when I asked the Minister for Security how many criminal investigations had resulted from that, he said that he could not answer

“For reasons of operational security”.

I went back to the Office of Financial Sanctions Implementation report to double-check, and of 147 reports of a breach, there have been a grand total of two monetary fines, both to fintech companies.

So there we have it: £18 billion frozen and licences issued like confetti in a secret regime that Ministers say is down to civil servants and civil servants say is actually advice to Ministers. Despite this flagrant abuse—and we know the scale of it, because the Financial Times told us that $250 million has been laundered by the Wagner Group—we have just two fines that total £86,000. Well, £86,000 in fines is not going to do much to help us rebuild Ukraine. I ask the Minister on the Front Bench to explain to us how she is going to do an awful lot better than that.

Sanctions enforcement in this country stinks to high heaven, and what concerns me most is the culture of secrecy around it. Many of us in this House have been around long enough to know that such a culture is never a recipe for good public policy. We in this House have to be realistic about the scale of finance that is needed; maximise the use of our Bretton Woods institutions; and move internationally and domestically, together with our allies, to change the parameters of international law and maximise the safety and security of domestic legislation that we pass here. But let us move now to send a clear signal from the UK—the home of the rule of law—that this is not going to be a safe haven for sanctions evasion. We are going to send that clear message by getting tough, and getting tough now.