Repurposing Russian Assets to Rebuild Ukraine

Debate between Iain Duncan Smith and Dave Doogan

Tuesday 27th June 2023 Commons Chamber

[Dave Doogan (Angus) (SNP)]

Where will we find half a billion dollars to rebuild Ukraine? The international community, certainly; the World Bank, almost certainly; the EU and/or the US, definitely—but we should certainly shine a very bright searchlight on the ill-gotten gains of the Russian elites who stood by and watched Putin, who relies on the co-dependency they create, systematically destroy the natural and built capital of Ukraine for reasons so spurious that they would be comic if they were not so egregious and deadly for the innocent people of Ukraine.

Let us not forget where the playgrounds of those Russian elites were. They were in Paris, in Manhattan and in Mayfair, and elsewhere in London, where their inexplicable wealth sloshed around the property markets, casinos and car dealerships of this city. The Londongrad laundromat was a clear and present threat to national security, but in the tension between national security and the Tories’ access to wealthy Russians, national security came off second best.

London is the most notorious safe haven for looted funds in the world, with much of the money hidden via London in offshore trusts in British overseas territories. Even after years of campaigning by SNP Members and other stakeholders, it took Putin’s barbarism against the people of Ukraine for the Conservatives finally to stop accepting Kremlin-linked donations and to impose sanctions on Putin and his cronies. It is clear now what lies behind this Government’s pedestrian approach to pivoting from freezing assets to seizing them: the sheer value of Russian assets held within the UK. In this instance, as in many others, when I say the UK, I of course mean London.

Contrast that with Estonia, whose Government have declared they will present a blueprint for how Russian frozen assets can be legally seized. Their goal is to use the funds to pay for Ukraine’s reconstruction. The Estonian Prime Minister, Kaja Kallas, said last month that her country plans to offer a legal rationale for the expropriation of the €20 million in Russian assets that it has frozen. What it is to be a small EU nation that can act nimbly and remain in touch with its populace.

However, a country does not have to be a small EU nation to do the right thing. In Canada, the Frozen Assets Repurposing Act aims to allow Canadian courts to take the frozen assets of foreign officials whose misrule creates forced displacement and humanitarian needs. It essentially foresees new powers to seize and sell assets of sanctioned Russian oligarchs while repurposing the proceeds to help with the rebuilding of Ukraine. In Switzerland, should an oligarch fail to demonstrate the lawfulness of their wealth, the law on asset recovery would allow for the confiscation of frozen assets without the need to commence a separate civil proceeding. The European Commission has also followed suit, presenting in May a new directive on asset recovery and confiscation. The proposal seeks to modernise EU rules on asset recovery through a series of measures, including an asset recovery and management office with the power to trace and identify criminal assets, ensure that frozen property does not lose value, and enable its sale for the purposes of rebuilding Ukraine.

[Sir Iain Duncan Smith]

To clarify, there is a difference between the seizure of private assets and the seizure of state assets. Sovereign immunity simply does not stand in the way of the seizure of private assets, which requires only that legislation be passed, therefore negating the sovereign immunity. I accept that the Government could do that quite quickly—they have been talking about it—but state assets are a bigger issue because of state immunity. Again, legislative action could be taken, but it should be done in co-operation with other states so that there is no flight of capital.

[Dave Doogan]

I thank the right hon. Gentleman for his intervention, particularly because he highlights, as he did in his earlier intervention, the issues to do with state immunity. At the heart of this debate is an appeal for urgency on legislation that tests the very boundaries to which he refers. I take no issue with that intervention.

In contrast with what is happening in other jurisdictions, the UK has yet to transform its words about hoping that the proceeds of sanctions pay for reconstruction into a more informed policy and legislation-focused debate with action to follow. The UK cannot afford to be the weakest link in the western alliance’s struggle against Russian illicit finance. We recommend, as a minimum, that the UK Government review the designation criteria underpinning the global anti-corruption sanctions regime to consider whether an abuse of function would provide greater flexibility for FCDO officials to impose designations. Any new legislation must be properly funded, of course. New laws are useful only if they are properly implemented with the correct resource. Economic crime has been the poor relation in UK policing for too long. Economic crime enforcement in the UK is woefully under-resourced, particularly given the scale of the challenge posed by dirty money in the UK economy.

The UK has taken some steps—if belatedly—to freeze assets, but it must now legislate at the earliest opportunity to seize Russian assets, in accordance with international ambition and international law, with adequate funding and in co-ordination with allies who have done the same. While other countries are taking strides to legislate for how frozen Russian assets can be lawfully seized, the UK Government are, thus far, yet to make the transition from warm words to legislative effect. We need a step change on that immediately.