Office of Financial Sanctions Implementation

James Cartlidge Excerpts

Thursday 30th March 2023 Written Statements

[The Exchequer Secretary to the Treasury (James Cartlidge)]

My noble friend the Treasury Lords Minister, Baroness Penn, has today made the following written ministerial statement.

In January, Treasury Ministers commissioned an internal review to assess how legal fees licence applications are considered. Following this review, I am updating the House on its findings.

Since the unlawful invasion of Ukraine, we have taken decisive action to sanction Vladimir Putin and those who support his regime. With partners, we have implemented the strongest set of economic sanctions ever imposed on a major economy. We have designated over 1300 individuals and over 140 entities including over 130 oligarchs with global assets worth over £145 billion.

The sanctions regime is governed by the Sanctions and Anti-Money Laundering Act 2018 which was considered by Parliament between October 2017 and May 2018. It gained Royal Assent on 23 May 2018. The Act empowers HM Treasury to issue licences which permit activities otherwise prohibited by sanctions, including for payment of legal fees. In the case of legal fees, the law requires that the Office of Financial Sanctions Implementation’s decision-making must carefully balance between the right to legal representation—which is a fundamental one—with wider issues, including the aim and purpose of the sanctions. While some legal claims may be unfounded, it is for the courts to decide whether their claims should be permitted to succeed—not the Government. The review confirmed this position.

The Government are clear, however, that our courts and legal system must not be used by those seeking to silence investigations in the public interest. We are committed therefore to bringing forward legislation to tackling strategic lawsuits against public participation (SLAPPs). This will include a statutory definition of SLAPPs, an early dismissal process, and costs protection for SLAPPs cases. The Government have committed to primary legislation to make these reforms a reality as soon as parliamentary time allows. These changes will help to uphold our fundamental liberties of free speech and a free press, end the abuse of our courts, and defend those who bravely speak out in the public interest.

As a result of the review the Government are committed to further targeted changes to the process for issuing legal fees licences that safeguard the sanctions regime against the risk of manipulation and ensure that Ministers are accountable for OFSI decision-making.

Our approach to date reflects the fact that the right to legal representation is a fundamental one and it is therefore important that designated persons are still able to access legal representation. However, in this context, it is the Government’s view that in most cases, the use of frozen funds for payment of legal professional fees for defamation cases is not an appropriate use of funds, and in many cases will be against the public interest. While still reviewing each individual application on a case-by-case basis (for both appropriateness and compliance with the right to a fair hearing), OFSI will, in future, take a presumption that legal fees relating to defamation and similar cases will be rejected. The Russian and Belarussian legal services general licence will also be amended so that it no longer authorises legal fees for defamation and similar cases. Any person or entity that acts without a specific licence where the activity is not covered by the general licence, will be in breach of financial sanctions and liable for a monetary penalty or, if egregious enough, criminal prosecution.

To strengthen the decision-making framework for specific licence applications in these and other cases, the Government have further updated the delegation framework under which decisions are taken by OFSI rather than Ministers. This framework will support and reinforce scrutiny of licensing decisions by making clear when it is appropriate for Ministers to take these decisions personally, or where officials can take these decisions. A copy of the updated delegation framework will be placed in the Libraries of both Houses.

The UK remains committed to stopping Putin’s unlawful invasion of Ukraine. Sanctions have been, and continue to be, a critical tool to holding those who support Putin’s regime to account. We have taken decisive action to freeze the assets on 23 major Russian banks holding over £960 billion, and with partners immobilised over 60% of Russia’s foreign reserves. The changes I have announced today to the decisions the Government take to sanctions and licences, support our efforts to oppose this barbaric war.

[HCWS700]