Sanctions and Anti-Money Laundering Bill [HL]

Lord Lennie Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 29th November 2017 Lords Chamber

Moved by

[Lord Lennie]

52: Clause 17, page 15, line 20, leave out subsection (4) and insert—
“(4) For the purposes of subsection (2)(b), a body incorporated or constituted under the law of any part of the United Kingdom includes a body incorporated or constituted under the law of the following— (a) any of the Channel Islands;(b) the Isle of Man;(c) any of the British overseas territories.”

[Lord Lennie (Lab)]

My Lords, this is a probing amendment concerning the territorial application of sanctions regulations. The amendment will make it automatic that the sanctions imposed would apply to bodies incorporated or constituted in the Channel Islands, the Isle of Man or the British Overseas Territories. This is not because they are favourite places to hide away from tax regimes—although they are—but because they are dependent on the UK in terms of foreign and defence policy matters. For sanctions to have an effect, they have to have an international dimension. Currently determined by the UN or the EU, they require co-operation and co-ordination between and across nations. It is surely a matter of good policy to seek to put our own house in order first—which this amendment would help to do.

The Bill currently proposes that its sanction provisions “may” be applied to the Channel Islands, the Isle of Man or the British Overseas Territories by use of an Order in Council, which I understand is a Privy Council matter. I am not a member of the Privy Council and I do not know how it operates. I do not understand in detail how it works, and I am not sure whether such orders are always granted, whether there is ever a debate about them, whether they can be challenged or whether there is delay built into the process. This amendment would make it clear that, as far as sanctions are concerned, the UK will have a consistent application of the law. We would welcome the Government’s views on that.

[Baroness Northover (LD)]

My Lords, I support the amendment. It is useful to have more precise definitions within the Bill, and it seems that the amendment seeks to tighten up the subsections which relate to the Channel Islands, the Isle of Man and the British Overseas Territories, so that instead of a Minister being able by an Order in Council to add these areas, they are included in primary legislation. It makes sense to clarify that now and in primary legislation in this way to ensure that those whom the UK wishes to sanction cannot evade that sanction by association with these areas. If the UK is to leave the EU, it makes sense to tighten in this way.

The Minister will know that there is a meeting today of the Joint Ministerial Council at the Foreign Office with the overseas territories. Perhaps he could assure us that they would be content to be clearly within the same sanctions regime. I know that they will be less keen on aligning themselves with the UK on anti-money laundering measures; we will of course come to that later.

I also flag to the Minister that, in addition, the Law Society emphasises that guidance should be given on the terms in Clause 17, as well as those in Sections 2, 10, 15 and 46. It points out that in Clause 17 it is unclear whether the UK sanctions regime would apply,

“where UK currency is used, where a non-UK subsidiary of a UK company is involved, or where a UK person on the board of a non-UK company is present when a decision is taken in breach of the UK sanctions regime”.

It suggests that Clause 17 should be renamed “UK nexus” as its current subject matter does not deal sufficiently with “Extra-territorial application”.

It seems that further clarity is required on such issues. Clearly, it would be useful if stakeholders were properly consulted to assess the impact of the scope of application of the UK sanctions regime, simply to identify any unintended consequences. Clearly, intended consequences are fine. So this is a complicated area, but I hope that the Minister will take on board this advice.

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[Lord Ahmad of Wimbledon]

I am fully cognisant of that. I meant no discourtesy to noble Lords on the Opposition Front Bench; I thought it appropriate to give the context of what I was going to say. The clarification that my noble friend provided from the outset is exactly why the particular clauses have been framed as such.

I will now take up what the noble Lord, Lord Collins, has just pointed out. The amendment is in the names of the noble Lords on the Opposition Front Bench. I thank them, as I did at the start. I believe that I came to the noble Lord, Lord Lennie, first—we will have to check Hansard on that—to thank him for tabling the amendment.

Clause 17 sets out which persons can be bound by sanctions regulations, in the UK and elsewhere. It also confirms that prohibitions or requirements can be imposed on any conduct in the UK, including UK territorial waters, or on any UK person anywhere in the world. This clause is consistent with the way the UK currently implements sanctions as part of the European Union. If noble Lords are interested, further detail is provided in the White Paper we published in April.

Clause 17 also allows for Her Majesty, by an Order in Council, to extend the effect of sanctions to bodies incorporated or constituted under the law of any of the Channel Islands, the Isle of Man and any of the British Overseas Territories. This amendment would remove the ability of Her Majesty to make an Order in Council in respect of corporate bodies registered in the overseas territories and Crown dependencies. Instead, it would require that, when UK Ministers legislate to create sanctions in regulations, these bodies would automatically be caught.

When introducing this particular amendment, the noble Lord referred to the overseas territories in a very generic way. I have had the good fortune of visiting one or two of them—somewhat tragically in the aftermath of the hurricanes that hit—and generalising all our overseas territories in a particular way is not something I would subscribe to. They provide some incredible potential. For example, I am not sure how many Ministers partake of lobster, but apparently Tristan da Cunha has the best lobster in the world. On a more practical note, we have done some incredible work with them on marine protection and building sustainable economies.

I make that point because it is important to recognise the role that our overseas territories play. However, I agree with the point the noble Lord raised that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions we apply, and that bodies incorporated or constituted in these jurisdictions must also be bound by sanctions. The Foreign Office—to confirm what I said at the start to the noble Baroness, Lady Northover—has discussed the Bill with the overseas territories and Crown dependencies, and they also accept this point of principle.

However, there are constitutional considerations that affect the way sanctions are implemented by the overseas territories and Crown dependencies. As my noble friend Lord Faulks pointed out, at the moment all Crown dependencies—Jersey, Guernsey and the Isle of Man—legislate on their own behalf, as do Gibraltar and Bermuda. We anticipate that these jurisdictions will seek to continue to do so—save, possibly, for a transitional period. We legislate for some of these jurisdictions directly through Orders in Council. However, as I have said, other jurisdictions legislate for themselves.

The Bill is drafted in a way that reflects this reality. It is consistent with the current implementation model for UN and EU sanctions, as well as measures under the Terrorist Asset-Freezing etc. Act 2010. To change this model would depart from current practice and we do not see a compelling case for this. With that explanation—and the assurance I have given to the noble Baroness on the valid point she raised about the Law Society, which I will certainly look at again—I hope that the noble Lord will be minded to withdraw this amendment.

[Lord Lennie]

I thank the Minister for that answer. We will consider, read carefully what he said and, perhaps, come back to it. In the meantime, we will seek leave to withdraw the amendment.

Amendment 52 withdrawn.

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[Lord Judge]

My Lords, I had thought of saying something but while the Minister, unlike Richard III, is in the giving mood, I do not want to discourage him.

[Lord Lennie]

My Lords, we have heard, and the noble Lord, Lord Pannick, has repeated, the gravity of the consequences of sanctions on the lives of individuals and dependants upon them. Three years is a very long time, particularly if the designation is wrong or if behaviour has changed and they are now compliant. Therefore, we ask that the three years be reviewed and replaced by one year. It cannot be left for a length of time without a review taking effect. The Minister has the right to review. The individual has only one possibility of an application review. Therefore, we ask that this become automatic in the Bill.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for tabling this amendment. The noble and learned Lord, Lord Judge, sat down before making a further point. I was reminded not of Richard III but of Oliver Twist, who wanted “more”.

On this particular point, Clause 20 is one of a number of safeguards, as I am sure noble Lords have seen, within the Bill that provides for designated persons and requires the Government regularly to conduct a thorough re-examination of designated decisions. The Government must, as we have heard from noble Lords who have spoken through this short debate, conduct this review at least every three years. The noble Lord, Lord Pannick, has rightly raised the issue, and I accept the point, that the EU carries out reviews more frequently. However, Clause 20 should be considered as part of a system of safeguards that the Government have built into this Bill which I believe will provide at least an equivalent, and in some respects greater, level of protection to that afforded to individuals designated by the European Union.

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[Lord Judge]

My Lords, my name is attached to the amendment. I shall not repeat what the noble Lord, Lord Pannick, had to say. The issue is simple: we must honour our obligations to the United Nations but if, having honoured them, there is an injustice, we must provide a remedy.

[Lord Lennie]

My Lords, I had not realised that there would be quite such a debate on the application of the rule of law, but I am now aware that it is an important matter. When a sanction’s designation is in place, and a review has been requested but denied by a Minister, the court here will have the authority to set aside the designation if the Government are found in breach of the applicable principles. That is entirely appropriate and sensible. I support the amendment.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for tabling the amendment and all noble Lords for their contributions.

I agree that appropriate remedies for designated persons are vital, but the Bill achieves this. However, since some noble Lords have mentioned comparisons with other systems of challenges—there was reference to the EU—it is worth emphasising how this Bill has been designed to reflect the current procedural protections for designated persons that exist in the European Union.

As the noble Lord acknowledged, I stated at Second Reading that the proposed threshold of “reasonable grounds to suspect” for designations is the same standard that the UK currently uses when considering designations at the EU and the United Nations. It is broadly equivalent to the threshold applied by EU courts. The Bill then provides a system for reviews and reassessments. Where those lead the appropriate Minister to decide that designation is not appropriate, they must take remedial actions. As I indicated in a previous debate, these provisions provide at least an equivalent level of protection to that afforded to individuals designated by the EU.

I agree with the noble Lords that designations should be put in place and maintained by the United Nations only if there is a sound basis to do so. I can assure all noble Lords—the noble Lord, Lord Pannick, in particular—that, as a permanent member of the UN Security Council, the UK makes this point consistently. The Bill provides a route for persons designated by the UN to bring a challenge in UK courts. As the noble Lord stated, if the court finds that the decision of the Secretary of State not to use best endeavours to secure an individual’s delisting at the UN is unlawful, the court may order the Secretary of State to do so.

However, as the noble and learned Lord, Lord Brown, also pointed out, this matter is slightly more complex. As a member state of the UN, we are legally bound to implement decisions of the United Nations Security Council taken under Chapter VII of the charter. If a person has been designated by the UN, the UK is bound by international law to maintain sanctions against the person unless and until the UN Security Council agrees to remove this designation. Again, as the noble and learned Lord pointed out, as set out in Article 103 of the UN charter, these UN obligations take precedence over obligations under any other international agreement, such as those in the European Convention on Human Rights.

I recognise that in the past—as the noble Lord, Lord Pannick, referred to—the EU court has occasionally made rulings striking down EU designations in place to implement UN sanctions. The UK’s position has consistently been firmly that it should not do so and the UK has made this point in submissions to the EU courts in the Kadi case. The EU courts adopting this approach does not change our analysis of the position. The EU is not a signatory to the UN charter and is therefore not bound by its terms—we are. It is not correct to say that this will leave a person in the UK in a worse-off position than a person in another EU member state. All the other member states of the European Union are also signatories to the UN charter, and are bound by it. If there is no EU law in place to implement a UN designation, those countries would need to take alternative steps, for example under their own domestic law, to remain in compliance with their UN obligations. The noble and learned Lord, Lord Brown, has just reflected that we have done this in the UK in the past. When, in 2010, the Supreme Court in the case of Ahmed ruled that an order putting UN counterterrorist sanctions in place was ultra vires, we created domestic legislation—the Terrorist Asset- Freezing etc. Act 2010 to ensure that the UN sanctions remained in place.