Lord Sassoon
Main Page: Lord Sassoon (Conservative - Life peer)Terrorist Asset-Freezing etc. Bill [HL]
Lord Sassoon Excerpts
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Terrorist Asset-Freezing etc. Bill makes provision for imposing financial restrictions on, and in relation to, certain persons suspected of involvement in terrorist activities, for amending Schedule 7 to the Counter-Terrorism Act 2008 and for connected purposes.
As we are all aware, this month marks the fifth anniversary of one of the worst terrorist attacks in the UK’s history, and the threat to the UK from international terrorism is still judged to be severe. Our police and security services work tirelessly to combat this threat and to reduce it. The Government must ensure that those organisations have the powers that they need to keep people safe, both here in the UK and abroad, while ensuring that we also protect civil liberties.
Asset freezing is an internationally used and recognised tool that aims to prevent and disrupt the financing of terrorism. The United Nations requires that all states,
“Freeze without delay … assets or … resources of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts”.
Attacking the financial flows between those people is essential. Some of the most devastating attacks in the past decade, including those in London in 2005, cost less than £10,000 to carry out. Around £150,000 is currently frozen in the UK under this regime, so the magnitude of what could be done with such a relatively small sum is clear. By freezing money intended for terrorist purposes, we can help to prevent individual attacks and the devastating injury and loss of life that they may cause. Focusing on the movement of money can also help to detect when it is being used to sustain wider terrorist networks, a crucial element in many investigations, and helps us to maintain effective relationships with international counterterrorism partners. No other tool in the Government’s counterterrorist finance toolkit can fully meet our international obligations in this area.
Against this background, the purpose of the Bill is to put the terrorist asset- freezing regime on a secure legislative footing. I shall explain why this is necessary. The previous Government relied on Orders in Council, made under Section 1 of the United Nations Act 1946, to give effect to the UK’s obligations under UN Security Council Resolution 1373. In February this year, the Supreme Court ruled that, in doing so, the Government had gone beyond the power conferred by Section 1 of the UN Act. Given the impact of asset freezing on fundamental rights, the court concluded that such a judgment on what is expedient should be expressly made by Parliament, not the Executive. The court quashed two of the Orders in Council and, in response, the previous Government put temporary legislation in place to validate those orders until 31 December of this year.
I will now explain the scope of the Bill and its provisions. The Bill focuses on the domestic terrorist asset-freezing regime that the UK is required to have in place under United Nations Security Council Resolution 1373. This is the regime where decisions to freeze assets are taken at a national level, by HM Treasury in the case of the UK, and freezes apply only nationally. The Bill does not cover al-Qaeda and the Taliban. These groups are covered by a separate asset-freezing regime, under UN Security Council Resolution 1267, where decisions to freeze assets are made by the UN and freezes apply globally. That regime is already implemented across the EU by a directly applicable EU regulation.
I should also make it clear that the asset-freezing powers in this Bill are not related to those in the Anti-terrorism, Crime and Security Act 2001, which were used to freeze the assets of Icelandic banks in 2008. That action and the legislation that permitted it should not be confused with the provisions that we are discussing today.
The Bill also includes some amendments to Schedule 7 to the Counter-Terrorism Act 2008. The legislation that we are discussing today makes a number of valuable improvements to the current terrorist asset-freezing regime and I have deposited in the House Library a schedule setting out these changes.
First, it makes the legal test for freezing assets clearer and more consistent with other counterterrorism legislation. The language clarifies but does not change the current legal test, under which past terrorist activity is relevant in determining whether someone is a person who is involved in terrorism. This is not an extension of HM Treasury’s power to designate. Secondly, it focuses the prohibitions more narrowly to minimise the impact on third parties. I will return to this. Thirdly, it makes it clear that state benefits paid to spouses or partners will no longer be caught by the asset-freezing regime. We believe that this is unnecessary to prevent terrorist-financing risks. The Bill is in line with a recent ruling by the European Court of Justice. Fourthly, it improves the transparency and accountability of the regime by requiring it to be independently reviewed nine months after this legislation is passed and every 12 months thereafter. The Bill also formalises the requirement for HM Treasury to report to Parliament on a quarterly basis on the operation of the regime. On Monday, I laid the most recent report before the House. As well as providing useful statistics, it makes it clear that HM Treasury has an active policy of reviewing designations. In the last quarter alone, nine reviews resulted in six delistings.
However, welcome as I hope the changes to the regime will be, I recognise that they do not fully address some of the civil liberties concerns that have been raised about the asset-freezing regime, both in Parliament and in the public consultation that HM Treasury has conducted. Chief among these are the legal test for asset freezing, which stands at reasonable suspicion, and the role of the courts in making and reviewing asset-freezing decisions. Both the use of reasonable suspicion and the role of the courts in these contexts have parallels in other counterterrorism powers.
Your Lordships will be aware that the Home Office’s urgent review of the most controversial and sensitive counterterrorism legislation and measures is ongoing and is likely to consider the appropriate safeguards for executive actions in this field. My ministerial colleagues and I are of the view that, unlike that of previous Administrations, this Government’s approach to counterterrorism measures should be co-ordinated and aligned wherever possible. It is too early to predict the results of the Home Office review but I hope that noble Lords will be reassured that, where the review’s conclusions are relevant to asset freezing, and should those conclusions alter the balance in favour of introducing additional safeguards, we will take them into account and bring forward any amendments that may be appropriate to the Bill. That said, I believe that the approach set out in the Bill is reasonable.
I turn now to points raised by the Constitution Committee in its report on the Bill last week. The committee’s experience and knowledge in this area are extensive and the Government value its input. First, the committee raised a concern that the Bill is partial because it does not include al-Qaeda and the Taliban regime or the freezing powers under the Anti-terrorism, Crime and Security Act. I accept that the Bill does not consolidate the legislation in this area. However, there is a good reason for this. The priority that the Bill seeks to address is the need to put the UK’s domestic terrorist asset-freezing regime on a secure legislative footing by 31 December. As the Constitution Committee’s report rightly points out, this is a tight timetable, even with the present scope of the Bill.
Secondly, the committee raised a concern about why the Bill retains the reasonable suspicion test when other pieces of legislation use reasonable belief. The reason why we have retained reasonable suspicion is that it allows for action to be taken early to meet an imminent national security threat. An example was the use of asset freezes alongside police arrests in 2006 to help to disrupt the transatlantic plane bomb plot. However, as I have said, we will consider this issue further. I agree that, where appropriate, it is desirable to maintain a consistent approach. That is why, rather than taking an independent view of the legal test for asset freezing, we are considering this matter alongside the wider review of counterterrorism powers that is being conducted by the Home Office.
Thirdly, the committee expressed concern that the Home Office review be completed as soon as possible so that any amendments to the Bill can be brought forward in Committee. As the Home Secretary made clear, her review is urgent and will help to inform what additional safeguards, if any, might be needed on asset freezing.
If we are making government amendments to this Bill, we are clear that they should be tabled at Committee stage to allow for full consideration.
Fourthly, the committee raised a number of issues around the judicial process and procedural fairness. I agree with its conclusion that in practice the judicial review process gives the courts a significant scrutiny power and, of course, we welcome that scrutiny, which is fundamental to ensuring that the regime operates in a fair, proportionate and lawful way. The committee has criticised Clause 22 as insufficient in setting out the court’s powers in challenges to decisions. Clause 22 is based closely on Section 63 of the Counter-Terrorism Act 2008, which deals with challenges to financial directions made by the Treasury. We believe that there is merit in having similar provisions governing challenges to these types of decisions and in not introducing ambiguity by having differences between the two provisions. On procedures for the use of closed source material, the Treasury is committed to operating the regime in a way that is consistent with ECHR Article 6.
I will discuss the content of the Bill in more detail, beginning with the provisions under Part 1. The effect of a designation under this legislation is to forbid dealing with a designated person’s funds and economic resources, to forbid making funds or economic resources available to such persons and to forbid funds or economic resources being made available to a person when the designated person will obtain a significant financial benefit. This is similar to the effect of a designation under the 2009 terrorism order, but with some significant differences. For example, third parties will breach the prohibitions only if they know, or have reason to suspect, that a designated person will use them in breach of the terms of their asset freeze.
The Bill also provides for licences to permit access to funds and limit the effect of the sanctions, particularly on third parties. It also makes changes to the requirements imposed on the financial and related sectors, which are an essential front line in the fight against terrorist financing. We thank them for the efforts that they continue to make on our behalf, as they bear much of the burden of compliance with this legislation. I am keen to ensure that the burden is minimised, wherever it can be, without increasing any terrorist-financing risks. That is why this Bill will no longer require financial institutions automatically to search historical records for links to designated persons. HM Treasury will remain open to legal challenge to its asset-freezing decisions, including the procedures approved by Parliament in the Counter-Terrorism Act 2008.
Part 2 makes minor amendments to HM Treasury’s financial restrictions powers under Schedule 7 to the Counter-Terrorism Act 2008. These powers are an important element of the Government’s toolkit to deal with risks posed to the UK by money-laundering, terrorist financing and the development or production of chemical, biological, radiological or nuclear weapons. They also enable the Government to take action where the Financial Action Task Force has advised that measures should be taken because a country poses a money-laundering or terrorist-financing risk. The risks that these powers address are of a serious nature. I consider it important that we have robust and effective financial tools to tackle them. In light of this, we have identified a small number of technical amendments to these powers.
First, we are introducing a prohibition on knowing and intentional circumvention of any restriction issued under these powers. This is a necessary deterrent to ensure that a unilateral restriction cannot simply be bypassed. Secondly, we are introducing a provision to allow restrictions to be targeted against subsidiaries of companies based in the country of concern, to reflect the risk that such subsidiaries can pose. Thirdly, we will be clarifying that, when the Government direct a UK financial or credit institution to implement a restriction, they will have to apply it across all their branches, wherever those branches are located. Fourthly, we are making provision for the transfer of responsibility for ensuring the compliance of Northern Ireland credit unions with these restrictions from the Northern Ireland Department of Enterprise, Trade and Investment to the Financial Services Authority.
I am certain that the asset-freezing proposals that I have put before the House will, when passed, create a secure legislative footing for an important and necessary counterterrorism power. The coalition is firmly of the view that such powers are not to be created lightly and we will keep the necessary safeguards under review as this Bill continues its passage. In this Second Reading debate, I particularly look forward to the maiden speeches of the noble Baroness, Lady Hughes of Stretford, and the noble Lord, Lord Davies of Stamford. I beg to move.
Lord Sassoon
My Lords, I thank noble Lords for their contributions, which have made for a stimulating and interesting debate and have played an essential role in providing full and proper scrutiny as we embark on this legislation. I am particularly grateful for the support from the Opposition Front Bench.
I opened this debate by observing that this month marks the five-year anniversary of the London bombings. I believe the whole House will agree with me that we must continue to guard against the threat to the UK from international terrorism. Importantly, a number of contributions this afternoon put this whole debate into context. We were reminded of the local and community context by the noble Baroness, Lady Hughes of Stretford, in her very welcome maiden speech; my noble friend Lord Sheikh also addressed this. At the other end of the scale, we were reminded of some of the global contexts, again in a striking maiden speech, by the noble Lord, Lord Davies of Stamford, who referred not least to piracy. My noble friend Lord Patten not only put the debate into its proper global context but even took us into the realm of cybercrime. This context is very relevant and points to the challenges posed by terrorist activity.
In this context, the Government have inherited an asset-freezing regime that is an essential part of the UK’s counterterrorism toolkit but which has not been grounded on a secure legislative footing, an asset-freezing regime which the UK is required to have as part of its international obligations but which exists only under temporary legislation. The debate today has taken us a step closer to resolving this undesirable situation.
The Government have rightly prioritised national security and public protection, and through this Bill we will ensure that suspected terrorist funds cannot be diverted and used for terrorist purposes. This will help to ensure that the UK financial system cannot be abused by would-be terrorists. But this Government are progressive and so is this Bill. It reasonably balances the requirements of national security with protecting civil liberties. It puts safeguards that did not exist under the 2006 order on a permanent and secure footing, and introduces additional mechanisms to assist Parliament in effectively monitoring the asset-freezing regime.
None the less, we have today debated the merits of this legislation and I will now turn to some of the major points raised. I am reminded by the noble Lord, Lord Davies of Oldham, that I might have tested the patience of some Members of your Lordships’ House last night in trying to respond to all the points in a long debate. I hope that noble Lords will forgive me if I do not address every point this evening, but I will write later on points which have not otherwise been addressed.
My noble friend Lady Falkner of Margravine asked about the number of people and the amount of money that was frozen. I mentioned it at the beginning, but I will mention it again. We are referring to only 26 people and only £150,000, but we have to remember that not only were some of those 26 people involved in such planned outrages as the 21 July Tube plot, the Glasgow airport bombs and so on, but that the amounts of money that can do so much damage can be very small. The estimates suggest that the 7 July London Tube bombings cost only £8,000.
Another part of the Bill which has been much discussed is the Home Office review. I will only repeat what I have said before in answer to points raised by the noble and learned Lord, Lord Davidson, my noble friend Lady Hamwee and my noble and learned friend Lord Mackay of Clashfern. The Treasury is working closely and co-ordinating with the Home Office review. The Home Secretary has said that the review will be reported to Parliament after the Summer Recess, which, for the other place, ends rather earlier than ours. I repeat what I said before: it would be appropriate to introduce any government amendments, if we consider them to be appropriate, in Committee.
A number of different questions and comments were raised about consolidation of the legislation into a single Bill, and whether it is counterterrorist legislation or asset-freezing legislation, by my noble friends Lord Patten, Lady Falkner of Margravine and Lady Hamwee, the noble and learned Lord, Lord Davidson, and the noble Lords, Lord Pannick, Lord Myners and Lord Davies of Stamford. At the outset I said that of course there is merit in consolidation, but producing consolidated legislation would be a very significant task. There was reference to eight months having passed since February. It has not been that long since the new Government took office and it would not be a simple matter to put together consolidated legislation. Our priority has to be to get the current legislation in place with appropriate parliamentary scrutiny before 31 December.
I turn now to some of the substantive concerns about the legal tests in the Bill. Understandably, there has been a lot of discussion about the reasonable suspicion test. Questions were raised again by my noble friend Lady Hamwee, the noble Lords, Lord Pannick and Lord Myners, and the most reverend Primate the Archbishop of York in particular. I and the Government very much recognise the concerns that have been expressed, but I have explained and would reiterate the operational benefits of using suspicion to allow early action. But this is a topic that we will consider alongside the Home Office review.
Since there have been quotations from Justices of the Supreme Court, perhaps I may read out something else that the noble and learned Lord, Lord Rodger, said to this point—that,
“it may well be that, in a significant number of cases, because of its variable quality and fragmentary nature, the available information does not permit the Treasury to go further than to say that they have reasonable grounds for suspecting that the person concerned is committing or facilitating terrorist acts. If so, then it may be better to base designation on reasonable grounds for suspicion rather than on some higher standard which could not be readily achieved and which, if applied faithfully, would mean that the Treasury failed to freeze a significant number of assets which were actually under the control of people who committed … terrorist acts”.
This is by no means an easy matter, even for the courts.
A related question was asked by my noble friend Lord Sheikh about decisions breaching or not breaching Article 8—the right to respect for private life. I can assure him that the Treasury considers interference with human rights when deciding to make a direction, and that directions are made only when necessary for public protection. When deciding what is necessary, of course the Treasury carefully balances individual rights against public safety.
A number of questions were put about appeals processes and the question of judicial review. Points were made by my noble and learned friend Lord Mackay of Clashfern and my noble friend Lady Hamwee. We seek to avoid being in a position where there is a need to challenge Treasury licensing decisions. We seek to take a fair and proportionate approach so that challenges are avoided, but if there is a need to challenge, we think that judicial review is the right course. The process can be expedited if the court thinks that there is a need to consider licensing decisions quickly, and indeed the Constitution Committee recognised that the judicial review process is a meaningful scrutiny process. But, again, we recognise that this is an issue to be examined further alongside the Home Office review.
The most reverend Primate the Archbishop of York asked whether judicial review should be automatic. Most UK asset freezes are made at the same time as criminal arrest and charge, so I believe that automatic judicial review would be unnecessary when many people are subject to prosecution for terrorist offences. However, I will take the matter away and think about it further. Another related point was raised by the noble Lord, Lord Davies of Stamford, on the question of whether the court should have access to information considered by the Minister. We expect the court to take a robust approach to any judicial review, examining the evidence on which a decision is made. This would include consideration of closed material so that the court would see all the information seen by the Minister if it wanted to do so. Again, of course, the Treasury in this context always seeks to comply with Article 6 of the ECHR.
The noble Lord, Lord Myners, asked about the availability of legal aid. I remind him that the Treasury has issued a general licence to ensure that, where people are entitled to legal aid, the asset-freezing regime does not prevent them accessing it.
The noble and learned Lord, Lord Davidson, asked a question about innocent people getting off the list. In that context, the noble and learned Lord, Lord Rodger of Earlsferry, was referring to the AQ regime, where the UN has a list of designated persons. The AQ regime is not part of this Bill and I am not sure whether I need to address that point.
The noble Lord, Lord Davies of Stamford, asked what would happen if someone was the subject of a wrongful freezing order. If a person’s asset freeze is quashed, that person can start an action for damages, including for breach of contract and under the Human Rights Act. We invite designated persons to make representations to the Treasury on their asset freeze to enable them to challenge evidence that the Treasury has used.
I am looking nervously at the clock but we may get through the points.
My noble friend Lord Patten referred to the importance of tackling the evolving nature of terrorist finance and questioned the poor performance of SOCA. I welcome his important contribution in recognising the evolving threat of terrorist finance and organised crime. The Government are committed to tackling these threats robustly and are already taking steps to do so. That is exactly what my right honourable friend the Home Secretary’s announcement on 6 July on proposals to establish a new national crime agency seeks to do.
As I said in opening, the financial services sector is very much in the front line. My noble friend Lord Sheikh asked about the guidance that is given to companies providing financial services. I reiterate that we recognise the crucial role that the financial sector plays in implementing asset freezing. The Treasury works closely with the financial sector to provide advice on implementation issues and, in that context, we welcome the input of the British Bankers’ Association to our recent public consultation.
There were a number of questions about the role of the independent reviewer as proposed in the Bill. The noble and learned Lord, Lord Davidson, asked about the cost in relation to the impact assessment, as did the most reverend Primate the Archbishop of York. The noble Lord, Lord Myners, asked about identity and commented on the need for an independent reviewer. The independent reviewer will be reimbursed but I cannot put a figure on it at this stage. In the current fiscal climate it will certainly not be a significant sum in relation to the totality of the impact of the legislation. We shall not appoint a reviewer until the legislation has been passed but, when we do, we will want someone who will be an effective and credible reviewer and who will take an independent stance.
There were a couple of questions on procedural matters, if I may put it that way. My noble friend Lord Patten asked whether the Bill will be extended quickly to the Channel Islands and the Isle of Man. Yes, it will. We are already discussing this with the overseas territories and the dependent territories and we shall seek to ensure that they are covered either by an order made under the Bill or through their own legislation.
This brings me to the question raised by the noble Lord, Lord Pannick—I do not know whether it is the most important point of the day—about the mystery of the word “etc.” appearing in the title of the Bill. That was something that I questioned when the Bill was first presented to me, but I assure the noble Lord that there is nothing behind this, other than that it was added to reflect the amendments to the Counter-Terrorism Act in Part 2 of the Bill. That is why “etc.” needed to be put in the Title. There is absolutely no intention of widening the Bill to include any wider conclusions from the Home Office review or anything. I am sorry to prick that sense of mystery.
Lord Myners
Before the Minister concludes—and noting the arrival of the Chief Whip to provide necessary protection in keeping him within his time limit—I should say that he has given us an excellent summing up of the debate. It has been one of the best that I have heard, and I congratulate him on it. He very kindly referred to my question on legal aid. In fact, I asked him to assure us that there will be no cuts in the legal aid budget and the legal facilities available through legal aid to those who find themselves the target of this legislation, because they are in such a delicate and exposed position that they have every right to be able to secure the very best legal protection.
Lord Sassoon
I am grateful to the noble Lord, who is doing his best to get me over the 20 minutes. I shall write to him. I shall now conclude, because I am equally nervous about the Chief Whip being here.
This Bill takes the necessary steps to prevent the raising and use of funds for terrorist purposes. I believe that it continues to improve the protection of individual civil liberties in doing that.