Sanctions

Robert Neill Excerpts

Wednesday 19th July 2023 Commons Chamber

[Anne-Marie Trevelyan]

The hon. Gentleman is generous as ever in offering to assist us to make progress. I hope that, as we bring in the secondary legislation, it will be another step towards tightening the pressure on those who would wish to use legal representation for the wrong things.

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

I welcome the Minister’s willingness to engage on the general licence; it is very important to the Law Society, and for good and sound reasons. We all share the policy objective, so will she perhaps agree to meet, at both official and ministerial level, with representatives of the Law Society so we can thrash out the exact detail and get it right?

[Anne-Marie Trevelyan]

I will be happy to do so. I know that we aim to have this in place in the coming days. As I said, we are working closely with the legal sector and are grateful for its constructive engagement on this important issue. I am happy to commit to my officials meeting the Law Society to hear its particular concerns and indeed, I have no doubt, offers of its views on how we can make the scheme as effective as possible.

Once we have issued the licence, we will consider whether amendments to the SI to address the issue are appropriate and necessary. We will do that in conjunction with the legal sector and bring such amendments forward, if needed, at the earliest opportunity.

As with all other sanctions, this latest package has been developed in co-ordination with our international partners. We will continue to work with the legal community to monitor the effects of the legislation to ensure that it is achieving its objectives. We will also continue to co-ordinate with our international allies to identify and address any gaps or loopholes that emerge in our respective sanctions regimes.

To conclude, this latest measure demonstrates our determination to target those who participate in or facilitate Putin’s illegal war of choice. Through our sanctions regime and those of our allies, Russia is increasingly isolated, cut off from western markets, services and supply chains. Key sectors of the Russian economy have taken a significant hit and its economic outlook is bleak. The UK Government will use actions to intensify the military and economic pressure on Russia until Putin ends his brutal invasion of Ukraine. We welcome the clear and continued cross-party support for this action and for the sanctions regime. I commend the regulations to the House.

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[Sir Robert Neill]

I welcome the tone and approach of the Minister’s remarks, and I fully understand and support the policy objectives of the regulation, as does every decent lawyer in this country. For completeness, I refer the House to my entry in the Register of Members’ Financial Interests. We want the UK legal system to retain its reputation as an able, efficient and honest jurisdiction, which it is. However, it is important that we get the detail right, so, with apologies from one lawyer to another, Madam Deputy Speaker, you will know that, if I say the detail matters sometimes, there may be a little detail to raise with the Minister in the context of her very welcome assurance that she will meet, and have officials meet, to discuss what comes next. I appreciate that the regulations have—rightly—had to be developed at pace, and that we have sought to be aligned with our allies, but there are some bits to which further attention needs to be paid.

I am grateful to the Law Society of England and Wales for the briefing that it has sent to a number of hon. Members. Given that we all endorse the policy objective that Russia must never be allowed to gain from its barbaric and disgraceful invasion of Ukraine, and that Russian entities must never be able to gain from it, we must do it in a way that retains the ability of UK-based international law firms to advise, with the highest level of professionalism, on the way in which clients may wish to divest themselves of interests in Russia, for example, or on the risks or otherwise of potential transactions that might involve an element of a Russian entity of one kind of another. It is in everybody’s interest that they are able to do that, but I am concerned, as is the Law Society, that the wording of the regulations, however well intended—I think that they are totally well intended—may have the unintended effect of limiting it.

In particular, there is concern that the very broad language of the regulations is broader than that of our counterparts in the United States and the EU in terms of limitations. The Minister is absolutely right that we should align, so that is something we perhaps now need to revisit. Licensing may be one way, and a revised statutory instrument may be another—perhaps the two go together—to align the language

I will set out one or two of the practical consequences. The language of new paragraph 8A(1)(a)(i) to schedule 3J —I think I have got that right; it is all in the detail, Madam Deputy Speaker—is quite important. Essentially, it prohibits advice that facilitates or enables activity that would be prohibited if it were conducted in the UK or by a UK person—let us call it “UK-prohibited activity”. It then goes on to prohibit any advice in relation to, or in connection with, UK-prohibited activity. In that context, “advice” includes the provision of legal advice that involves—here is the rub—

“the application or interpretation of law”.

Well, that is pretty much what lawyers do, hopefully: they advise people about the application and interpretation of the law. Early advice is the best way to prevent people from getting into legal problems and prevent needless litigation. There is, I accept, an exemption covering advice, but, as the Minister will know, there is real concern that the exemption is narrowly drawn—too narrow, I would argue.

On the face of it, that means in practical terms that British companies cannot get advice from English and Welsh lawyers on whether their activity will comply with international sanctions regimes, for example. They could go to American lawyers for that. Many American-based law firms have entered the UK legal markets. It would be a bizarre situation if one could not go to the UK law firm for that advice but could go to the New York office of the American law firm. I do not think that was the intention behind the policy. We must ensure that the language reflects the intention.

In the same way, if, for example, an international company wants to know whether a specific activity that it is contemplating for perfectly good and legitimate commercial purposes is prohibited by UK, EU or US sanctions—all of which vary somewhat—the UK lawyers can answer on whether or not that activity is prohibited by UK sanctions, but once the lawyer has said, “Yes it is,” they are not then allowed to advise on whether it is prohibited by EU or US sanctions. That cannot be a sensible or practical approach, and it cannot be what the Government actually want to achieve.

The whole advantage of UK international law firms is, of course, that they have many multidisciplinary lawyers and people qualified in many jurisdictions. Our strength is that people come to us because we can advise on a range of law in a range of jurisdictions. At the moment, however, a lawyer would be committing an offence if they took the obvious step. Instead, they have to say, “Okay, it is illegal in the UK, but I cannot tell you whether it is illegal in the EU or the US.” That is clearly not a situation that anybody wants to see. The difficulty is that the language does not reflect the intention. Surely, giving such advice does not enable or facilitate unlawful activity. It allows a company to know whether, if it does the activity, it might infringe the law, and whether the law is applicable to it. The language does not reflect that policy intention as it stands.

Another example is that the advice exception in regulation 60DB(3) is limited to advice on compliance with sanctions, and not to other forms of compliance advice. The logic is that one seeks advice from one’s lawyer on the whole range of potential legal risks that one might run in taking a particular course of commercial activity. The facts will be the same, and may raise questions about sanctions compliance, but as it stands—this is of real concern to the Law Society—a UK lawyer could supply the client only with advice on sanctions, not on whether they comply with other criminal offences. The strict wording of that regulation would, on the face of it, criminalise lawyers giving advice on whether that same form of action falls foul not just of sanctions, but of anti- money-laundering, anti-bribery and export control laws.

Surely we want any UK lawyer to be able to give one-stop-shop, rolled-up advice on all the legal risks that might arise from that activity, but at the moment, once they have established the first part—that it falls foul of the UK sanctions regime—they cannot go on and do the obvious and common sense thing of saying, “And, by the way, you also fall foul of this, that and the other.” That cannot be the intention, but as it stands, that is where we could end up.

That is why the general licence is, in the short term, so important. Individual licences, which were referred to by the shadow Minister, the hon. Member for Cardiff South and Penarth (Stephen Doughty), have been tried in the past. Not only is there difficulty in how effective they are in policy terms, but there are practical difficulties as well.

That is where advice about disinvestment comes in, for example, because UK companies might very properly want to withdraw from transactions involving Russian entities or individuals. Surely we want UK lawyers to be able to advise them fully and frankly on how best to disinvest. But if they have either to be caught by the risk of a criminal sanction or to get an individual licence, we know that Russia—not a rule-of-law country, to put it mildly—is well able to take actions to sequester property and prevent the return of assets to British nationals and British companies in a way that we would never countenance in this House. When dealing with people of that kind, we do not have that leisure, frankly. Once a company has taken the decision to disinvest, they want to get the assets out quickly. Waiting for an individual licence would not make that possible. That is why a general licence, rather than individual licences, is important.

That is why it is important to sit down with the Law Society, hear the lived experience of law firms in the UK, and get the regime right so that it sticks. Regrettably, this war, and therefore the sanctions, may go on for longer than any of us would wish—however long it takes to get Ukraine its freedom and to get rid of that wretched regime in the Kremlin—so we must have something that will stand the test of time. That is why I am so anxious for the Minister to engage in detail with the Law Society about this.

I have a final example. We could have a situation in which an EU firm based in the UK can go to their Paris office for advice on different terms of legal trade from the UK office. That cannot be to the advantage of the UK legal system, and it does not help us to align with our allies.

I have greatly shortened the briefing that I received because everyone wants to get away for the summer recess. I hope I have flagged up some serious practical points. There is an issue of principle, but the detail matters. If we can work together to get that right, I hope we can come back to the House after the recess with the general licence and a revised approach to the SI, which will give us a permanent system through which to bear down on the evil of the Russian regime while enabling British lawyers, with their expertise, to play their part in that fight. At the moment, they would have one hand tied behind their back, which was not the Government’s intention.

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[Sir Chris Bryant]

Long may he persist.

I support the measure before us today. The Minister knows that I and other Members have campaigned for as robust a set of sanctions as possible. I have been critical sometimes of the processes we have used to get there. Oliver Bullough wrote a splendid book that lays out why it is important to deal not only with financial instruments but with some of the people who have effectively enabled others to bypass sanctions regimes and hide their money from prying eyes in the UK.

It was a joy to hear the extremely learned hon. Member for Bromley and Chislehurst (Sir Robert Neill), not least because he referred to “every decent lawyer”. I detected a characteristic wink at that point, because not every lawyer is decent, m’lud. I gently suggest—

[Sir Robert Neill]

rose—

[Sir Chris Bryant]

Now look what I have done.

[Sir Robert Neill]

I have prosecuted some less than decent lawyers over the years, so I take the hon. Gentleman’s point. But he knows just how good the English legal system is collectively, and I know he will want to recognise that.

[Sir Chris Bryant]

I have great admiration for lawyers, especially those who advise me, as is occasionally necessary—[Laughter.] It is a serious point: if the UK stands for anything in the world, it is the rule of law. The hon. Gentleman and I have often had to join cause on occasions when we have worried that the Front Benches have not quite seen things in exactly the same way as we do.

I will not rehearse all the arguments, which were laid out so beautifully for the hon. Gentleman and others in the Law Society’s note. He understood it better than I did. The important point is that all British businesses should be withdrawing from Russia. It is extraordinary that any British businesses are still doing significant business in Russia. I do not wish to make any partisan points, but I think it is still true that Infosys has a substantial presence and has not managed to wind down its presence in Russia. That is worrying. Mantrac is certainly still operating in Russia, and some of the money it has earned there will have made its way into its recent £5 million donation to the Conservative party. We should be doing more due diligence about these matters.

I do not understand how Unilever can still claim that it is only selling Magnum ice creams in Russia because they are an essential item. They might be an essential item for somebody who is going to watch the “Barbie” movie later this year—that sort of fits—but in all seriousness, I honestly do not think that Unilever should still have a significant presence, or any presence, in the Russian Federation. Its remaining there is a problem. I hope that the Minister will be able to respond to the point about British companies being able to advise on how to disinvest as fast as possible. If the regulations were to make that more difficult, that would be a bit of an own goal on our part.

I have some other, very minor, points to make. One is that the sanctions regime is now getting very complex. These are No. 3, the third regulations in this Session. I know that this Session of Parliament has gone on a bit—one could argue that the whole of this Parliament has gone on a bit, maybe a bit too long—but we are relying on lots of statutory instruments and secondary legislation. The amount of such legislation has grown enormously over the past 20 years, not just since 2010 but before then, and there is a danger that it is very difficult for lawyers to keep up with what the law is. Of course, there is no excuse for lawyers to say that they do not know what the law is, but none the less, these regulations came into force on 30 June—they are already in force. That is the problem with the way in which we are legislating these days. When there is a Labour Government, I hope that we will use secondary legislation much less frequently, because we need to be able to amend legislation on the Floor of the House or in Committee to make sure that Governments do not make silly mistakes.

I note the subtle difference in the exemption that exists for advice. Of course, advice can cover a multitude of sins and is sometimes designed to do so, but I note the subtle difference between the exemptions granted in the UK, those granted in the US and those granted in the EU. If I heard the Minister correctly, she attributed those to the different legal systems that exist in those jurisdictions. That may be true, but I would like her to expand on that and explain why it is necessary for us to make distinctions in that way. Otherwise, the point made by the hon. Member for Bromley and Chislehurst is absolutely right: an international law firm could just say, “All right, I’m popping over to Paris, Madrid, Berlin or wherever for the weekend, and we will do it from there.” That would be a mistake. I also think that sanctions need to be a stiletto blade, not a blunderbuss, if they are to be truly effective in peeling away support from Vladimir Putin within the Russian Federation.

In a previous debate on sanctions, I referred to the former leader of UKIP. Let me be absolutely clear: I have had no correspondence of any kind—electronic, in writing, or digital—with Coutts bank about him, or for that matter about anybody else, because I do not have many constituents who bank with Coutts. I have no idea why Coutts has closed his bank account, but I should have been more careful with the words that I used a year ago. The figure I gave was for his total income. I think he himself has stated that he was paid for his appearances on Russia Today, which is of course a part of the Russian state, and he has made clear his respect for Vladimir Putin as a nationalist. However, I do not think that the figure I gave was anywhere near the accurate figure, so I apologise if I have inadvertently misled the House. I had no intention of doing so, and I hope that puts the record straight. I had hoped that this afternoon’s debate was going to include a debate on the Procedure Committee’s report into allowing all Members of the House to correct the record, rather than just Ministers, but that option is not yet available to us. As such, Madam Deputy Speaker, I have rather stretched your generosity in making these comments.