National Security Bill (Thirteenth sitting)

Stewart Hosie Excerpts

Committee stage
Tuesday 18th October 2022 Public Bill Committees

[Tom Tugendhat]

New clauses 11, 12 and 13 are the first of a series of amendments relating to the foreign influence registration scheme announced by the Home Secretary on Second Reading. I will come to the new clauses shortly, but first I want to make some introductory remarks about the scheme itself.

In the 2020 Russia report of the Intelligence and Security Committee, it was recommended that future counter-state threats legislation should address the issue of those acting on behalf of a foreign power and seeking to obfuscate their links or relationship. The director general of MI5 strongly emphasised the importance of legislating to ensure that those acting covertly could be pursued through criminal means to make the operating environment harder for those who intend to disguise or obfuscate who they are acting for. The ISC’s report identified the need for stronger transparency legislation, akin to that in place in the United States—namely, the Foreign Agents Registration Act 1938, known as FARA.

FARA requires any person, regardless of nationality, to disclose to the Department of Justice where they represent the interests of foreign powers in a political or quasi-political capacity, as described by the report. It is a disclosure requirement that applies far beyond a situation in which a person acts for a foreign intelligence service, extending to activities undertaken for foreign powers as well as other entities and individuals.

Only four years ago, the Australian Parliament passed its contemporary equivalent to FARA, the Foreign Influence Transparency Scheme Act 2018. The Australian scheme requires the registration of political influence activities undertaken for, or on behalf of, a foreign power or other individuals or entities subject to foreign power control. Both schemes contain a range of exemptions, offences and enforcement powers to further shape and support enforcement of the scheme. Although not like-for-like schemes, they share the principle of tackling covert influence through greater transparency.

There is evidence of the value of these schemes. A submission from the Australian Attorney-General’s Department to an ongoing review of FITS, which commenced in August last year, describes the behavioural changes that it has seen as a result of the scheme’s implementation: some organisations and individuals have adopted better transparency practices, while others have seemingly ceased activities that would be registrable. Enforcement of the US’s FARA has increased in recent years. That has also resulted in behavioural change, as well as prosecutions for non-compliance, including of one very high-ranking former military officer.

I am delighted to be before the Committee today to talk through the proposed UK scheme. This is an important piece in our package of measures and is the area of legislation that calls on sectors to play their part in making it difficult for foreign powers to operate covertly in the United Kingdom. Similar to the position with the precedents that I have just described, its overarching aim is to deter foreign power use of covert arrangements, activities and proxies by requiring greater transparency around certain activities that they direct, as well as where those activities are directed or carried out by entities established overseas or subject to foreign power control.

Put simply, where a foreign state deploys its influence in the UK, either directly or through third parties, that will now be subject to registration and more transparent. I must stress that the scheme’s requirements are not identical to those of the United States and Australian schemes. Although we have worked with our US and Australian colleagues to understand the lessons learned from implementation of their schemes, our scheme’s requirements reflect our own experience and the threats that we face.

The overarching aim of the scheme is to be delivered through two separate objectives and requirements. The first is to strengthen the resilience of the United Kingdom’s political system against covert foreign influence. Openness and transparency are vital to the functioning of our democracy. Where covert influence is deployed by foreign powers, directly or through third parties, it undermines the integrity of our politics and institutions. The scheme will therefore require the registration of political influence activities where they are to be undertaken within the United Kingdom at the direction of any foreign power or foreign entity, or by a foreign entity itself. I will refer to these obligations as the “primary registration requirements”.

Certain registered information will be made available to the public via a scheme website, similar to the position with the schemes of our Australian and US partners. This requirement is deliberately state and sector agnostic, as the source of foreign influence should be transparent no matter where it originates or manifests. The only exceptions, which I will come to, are where exemptions are necessary to protect existing obligations.

The second objective is to provide greater assurance around the activities of specified foreign powers or entities. The scheme contains a power to specify a foreign power, part of a foreign power, or an entity—such as a company or organisation—subject to foreign power control, where the Secretary of State considers it necessary to protect the safety or interests of the United Kingdom. It would require a person acting within the United Kingdom at the direction of a specified power or entity to register with the scheme. It would also require a specified entity to register activities to be undertaken within the UK with the scheme. I will refer to this as the “enhanced registration requirement”. Its use will be limited and subject to parliamentary approval.

These requirements will apply to certain arrangements and activities, regardless of the nationality of those carrying out the activity, and will be enforced through a range of offences and penalties, as well as powers to request information.

I also want to tell the Committee about the scheme’s exemptions, which are as follows.

[Stewart Hosie (Dundee East) (SNP)]

Before the Minister tells us about the exemptions, it would be helpful to know how the enhanced registration—let us call it tier 2 —will actually work. So far, we are in the dark. The basic registration seems eminently sensible, but what will the procedure be to specify a country, entity or person to whom enhanced registration will apply? How will it work? We need to know that before we find out who might not be expected to register in that way.

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[Stewart Hosie]

The Minister explained just a few moments ago that the tier 1 registrations would be public but the tier 2 enhanced registrations would be private. I am not sure how he can argue that the tier 2 enhanced registration would give the public much more confidence if it is a secret.

[Tom Tugendhat]

The nature of the registration will not be a secret, but who has had to register will be kept private at the moment. I am already keeping this matter under discussion, so I am glad that the hon. Gentleman sympathises with my concerns. He and I are fully aware that journalism is a very powerful force in many of these areas.

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[Tom Tugendhat]

Okay. I am going to carry on, but I am very happy to continue this discussion on a later occasion.

New clause 11 will provide three principal benefits. First, it will give the Government and the public greater understanding of the scale and extent of the activity. Secondly, the offences and penalties for non-compliance will increase the risk to those who seek to engage in covert activities for foreign powers, either directly or through specified entities. Finally, it offers potential for earlier disruption of state threat activity where there is evidence of a covert arrangement between a person and specified foreign power or entity but it is not yet feasible to bring charges for a more serious state threat offence.

I want to be clear that we expect use of the enhanced registration requirement to be limited. It is an additional tool of assurance to bolster the package of measures within the wider Bill. The power to specify a foreign power or entity will be available to the Secretary of State when the Secretary of State considers it reasonably necessary to do so to protect the safety or interests of the United Kingdom. It will be subject to the affirmative procedure.

It is also vital to stress that the use of this requirement should not be taken to imply that every national of a specified foreign power or person associated with a specified foreign entity is to be mistrusted. The message here is quite the opposite: any person who complies with the obligation to declare an arrangement with a specified foreign power or entity is contributing to the safety and security of the United Kingdom by being open and transparent about that arrangement.

Although I am sure that members of the Committee will be keen to understand which foreign powers will be in scope of the enhanced registration requirement, I am sure they appreciate that it would be premature—if not damaging—to make undertakings on that at this stage. The Government will decide when the scheme is ready to be brought into force. For now, I will cover each amendment.

New clause 11 is the requirement to register foreign activity arrangements. A foreign activity arrangement is where activity is to be carried out, or arranged to be carried out, within the United Kingdom at the direction of a specified foreign power, part of a foreign power or an entity subject to foreign power control. The requirements could apply to any activities, but subsection (9) provides for this to be modified through regulations where necessary.

I wish to bring four key points to Members’ attention. First, I want to reflect on what we mean by a person required to register in this context under subsection (1). A person can be an individual, regardless of their nationality, or an entity. However, if a company or organisation is being directed by a foreign power or entity, the company or organisation would be responsible for registering the arrangement, not its individual employees.

We will shortly discuss new clause 13, which includes a requirement for specified entities to register their own activities. That is important because it makes clear our intention that an employee of a specified entity cannot be considered as being in a registrable arrangement with that entity. The approach was taken in response to sector feedback during our public consultation as a means of reducing the potential registration burden on companies and other organisations that may have many employees all engaged in the same activities.

Importantly, subsection (8) clarifies that there is no requirement for a foreign power itself to register. The scheme intends to increase assurance and transparency of activities being carried out for a foreign power where the involvement of that power might otherwise not be apparent.

[Stewart Hosie]

In new clause 11(1), “A person (‘P’)” might, as the Minister said, be an individual, an entity or a business. This is not at all clear. Is this the UK individual, entity or business or is it the overseas individual, entity or business that is directing a UK citizen? Is it a combination of the two?

[Tom Tugendhat]

Let me be completely clear, because subsection (8) makes it completely clear: there is no requirement for a foreign power itself to register. We cannot compel foreign powers or entities to register; this is a compulsion on UK entities or individuals.

The scheme intends to increase assurance and transparency to activities being carried out for a foreign power, where the involvement of that foreign power might otherwise not be apparent. As such, we would not expect other Governments to register with the scheme in respect of activity that they themselves are undertaking. As the later “interpretation” clause will make clear, that includes any person acting in the capacity of an office holder, employee or other member of staff of the foreign power, or a person whom the Secretary of State reasonably considers to be exercising such functions.

This scheme has been designed to avoid interference with our obligations under international law regarding the diplomatic and consular relations between countries, as well as the need to protect routine Government-to-Government engagement—the official visits of officials, military and other agencies of a state, for example.

Secondly, subsection (2) sets out the definition of “arrangement”, which requires there to be direction from a specified foreign power or entity to a person. That element of direction is important because it envisages a power relationship between the specified foreign power or entity and the person. The specified foreign power or entity has told the person to carry out the activity, or arranged for it to be carried out. While in practice it is entirely likely for a direction to be delivered in the language of a request, the context of the relationship between the specified foreign power or entity and the person being directed will ultimately determine whether it falls within scope.

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[Tom Tugendhat]

The right hon. Gentleman is right to ask. Control over an entity means 25% of a shareholding—that is one thing that we have already identified—or it could also be formal mechanisms within the company, including voting power or other forms of control. Some foreign powers enact legislation to oblige entities to comply with their security services or intelligence agencies—the right hon. Gentleman knows what I am referring to—giving them a right to exercise an element of control over those entities outside formal governance structures.

[Stewart Hosie]

Further to the point made by the right hon. Member for North Durham, the control criteria could be indirect control of more than quarter of the stock, indirect control of more than a quarter of the voting rights, or an indirect ability to appoint or remove an officer of the entity. That is dreadfully subjective. Unless the criteria are really nailed down, people could absolutely fall foul of the measures without knowing that they are being controlled in any way.

[Tom Tugendhat]

I do not think that is the case. The hon. Gentleman should realise that foreign control of any kind is under the general provision of the so-called ordinary provision, while the enhanced provision would be specifically identified, so individuals required to register under the enhanced provision would be aware that they are contracting within an organisation or entity that falls under it. All those contracting with a foreign entity will know that they have to register under the ordinary provision, so the legislation covers both cases.