Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

[Lord Pannick (CB)]

My Lords, the Minister said in his opening remarks that this is a “technical Bill”. However, it raises a number of constitutional issues and concerns which flow from the fact that the imposition of sanctions on an individual has a very adverse impact on the person designated, as the noble and learned Lord, Lord Hope of Craighead, rightly said. The noble and learned Lord mentioned the Supreme Court case of Ahmed, in which he was a member of the Appellate Committee. He rightly said in that case that an order freezing the assets of an individual makes such persons,

“effectively prisoners of the state”.

He added that these orders are,

“intrusive to a high degree”,

and have an adverse effect on not just the individual but members of their family.

My first concern is that the Bill states, at Clause 10(2)(b) and Clause 11(2)(b), that if there are “reasonable grounds to suspect”, then the question for the Minister is whether it is “appropriate” to designate. The current legal test applied by the courts here and in the Court of Justice in Luxembourg, in part by reference to the European Convention on Human Rights, is to ask whether designation is proportionate in all the circumstances, including the impact on the individual. Can the Minister say whether the Government accept that a proportionality test will continue to be applied under the Bill? If so, will the Government accept that it would be highly desirable for this to be stated in the Bill?

My second concern is that Clause 11 allows for designation of persons by description. Currently, EU law requires that persons or entities must be expressly named if sanctions are to be applied. That is for a very good, practical reason. For a person to be designated other than by reference to their name will inevitably cause uncertainty not just for the persons concerned but for those who have to apply these provisions-in particular, banks required to freeze the assets of persons who are designated. Will the Minister comment on these problems which will inevitably arise if persons are designated by description?

My third concern is that Clause 2(1) will allow for financial sanctions to be imposed not just on designated persons but also on persons,

“connected with a prescribed country”.

Clause 50(4) will allow the Minister to make regulations specifying the relevant connection. Can the Minister explain why sanctions should be imposed on a person simply because they are connected to a specified country as opposed to misconduct by that person or their personal responsibility for the decisions of a repressive regime or a regime which otherwise justifies a sanctions border?

My fourth concern is procedural fairness. I think the Minister accepted in his helpful opening remarks that one of the vital safeguards in this context is the right of the individual to know the case against them and to have the opportunity to answer it. The European Court of Justice has recognised that procedural rights are vital to the integrity of any sanctions regime. The Minister said that the Bill contains “robust” provisions to protect procedural rights. In fact, the Bill contains very little indeed on the subject of procedural fairness. I well understand that a person cannot be told anything before listing occurs, as there will be too great a risk that funds may be dissipated, but once listing has occurred, the individual must have a right to be told why listing is taking place and by reference to what evidence so that he or she has a fair opportunity to respond—subject, of course, as the Minister mentioned, to retention by the state of security-sensitive details, but even then the individual must be told the essence of the case against him or her, as the case law requires.

It is striking that this Bill does not include any provisions setting out such a basic requirement of fairness at the stage after a designation order is made—neither a detailed code nor even a statement of principle to be developed in secondary legislation. There is only a requirement of disclosure if and when a case comes to court; that is, Clause 34(1), which refers to Sections 66 to 68 of the Counter-Terrorism Act 2008 and which incorporates the special advocate procedure for sensitive material. Even then, there is no recognition that individuals must be told the essence of the case against them.

I would like to see a duty to disclose at the earlier stage; that is, when or soon after the designation is made. The reason why it is essential that the individual is told at least the essence of the case against them at the designation stage is that you cannot start court proceedings under Clause 32(1)(d), read with Clause 33(5), until you have sought a review by the Minister and received a decision on that review from the Minister. That may take months—one hopes that it will be speedier than that, but, being realistic, it is bound to take time. There are no requirements on Ministers as to the timetable for conducting reviews. Unless you know the case against you, it is impossible effectively to present your arguments on the review. It is important to have clarity in this area on the face of the Bill, otherwise there will inevitably be litigation—and that litigation will lead to the courts imposing a duty to follow a fair procedure, which is my fourth concern.

My fifth concern about the Bill is in relation to the periodic review provisions in Clause 20. The appropriate Minister is required to consider any designation of a person every three years. That is far too long a period given the gravity of the consequences of listing a person. In the EU system, the periodic review sometimes occurs every six months, but in all such cases it must occur at least every year. It is true that the listed person can themselves seek a review under Clause 19, but, under Clause 19(2), once such a request has been made,

“no further request may be made … unless … there is a significant matter … not previously … considered”.

There will be cases where although there is no significant new material, the very fact of the passage of time may justify looking again at whether a listing is really appropriate. The three-year period is especially troubling because, as I said, you cannot start court proceedings until you have sought a review by the Minister and received a decision on that review. Will the Minister say why the review period of one year at the most in Europe is being increased to three years, and will he please reconsider the point?

My sixth concern is that the Bill would remove effective remedies for persons listed in the UK in order to implement a UN designation. The current position under EU law is that it is contrary to the rule of law for a UN listing to be implemented without procedural safeguards—that is, supporting evidence, effective judicial review, and the European court has the power to quash an order if it is not proportionate. Under the Bill, Clause 21(2) and (4), the individual would only have a right to request the Secretary of State to use his or her best endeavours to take the matter up at the UN to remove the person’s name. There is a right under Clause 32(1)(c) to seek a court review of the Minister’s decision not to use best endeavours. Can the Minister confirm that I have correctly understood that the intention of the Bill is to deprive the individual on the UN list of the rights that he or she currently has under EU law to obtain from the court, in appropriate cases, a quashing of a listing that derives from the UN?

If that is so, the individual designated in this country as a result of being placed on a UN sanctions list will have much less legal protection than a person who is listed in France or Germany as a result of being placed on the same UN sanctions list. The Minister said in his opening remarks, and he is right, that this country has an international law obligation to implement a UN listing. But can he confirm that, nevertheless, the European Court of Justice in Luxembourg requires the rule of law to be satisfied and has a power to give effective judicial remedies in appropriate such cases?

My seventh and final concern is the very broad delegated powers conferred on Ministers under the Bill, for example under Clause 39. The noble and learned Lord, Lord Judge, will address this topic, and I share the views that I know he is going to express. I look forward to hearing the Minister’s response on these points.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Lord Judge (CB)]

My Lords, the noble Lord, Lord Pannick, and I are bringing forward Amendments 1 and 23 in relation to Clauses 1 and 7. I will get this out of the way. We are both members of the Constitution Committee. We do not speak for the committee, but we do highlight its recent report on the Bill and we shall rely heavily on it; perhaps we should invite the Committee to spend some time studying it closely.

The second preliminary matter is this. I acknowledge the letter sent by the Minister to the noble Lord, Lord Pannick, which was copied to me. I acknowledge his kind invitation to see if we could organise a meeting. Unfortunately, for personal family reasons I could not manage those dates, but I will begin by thanking him for his customary courtesy.

At Second Reading I described the Bill as a “bonanza of regulations”. In truth, on reading it again I can still find nothing of true substance in it except regulation-making powers. Clause 1 deals with regulations—and then on and on we go. Let me throw in, just casually, Clauses 14, 35 and 44. Good old Henry VIII comes stumbling in crush all the regulations that have been made and to make any others he wishes. We really should rechristen this Bill the “Sanctions and Anti-Money Laundering (Regulation Bulk Buy) Bill”.

Everyone who spoke in the Second Reading debate acknowledged that the asserted objectives were desirable. Compliance with our treaty obligations with the United Nations and other countries is admirable. Arrangements currently exist in this field which at the moment are governed on the basis of EU law; they are part of our law but they have come through to us on the basis of the 1972 Act. No one has yet said that those powers are inadequate, yet the Bill is not simply bringing what I shall describe as EU law into domestic law and preserving it—rather, it goes much further. It vests more far-reaching powers in the Minister to rule by regulation on these issues and, beyond fulfilling our treaty obligations, it throws in powers to deal with terrorism. Terrorism is criminal activity that is already subject to vast tranches of primary legislation, so we are producing a Bill that is bung-full of regulations and nothing else in order to enable our international obligations to be fulfilled—but more so—while at the same time extending these powers to criminal activity that is already governed by statute.

I recognise that legislation by regulation is unavoidable, and that some regulation is inevitable and justifiable. However, in the context I have endeavoured to paint—I could have gone on for hours, but I will not—I remind your Lordships that the Constitution Committee said on this issue:

“Given that the purpose of the Bill is to address the need for domestic powers to impose, amend and revoke sanctions after Brexit, it is important to ensure that there are sufficient safeguards and there is adequate parliamentary scrutiny to make the delegated powers constitutionally acceptable”.


While I have page 4 open, I will draw attention to some of the phrases in different paragraphs, such as “constitutionally inappropriate for Ministers”. The committee recommends,

“this important limitation on ministers’ powers”.

It states:

“Clause 11 raises constitutional concerns”.


Then, on page 5, the committee says that it is,

“concerned about the breadth of the power conferred”,

and,

“deeply concerned that the power in … may be used”.

This is not an emotional reaction by the Constitution Committee; it is simply an examination of the reality of the legislation and a short summary of where it leads us.

In that context, I will make a short point in relation to the proposed amendment: throughout the Bill, should we not proceed on the basis that the greater the apparent imperative to proceed by unconstrained regulation, the greater the corresponding imperative to provide for the fullest possible parliamentary scrutiny, always achieved by careful primary legislation?

Clauses 1 and 7 go to the heart of the Bill. In the remarkable context that I endeavoured to summarise a few minutes ago, I hope to identify the purpose of the amendment. It is utterly simple: I hope it will make these two clauses more attractive. The relevant word in these clauses is “appropriate”. I think we can assume that no Minister would try to make regulations that he or she did not think were appropriate; I think we can also agree that any regulations made consequent on the Act should be an exercise in what is appropriate. However, in this context in the Bill, “appropriate” is far too vague, easily dependent on ministerial discretion and subjective.

If we are to allow powers such as these to be exercised by regulation, the exercise should always be both appropriate and necessary. If it is necessary, it will almost always be simultaneously appropriate; however, if it is only appropriate, it will not always be necessary. Hence the amendment: by strengthening the language of a single word, we will impose a greater responsibility on the Minister—not our present Minister but the Minister to come and Ministers to follow for years yet—and he or she will be less likely to make an ill-judged, mistaken decision about the exercise of these extravagant powers, when simultaneously the opportunity to correct errors is significantly diminished. I beg to move.

[Lord Pannick (CB)]

My Lords, I want to add some footnotes to the powerful speech of the noble and learned Lord, Lord Judge. As your Lordships know, this is the first substantive Bill to be brought forward in this House to address the consequences of Brexit. As the Minister explained at Second Reading, domestic powers are needed to impose sanctions to replace the powers currently enjoyed under EU law. In relation to these amendments, it is important to say—as is repeatedly pointed out—that there is a disturbing irony when a Brexit that is said to be justified by a desire to restore to Parliament powers currently enjoyed in Brussels results in Ministers seeking to confer extensive powers on themselves.

That is a topic to which the House will no doubt return when the European Union (Withdrawal) Bill reaches us, but for today, these amendments seek to identify the unjustifiable breadth of the powers that Ministers seek to confer on themselves in the context of the Bill. I pose this question to the Minister: why should the Committee be satisfied that Ministers should take powers that are unnecessary? That is the question. It is not sufficient that the powers are appropriate; they need to be necessary, because a Minister in this context should not have a power that is unnecessary.

The noble and learned Lord mentioned the report of the Constitution Committee. I also draw attention to the report on the Bill published last Friday by the Delegated Powers and Regulatory Reform Committee. I draw the Committee’s attention to paragraph 18, which I will quote because it is so powerful. It says:

“As drafted, clause 1(1) allows the Minister to make sanctions regulations where the Minister considers that doing so is ‘appropriate’ to achieve one of the purposes listed in that clause. In the light of the width and significance of the powers, we take the view that the Minister should only have power to make sanctions regulations if doing so is considered ‘necessary’ to achieve the purpose for which they are made”.


I hope the Minister will reflect on that advice from that committee, as well as that of the Constitution Committee.

I expect the Minister will respond by seeking to placate the Committee—he is very good at that sort of thing—with reassurances about the Government’s benign intentions in this context. If I may get my retaliation in first, the answer to that contention is given again by the Delegated Powers and Regulatory Reform Committee. It is in its report published on 28 September this year on the European Union (Withdrawal) Bill, but it is a general point. At paragraph 10, the report says that the committee judges,

“powers on how they might be used and not just on how the Government indicate that they intend to use them”.

That must be right. That is the approach we should adopt in this Committee.

The noble Lord is, if I may say so, the acceptable face of ministerialism, but who knows the identity of the Minister who will perform this role in a year’s time or five years’ time? I say respectfully to those on the Government Benches that they ought to bear in mind that it may not be a Minister from their party performing this role in a year or five years’ time. It is important to adopt a non-partisan approach to this issue. It is not good enough that the Minister has benign intentions, as I know he has; we have to look at the extent of the powers being given. I strongly support the noble and learned Lord’s amendments.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

I have stated that the position is as it is now. I know the noble Baroness is seeking to develop arguments that we have had on a previous occasion, but what I have stated is the position as it exists. The noble Baroness talked about it being enshrined in law. Currently, that is how affirmative instruments and statutory instruments work. I am sure she is fully cognisant of that fact.

The noble Lord, Lord Lennie, said that the amendment would not inhibit the Government in any way. But as I was saying—to give further explanation and clarity, if I may—changing “appropriate” to “necessary” would effectively force the Government to use sanctions only as a last resort. Let me assure noble Lords that by saying that I do not mean that sanctions are never our first option. It is important that the Government of the day have some flexibility in deciding when and how sanctions should be deployed. We would not want to find ourselves in a situation where we could not use sanctions in the early stages of a crisis and instead had to allow it to escalate until the necessity of sanctions could be demonstrated.

Moreover, sanctions work best when agreed multilaterally. To be required to demonstrate that other options have been exhausted and sanctions are therefore necessary would leave the UK more constrained than our allies and international partners in our ability to agree and deploy sanctions. It would be a high bar to meet, especially in cases where we may wish to impose sanctions as part of a multilateral agreement with allies in areas where there is no direct risk to UK citizens or direct impact on UK interests. Too high a bar could prevent the UK acting in these areas. This could not only reduce the ability of the UK to continue to play a central role in international affairs but reduce the effectiveness of the sanctions measures themselves. For example, financial sanctions against Russia—

[Lord Pannick]

I am puzzled by this point. The amendment is concerned, under Clause 1(1), with the circumstances in which regulations may be made, but it does not affect the broad discretion embodied in Clause 1(2), which defines purposes. Clause 1(2) states:

“A purpose is within this subsection if the appropriate Minister … considers”—


so it is a matter entirely for the Minister—

“that carrying out that purpose would”,

for example,

“further a foreign policy objective of the government of the United Kingdom”.

So, as I understand it, my noble and learned friend Lord Judge’s amendment would in no way inhibit the complete discretion of the Minister to decide matters of purpose and to decide what is or is not in the foreign policy objectives of the Government; for example, that sanctions should be imposed, in general terms. All the amendment does is to say that the Minister has to be satisfied that it is necessary to impose these regulations once the foreign policy objective has been determined—and it is to be determined by the Government. With great respect, I do not understand the point that the Minister is making.

[Lord Ahmad of Wimbledon]

The point I was making was about the implication in the current wording of “appropriate”. This is not an open invitation for a Minister to impose sanctions, and the appropriateness of imposing sanctions is qualified in the context in which they must be applied. That was why I referred to the specific section that I did.

I think I have made the point already that the concern would remain. Several noble Lords have referred to the Constitution Committee and the Delegated Powers Committee. We have received those reports as well, and I assure noble Lords that I am not dismissing them. We are reflecting very carefully on the representations made by both committees because it is important that we respond carefully and after detailed consideration of what is being put forward. As I said right at the start of my remarks, I will reflect very carefully and will very much bear in mind the voices and experience of those who have tabled these amendments. We certainly remain of the thinking that the current wording, with the balances and the qualifications in the context of the legislation as presented, means that this is not an open invitation for a Minister to apply a sanction. However, in the context of the two reports, I will of course look again at the basis on which perhaps we can look to qualify, and provide greater certainty in respect of, the language used.

Amendment 1A, tabled by the noble Baronesses, Lady Sheehan and Lady Northover, would require there to be a “compelling” reason why sanctions are appropriate for the purposes set out under subsection (2), which relates to non-UN sanctions. I agree with the sentiment behind this amendment and note that it reflects a specific recommendation of the Delegated Powers Committee. However, adding the requirement for a “compelling” reason might also give rise to some of the difficulties I have already highlighted in respect of the previous amendment.

As I said, we think that in matters of foreign affairs and security policy the Government should have discretion about when it is appropriate to act. This amendment would effectively remove some of that discretion. We also believe that it could restrict our ability to work with international partners to ensure that sanctions are effective. In some cases, sanctions may be more compelling for our international partners than for the UK, but it would undermine the effect of sanctions if we were not able to participate or agree to them being applied multilaterally. I am sure that all noble Lords will recognise that perspective. If the UK was unable to act, this could in turn undermine the UK’s relationships with our international partners.

Amendment 23 deals with a similar issue, but in relation to UN sanctions only. I think there is agreement on all sides of the Committee that it is appropriate that the UK can continue to comply with its international obligations, so I doubt there is much between us on this issue. We think “necessary” would in many cases be acceptable in that place in the Bill. However, we also think it is important that where the UN provides some flexibility about how to implement obligations, the Government should have the flexibility to decide how best to do so. The word “appropriate” provides that flexibility.

It should be noted that the power here is broadly consistent with the equivalent provision in Section 1 of the United Nations Act 1946, which enables Ministers to,

“make such provision as appears to”,

them,

“necessary or expedient for enabling”,

measures in UN Security Council resolutions “to be effectively applied”. It should also be noted that the word “appropriate” does not enable Ministers to do whatever they want. The noble and learned Lord, Lord Hope, referred to the Ahmed case, which I know he knows well. That demonstrated that the courts will take a robust approach to scrutinising the exercise of the Executive’s powers.

I have already alluded to the fact that we have received the reports of both the Constitution Committee and the Delegated Powers Committee. I put it on record that we will consider both committees’ recommendations very carefully. I have also listened carefully to the contributions during the course of this short debate, and I am sure we will explore the issues further as we scrutinise the Bill in Committee.

It says here, “I hope I have been able to convince noble Lords”, but, from looking around the Chamber, I think that would be a rather hopeful word to use at this juncture. Perhaps I have provided noble Lords with a degree of reassurance with some of the explanations that I have given about the context in which the sanctions would apply, but I respect and understand that there would be a need for continued parliamentary scrutiny and for ensuring, as I am sure all noble Lords appreciate, that the UK continues to comply with international law and maintains a leading role in international affairs after the UK’s exit from the EU.

As I said, we will continue to consider very carefully the recommendations of the two committees, and I am sure we will return to this issue in discussion with noble Lords. Again, there are important issues of discussion here. Both in the course of the Committee stage of the Bill and in the meetings that we are having beyond the Chamber, I am sure we will reach a means of moving forward constructively on this basis. The ultimate purpose and objectives of the sanctions regime are something that I know all noble Lords respect. Based on that, I hope the noble Lords will be minded at this juncture to withdraw the amendment.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

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

Moved by

[Lord Pannick]

54: Clause 19, page 16, line 15, after “decide” insert “as soon as reasonably practicable”

[Lord Pannick (CB)]

My Lords, this amendment is in my name and those of the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins of Highbury. It is not concerned with lobsters; it is concerned with the duty of the Minister to consider a request to vary or revoke a designation. The Bill contains no provision requiring the Minister to address such a request within any specific time period. I can understand why it would be inappropriate to set any defined time period—how long it takes to address a request to vary or revoke a designation will inevitably depend on the circumstances of the individual case—but the Bill should, I think, contain a more general obligation on the Minister in relation to time. This amendment would require the Minister to decide on a request to revoke or vary,

“as soon as reasonably practicable”.

It is important for the Bill to impose such an obligation because, under Clause 32, read with Clause 33(5), a person who is put on a sanctions list cannot seek a review from the court until the Minister has made the decision on the request to vary or revoke the designation. It would be quite wrong for a person to be listed, with all the adverse consequences that that involves, with no opportunity to complain to a court unless the Minister had an obligation to act with reasonable expedition. In an extreme case, were this amendment to be included in the Bill, the courts would be able to say to the Minister that his or her delays were unacceptable.

I cannot see that a “reasonably practicable” test could be in any way objectionable. I suspect that the Minister will tell the Committee that the amendment is unnecessary because of course Ministers will decide these cases as soon as reasonably practicable. We have heard such assurances repeatedly during this Committee stage. However, I am sure that the Minister understands that in contexts as important as this Bill I prefer to see obligations written into the statute rather than rely on assurances from Ministers, however fair and reasonable they are. I beg to move.

[Baroness Northover]

This seems an eminently reasonable amendment. It almost seems unambitious in its scope—it invites Ministers to answer questions along the lines of “as soon as possible” and “shortly”—but noble Lords are surely right to seek to put something of a common-sense timetable on this, and we support them. The Bill proposes to give such wide and untrammelled powers to Ministers that any moves to qualify them should be welcomed.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for tabling this amendment, and I thank other noble Lords for their contributions. Perhaps I will disappoint the noble Lord, Lord Pannick, somewhat by saying that I agree with the substance and constructive nature of the proposal before us. When the noble Baroness, Lady Northover, started talking about “shortly” and so on, I was reminded of my time as the Aviation Minister and the occasion when an announcement on Heathrow Airport was pending—but we got there.

In that mood, let me outline the Government’s position on this amendment. When a request is received from a designated person to vary or revoke their designation, the appropriate Minister should ensure that they make their decision as soon as is reasonably practicable. As sanctions are applied without giving those sanctioned the opportunity to make representations, and because they have serious consequences on the individuals concerned, it is important to ensure that mistakes are rectified swiftly.

As sanctions are intended to change behaviour, it is also important that people should be able to have their designation revoked if they change their behaviour. Clause 19 therefore provides a quicker and less costly option than going to court. It will also have the advantage of keeping unnecessary pressure off the courts and potentially reducing costs to the taxpayer. The reassessment process exists to allow designated persons to seek swift redress when wrongly designated—and I can assure noble Lords that the Government fully intend to act promptly to requests for reassessments.

I shall certainly reflect on the amendment. I have listened carefully to noble Lords, who have made a compelling case for us to look at our position. With the assurance today that we will look at the amendment again—although it is only an assurance at this juncture—I ask the noble Lord, Lord Pannick, to withdraw his amendment.

[Lord Pannick]

I am grateful to the Minister. I look forward to hearing from him before Report that the Government are able to move on this matter. He has heard the views that there is no basis for not including this in the Bill. I hope this is the first of many amendments today that he will see the wisdom of. On that basis, I beg leave to withdraw the amendment.

Amendment 54 withdrawn.

--- Later in debate ---

Moved by

[Lord Pannick]

56: Clause 20, page 16, line 43, leave out “3 years” and insert “1 year”

[Lord Pannick]

Again, this amendment is in my name and the names of the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins of Highbury. It concerns the periodic review provisions in Clause 20. The appropriate Minister is required to consider any designation of a person every three years. That is far too long a period given the gravity of the consequences of designating a person. It is true, as the Minister emphasised at Second Reading, that the listed individual can seek a review under Clause 19, but subsection (2) of that clause provides that once such a request has been made, no further request may be made by the individual unless,

“there is a significant matter which has not previously been considered by the Minister”.

There may well be cases where, although the individual can point to no significant new material, the Minister, on reviewing the matter, may find good reason to vary or revoke the designation. Indeed, the passage of a year without any further material coming to light may justify looking again at whether the listing is appropriate. The three-year period is especially troubling because of the grave consequences of listing for the person concerned and because, as I said in the earlier debate today, you cannot start court proceedings under Clause 32(1)(d), to be read with Clause 33(5), until you have sought a review by the Minister and received a decision on that review.

The Minister will confirm that under the EU system, which this Bill is designed to replace, a periodic review occurs every six months normally but certainly in all cases at least every year. I can see no justification for this Bill to triple the period which can elapse before a review is required. I beg to move.

[Baroness Northover]

The noble Lord, Lord Pannick, was eagle-eyed as ever, and this issue came up at Second Reading. He now brings forward this amendment with other noble Lords, and we support them.

The point here is that the review period for designations would occur not after one year but only after three. As the Minister said on Second Reading, it could happen earlier, but of course it does not have to. I also note that, on Second Reading, the Minister said that he did not regard the period proposed by the Government as excessive. He did not answer the point that this was a detrimental change from the position should we stay in the EU. I expect that he has now had time to consult on that and—if you like—to recognise that the writing is on the wall and, I hope, to persuade his colleagues that this cannot stand.

There is no reason for the frequency of reviews to change from one year, as now in the EU, to three years. I hope and expect that the Minister will find that this is one straightforward area in which to concede. After all, it has always been said that if we were to leave the EU, no protections or rights of UK citizens would be diminished. This is a case in point.

I raise one other issue, which I think has been flagged to the Bill team. This is, again, from the Law Society. It is concerned that UK courts should have the jurisdiction to hear wrongful listings in the case of UN listed persons. It points out that the Bill does not require or permit a UK court to quash a wrongful listing for a person who is UN listed and can only ask the Government to use their best endeavours to secure a de-listing in the UN. It recommends that the Bill directly transpose into UK law—

[Lord Pannick]

I am sorry to interrupt, but that is the specific subject of Amendment 62, to which we are coming. I do not wish to inhibit the noble Baroness, but she may wish to be aware of that.

[Baroness Northover]

I did not spot that point. In that case, I will wait until we get to it. I hope that the Bill team will have taken it on board, both from the amendment submitted in the noble Lord’s name and, indeed, from what we sent through.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

I think I understand the noble Baroness’s question, but, notwithstanding the issue of numbers alone, Clause 20 lays out a process which the Government perceive to be more efficient than that currently adopted by the EU.

[Lord Pannick]

My Lords, I thank the Minister for his response. It is disappointing. I am not persuaded. As the noble Baroness pointed out, a limited number of people are involved here, and surely the time and the resources are justified by the significance of the sanctions imposed. It is right and proper that sanctions of such significance should be reviewed more often than every three years.

The Minister says that the individual can seek a review, which is right, but the individual can do so only if there is a significant matter known to the individual not previously considered by the Minister. There may well be material in the files available to the Government which is not known to the individual. The Minister says that the individual can go to court, but it is the same under the EU system: you can go to court but the whole point of the Bill is to encourage court procedures as a last resort.

The Minister’s other point was that there is a sanctions review every year, but as I understand it—the Minister will correct me if I am wrong—that is not a review of individual cases but a review of the structure of the system, so for my part I do not see that that adds to the debate.

I will reflect on what the Minister has said, and I hope that he will reflect on this debate before Report, but we may well come back to this on Report. For the moment, I beg leave to withdraw the amendment.

Amendment 56 withdrawn.

--- Later in debate ---

Moved by

[Lord Pannick]

62: Clause 32, page 23, line 16, at end insert—
“( ) For the avoidance of doubt, in relation to a decision under subsection (1)(c) above, the court has power to set aside the designation if satisfied that it is in breach of the principles applicable on an application for judicial review.”

[Lord Pannick]

This amendment is in my name and the names of the noble and learned Lord, Lord Judge, and the noble Lord, Lord McNally. It is concerned with persons who are designated in this country because they have been placed on the UN sanctions list. It raises a very troubling rule-of-law issue, to which the noble Baroness, Lady Northover, referred in one of our earlier debates this afternoon.

Clause 21(2) and (4) provide that a person who is designated here because they are on a UN list may request the Secretary of State to use best endeavours to secure that their name is removed from the UN sanctions list. My concern is that what Clause 32 means —and indeed is intended to mean—is that, in relation to such a case, a court in this country has no power other than to overturn a decision of the Secretary of State not to use such best endeavours, and to ask the Secretary of State to use best endeavours at the UN. What the Bill appears to deny the person concerned is the right to say to the court: “I have been listed in this country—designated in this country—because I am on a UN list. But I am on a UN list as a result of procedural unfairness, as they have never told me why I am listed, or as a result of a substantive defect. There is no basis whatever for my listing, therefore the court in this country should quash the domestic designation”.

--- Later in debate ---

I have listened very carefully to the noble Lord, but I hope equally that he has listened carefully to my response, and I hope he is minded to withdraw his amendment.

[Lord Pannick]

I am grateful to the Minister. I have listened carefully, but I am not persuaded. The Minister is telling the Committee that however strong the individual’s case that his or her designation is unfair as a matter of procedure and substance, there is nothing that the English courts can do except ask the Secretary of State to use best endeavours at the United Nations, which the Secretary of State may already have done. What happens if the UN’s response is that it will maintain the designation and the English court is still satisfied that there is no basis for including this person on the list? There may be no evidence that justifies it; it may be a rank breach of fairness.

I am not satisfied, as I said, that we should subcontract these matters to the United Nations. I can well understand that the English court would be very slow to form the view that it should take the step of quashing the domestic designation when the United Nations has imposed internationally such a designation, but I cannot accept that the English court should be left without power to do so if it believes that injustice has been done, given the grave consequences for the individual concerned. I will reflect further on this, and I hope the Minister will reflect further before Report. If not, we will need to return to what, as the noble and learned Lord, Lord Judge, said, is a simple matter but also a fundamental matter of the rule of law. For the moment, I beg leave to withdraw the amendment.

Amendment 62 withdrawn.

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[Lord Collins of Highbury]

My Lords, this group of amendments is focused on a subject matter that we repeatedly return to: namely, parliamentary accountability and scrutiny of the actions of the Executive. I want to focus primarily on how we enable Parliament to do the job of scrutiny. Amendments 65 and 68, in particular, are designed to ensure that there is relevant information in relation to actions to revoke or introduce regulations. I know that the Minister will say that because regulations will be placed before Parliament there will be a scrutiny function there—but I think more than that is needed. We say that an affirmative decision is required, and also that the reasons should be clearly stated and set out in a written memorandum by the appropriate Minister. So the theme that we are returning to, and focusing on, is enabling Parliament to scrutinise, and giving it the tools to do that job.

There is a power under Clause 35 for an appropriate Minister to suspend regulations “for a specified period” —no period being specified, of course, because that is subject to regulations. I keep coming back to the fact that, in the exercise of powers, it is important to put certain principles on the face of the Bill. We would insert a requirement for the time period to be put in. We must understand that the power of the Executive to suspend regulations or other sanctions has the potential to cause compliance uncertainty for business. There could be uncertainty about when and on what terms a sanction may be reimposed, or whether it could be revoked entirely.

The purpose of the amendment is to create more certainty for all those involved, and by doing so to introduce more effective compliance with sanctions. Considering the aims of those sanctions, that is very important. The persons or entities that are subject to suspended sanctions may still be affected by reputational stigma. It is important, in terms of procedural fairness, that these issues should be properly addressed.

The group is focused primarily on parliamentary scrutiny and enabling Parliament to do that job effectively, and I have also put my name to Amendment 72, to Clause 44. I look forward to the contribution from the noble Lord, Lord Pannick, on that. In my opinion that clause gives the Executive an overwhelming power, which the Minister will have to give very good reasons for retaining. I beg to move.

[Lord Pannick]

My Lords, the noble Lord, Lord Collins, mentioned Amendment 72, which is in my name and his, and in those of the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover. It concerns Clause 44(2), which is a very broad Henry VIII clause. As the noble and learned Lord, Lord Judge, repeatedly argued during earlier debates in this Committee and elsewhere, we should not be giving Ministers powers to amend primary legislation without very strong justification. Clause 44(2) would allow Ministers to take action,

“amending, repealing or revoking enactments”,

including primary legislation,

“(whenever passed or made)”.

It contains no limitations on those powers. For my part, I cannot see any justification for including such extensive powers in the Bill. I strongly suspect that such a provision is included simply because it may turn out to be useful at some time in the future. We in this House are seeing too regularly provisions of this sort and we ought to take a stand against the conferral of such sovereignty on Ministers.

--- Later in debate ---

[Baroness Sheehan (LD)]

I am a little intrepid in saying this as I am not a lawyer or a constitutional expert but this seems to be a Bill that, from a layman’s point of view, lets the Government give themselves great powers through the way it designates individuals, connecting persons through descriptions, through definitions of involved people and through clauses that give powers to amend. These include Clause 39, which gives power to amend all of Part 1 so as to authorise additional sanctions, and Clause 44(2), which gives sweeping Henry VIII powers to amend, repeal and revoke amendments and enactments. To me, this seems like Jekyll and Hyde legislation. You think you are getting one thing, yet there is every ability within the proposed Act to change itself into something quite different.

I was quite concerned in last week’s debate, when my noble friend Lady Bowles talked about how Acts could be used for unintended purposes. I recall the case of Maya Evans, who read out the names of 97 British soldiers during the remembrance ceremony at the Cenotaph in 2005. Although it was a very innocuous statement that she was making—she was protesting against Britain being taken into the Iraq war; she felt that it was illegal—she was arrested and was the first person in the UK to be convicted under the Serious Organised Crime and Police Act 2005. Also in the same year—I might embarrass the Labour Benches here—Walter Wolfgang was forcibly removed from the Labour Party conference. Again, he wanted to protest about the Iraq war, and shouted out “Nonsense!” and “That’s a lie!” during a speech made from the conference platform by Jack Straw. He was ejected and was stopped from re-entering the conference hall by a police officer citing the Terrorism Act.

From my point of view as a lay person, I am fully supportive of the well-informed noble Lords here who are leading the charge to make sure that the Bill does what it says on the tin and does not turn into a Jekyll and Hyde Bill.

[Lord Pannick]

Whether I am well informed or not, can the Minister confirm that in his response on Amendment 72 he gave a reassurance to the Committee that these powers would be used only when necessary? That was the word he used on more than one occasion. He will remember an earlier debate we had in this Committee on whether that word should be written into an earlier clause. If with the aid of parliamentary draftsmen “necessary” could be written in to confine the use of that power, it would mitigate substantially my concern about Clause 44(2); I speak only for myself. Perhaps the Minister and the Bill team could reflect on that before Report.

[Lord Ahmad of Wimbledon]

To pick up on that final point, of course we will. I confirm that I used “necessary”. As regards the intervention from the noble Baroness, perhaps I did not quite follow her whole argument—various rules were in play—but I got the general principle that she was in support of the powers that are being conferred. As I said right at the beginning, laying it out in quite a lot of detail, I totally accept the point about the Henry VIII powers—the use of secondary legislation rather than primary legislation—which we have debated several times. Certainly, from our perspective as the Government—that is true not only of ourselves but of previous Governments as well—there is a point in principle that we try to strike a balance. Therefore I am listening carefully. On the specific point that the noble Lord made at the end, I will take that back and see how it can be adapted.

I am in reflective mode, as several noble Lords have noted during some of the earlier debates in Committee. However, on this group of amendments, I hope that after the explanation I have given the noble Lord will be minded to withdraw his amendment.

--- Later in debate ---

Debate on whether Clause 39 should stand part of the Bill.

[Lord Pannick]

My Lords, the noble and learned Lord, Lord Judge, the noble Baroness, Lady Northover, and the noble Lord, Lord Collins, have joined with me in objecting to Clause 39, which would allow the Minister to authorise prohibitions or requirements of kinds additional to those set out in Chapter 1. So the Minister, by regulations, would have power to add to financial, immigration, trade, aircraft and shipping sanctions, and sanctions for the purposes of implementing UN sanctions.

If additional types of sanctions are to be added to Chapter 1 and they are not new types of UN sanctions—which is already covered by Clause 7—surely that should be done by primary legislation so that Parliament has the same opportunity to debate and amend the proposals as it does with the clauses of this Bill. These are vital matters to add new types of sanctions to this legislation.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords for their contributions on this clause. I am hearing the message loud and clear, but in doing so I need to pick up on a few points as to the motive and the intent behind the clause. I appreciate the clarification by the noble and learned Lord, Lord Falconer, of the Government’s motives. I will not comment on his description of lawyers; it would be entirely inappropriate for me to do so. However, he makes a valid point about the explanation and it is appropriate to explain the Government’s intention behind the clause.

The clause will allow the UK to make amendments to the Bill, as noble Lords have mentioned, to allow for the imposition of new and unforeseen sanction measures, a point well made by my noble friend Lord Faulks. The power is confined to new types of sanctions and cannot be used to alter the purposes for which sanctions can be imposed. I should explain what I mean by new types of sanctions. Common types of sanction include asset freezes, travel bans, arms embargos and prohibitions on aviation and maritime transport. These are included in the Bill. However, the international community sometimes finds it necessary to develop and deploy new types of sanctions. Indeed, a recent example is the UN sanctions imposed in respect of North Korea. That resolution requires that UN member states do not grant work permits to North Koreans save where the UN agrees, in advance, on a case-by-case basis. Prior to the UN’s putting in place that sanction, such a sanction did not exist. There may be times in the future when a currently unforeseen type of sanction would again be appropriate.

[Lord Pannick]

I am sorry to interrupt the Minister but if the new type of sanction is to be imposed because the UN has considered it appropriate, it surely falls within Clause 7.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

Report: 1st sitting: House of Lords
Monday 15th January 2018 Lords Chamber

Moved by

[Lord Pannick]

1: Clause 1, page 1, line 8, leave out “it is appropriate” and insert “there is a reasonable need”

[Lord Pannick (CB)]

My Lords, Amendment 1, which is in my name and that of the noble and learned Lord, Lord Judge, the noble Baroness, Lady Northover, and the noble Lord, Lord Collins of Highbury, is provoked by the very wide discretion which Clause 1 confers on Ministers to make regulations when they think it “appropriate” to do so for defined purposes. It seeks to impose a degree of rigour and control by substituting a test of “reasonable need”.

I am very pleased that the Minister has tabled his own Amendment 9, to which I have added my name. That amendment recognises that apart from those cases where the United Kingdom has a UN or other international obligation, the Minister can make regulations only where he considers there are good reasons to do so and that the imposition of sanctions is a reasonable course of action to take. Amendment 9 would also require the Minister to lay a report before Parliament explaining his reasoning when making the regulations. I am satisfied that this will impose a real discipline on the Minister, backed up of course by the prospect of judicial review, for which I was delighted to see over the weekend that the Government have a new enthusiasm.

The distinction between the requirements in Amendment 9 and a test of reasonable need is more theoretical than practical. The noble and learned Lord, Lord Judge, and I have had a number of productive meetings with the Minister and the Bill team since Committee on this and other issues. I thank them for their patience, courtesy and flexibility in responding to the issues that we raised in Committee and that are the subject of amendments today and on Wednesday.

This group includes Amendment 3 in the name of the noble Lord, Lord Collins of Highbury, to which I have added my name. It identifies further purposes for which sanctions regulations may be made, particularly—and I think importantly—to promote respect for human rights, democracy, the rule of law and good governance. I hope the Minister can be persuaded by the noble Lord, Lord Collins, to accept Amendment 3. There is a reasonable need for it, or at the very least it is appropriate to include that provision in the Bill, if only for its symbolic value that these admirable goals should be recognised in the Bill. To do so would of course not commit Ministers to making any regulations; it would simply give them the power to do so. I look forward to hearing the noble Lord, Lord Collins, explaining the case for Amendment 3. If he decides to test the opinion of the House, he will have my support. I beg to move.

[Lord Judge (CB)]

My Lords, the noble Lord, Lord Pannick, speaks for me. I am afraid that if I spoke too much today I might have a party political conference problem, so I shall say no more.

--- Later in debate ---

As I said at the start, I welcome the fact that all Peers have engaged in constructive dialogue with the Government and that they appreciate we have moved forward. I hope I have illustrated that the Government have demonstrated this through their amendments, and that the Bill is in a much better place than when we discussed it in Committee. Equally, I hope I have articulated the reasons why the Government cannot accept the amendment in the name of the noble Lord, Lord Collins. I understand its spirit and the basis on which it was tabled, but I hope the noble Lord will also recognise that the scope of the Bill, as currently drafted, subject to the amendments put forward by the Government, would allow the purposes that he intends to also be achieved.

[Lord Pannick]

My Lords, I am grateful to the noble Lord for his contribution to what he called the “constructive dialogue”. I am not persuaded by the too-much-detail response to Amendment 3. There is no dispute about the validity and importance of the purposes set out in the amendment and there is considerable symbolic value in adding such important purposes to a Bill that addresses sanctions. I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

--- Later in debate ---

Moved by

[Lord Pannick]

10: Clause 2, page 3, line 11, leave out sub-paragraph (ii)

[Lord Pannick]

My Lords, Amendment 10 is in my name and those of the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover. The amendments in this group are concerned with the powers that the Bill confers for the Minister to make sanctions regulations relating to a person connected to a specified country or to make sanctions regulations that allow for designation of a person by description rather than identification.

I am persuaded by the points made by the Minister in meetings and correspondence on the need to have a power to designate by connection with a specified country. I am sure the Minister will want to say more about that when he replies to this short debate. Designation by description is a more troubling issue. The concern is that if designation is by description, banks and others who have to comply with the designation will find it difficult to identify who is covered by it. Obviously designation by membership of al-Qaeda would be problematic since you cannot find a membership list published on the internet. The concern is that, when persons are designated by description, banks and other institutions will inevitably adopt a cautious approach. Those who then find that their funds are frozen will have great difficulty securing legal redress because the banks and other institutions have, in general, no contractual obligation to maintain a relationship with a client or potential client. That is the problem.

Again, I am most grateful to the Minister and the Bill team because they have responded positively to this concern. Government Amendment 34, to which I have added my name, confines the power to designate by description to those cases where the description is such that “a reasonable person” would know whether a particular individual falls within the description, and that,

“at the time the description is specified, it is not practicable for the Minister to identify and designate by name all the persons falling within the description at that time”.

That government amendment meets my concerns. I am grateful to the Minister and the Bill team for considering this difficult problem and responding so positively.

I find it very difficult to envisage that there will be many circumstances, if any, where it is not practicable for the Minister to designate by name and a reasonable person would know from the designation by description whether a particular person fell within it. It seems there will be very few cases where designation by description can occur, but I am very content with the government amendment. Therefore, I beg to move.

[Baroness Northover]

My Lords, I too am very glad that the Minister listened to the debates in Committee and engaged, with his team, so effectively with the noble Lord, Lord Pannick, and others. I was slightly amused that, in his letter to us, the Minister described his amendments as technical in nature. I thought that was a phrase he might have avoided, given the trouble he ran into on it before. That aside, I welcome the amendments.

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[Lord Ahmad of Wimbledon]

My Lords, once again I thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their constructive engagement on understanding and then coming forward with appropriate amendments in this regard.

The group of amendments in front of us focuses upon the description of persons who can be subject to sanctions by way of sectoral sanctions and individual designations. Before I come to the main thrust of the amendments—and I use this term advisedly, notwithstanding the contribution of the noble Baroness, Lady Northover—there are two technical government amendments to Clause 2. These amendments will ensure that sanctions regulations can prevent the procurement of funds or economic resources, as well as receiving such funds or economic resources. This will help prevent sanctions being evaded and thus improve their overall effectiveness, which I know is the intent of all noble Lords in respect of the Bill. I hope that this small and technical change will be deemed non-controversial, and would be grateful if your Lordships would support the amendments and enable us to further enhance the Bill’s provisions.

I turn to the amendments tabled by noble Lords, which seek to stop the Government from being able to impose sanctions on persons “connected with” a prescribed country. As I have assured your Lordships during previous stages of the Bill, while I understand the concerns in this respect, I believe the Government have acted to address them where we can and there are good reasons why these provisions are needed. I totally understand the concern raised by the noble and learned Lord, Lord Judge, in Committee that a Minister would be able to define the connection to a country by regulations, and do so in ways that were unacceptable. I assure him that there are safeguards to prevent this power being misused.

As set out in the Bill, sanctions measures can be made in line only with the purposes for regulations set out in Clause 1. The definition of “connected with” must therefore be appropriate for the pursuit of the said purpose. It would not be reasonable or appropriate to create sanctions measures relating to persons that have only a very loose connection with a sanctioned country.

The noble and learned Lord, Lord Judge, said in Committee that it surely makes sense for the Government to define connection now, in primary legislation, rather than at some point in the future. We have considered this suggestion carefully and looked at a couple of types of possible approaches in this respect. The first approach would be to list the connections that sanctions currently impose, but this poses two problems. First, the list would be very long, as there are a great deal of different types of connections. Secondly, an exclusive list would not give us the flexibility that we will need in future when new types of connections need to be made. It is worth remembering that the context of international policy is changing rapidly. This is perhaps best typified by the sanctions regime on North Korea, which has changed three times in the last six months alone. We do not know how much further we will be obliged to act on North Korea; unpredictable world events could make it necessary to have new regimes with measures of increasing complexity.

We also considered whether it might be possible to restrict the power by making sure that certain types of loose connections could not be specified. Again, the vast number and shifting type of these connections make drafting such provisions prohibitively difficult. The situation also changes in each case. I agree with the noble and learned Lord, Lord Judge, that a connection based on familial connection might be very loose and unjustifiable in many circumstances, but in the context of misappropriated wealth spread through the close family of a former head of state, such a connection might be required. I therefore request noble Lords not to press their amendments in relation to connected persons for the reasons that I have given.

On designation by description, I have listened closely to the concerns of noble Lords who spoke in Committee, including those about the practical difficulty that this would present for banks and others responsible for complying with such sanctions. I noted in Committee that it is important for the Government to have the power to designate by description in some circumstances, such as where we do not have the names of members of a terrorist group. I have accordingly sought to strike a balance here by placing restrictions on the use of this power to ensure that it can be used only in limited circumstances.

Based on the debate in Committee, I have tabled government Amendments 33 to 35 to ensure that the use of this power is tightly constrained, as the noble Lord, Lord Pannick, acknowledged. With this amendment in place, the Government must impose sanctions on an individual by name if we have access to their name, as the power to designate by description cannot be used when we do. The description must also be sufficiently detailed that a person can apply it to themselves and decide whether they are subject to sanctions. For example, if we wished to sanction all Ministers of a certain state, we would designate as many as possible by name and would then be able to designate any others of unknown name by the description “Ministers of that state”. A Minister of that state will clearly know that the sanction applies to them, and UK persons, such as banks, will be able to ascertain the position in relation to their own business dealings. This enshrines the Government’s commitment to use this power only when it is not practicable to designate by name, thus easing the compliance burden on industry. I thank the noble Lord, Lord Pannick, for his acknowledgement of the government amendments in this respect.

The noble Lord, Lord Hain, raised a specific issue relating to the work of Hogan Lovells for the South African Revenue Service. The noble Lord has raised various matters during the passage of the Bill, and I am grateful to him for bringing this information to our attention. I assure the noble Lord that, on this matter and the matters he has raised previously, the Government continue to be concerned about the allegations of corruption in South Africa. I further assure him that the British high commission continues to monitor this issue very closely. As the noble Lord said, he has already brought this issue to the attention of the Solicitors Regulation Authority and awaits its reply. Once he has heard from it on that subject, any correspondence could be copied to the Government, although I am sure we will already be informed. It has been helpful to have his interventions in this respect.

We have listened very carefully to the various elements and concerns raised in Committee. I once again thank noble Lords for their engagement in reaching the position that we have on these amendments. As I said at the start of Report, and during Committee and Second Reading, the guiding principle that I have adopted in this regard is that I believe very passionately that legislation is not just made more effective and more practical but enhanced in your Lordships’ House. Through the co-operation we have had on this group of amendments, we have seen that level of constructive engagement.

On the basis of that explanation, I hope I have been able to persuade all noble Lords to support the government amendments and would ask them to withdraw or not move their amendments.

[Lord Pannick]

I am very grateful to the Minister, who has shown exemplary constructive engagement throughout discussions on the Bill. I am sure all parts of the House are very grateful to him and the Bill team for that.

Amendments restricting Ministers’ powers to designate by description are far from technical, and I simply point out one matter in response to the Minister. I think he suggested that, in relation to government Amendment 34, the issue would be whether the individual himself or herself would be able to identify from the description whether they were covered. In fact, government Amendment 34 goes a lot further than that, because the test under it is whether, from the description, a reasonable person would know whether the individual falls within the description. That is the test. But I am very grateful to the Minister and beg leave to withdraw Amendment 10.

Amendment 10 withdrawn.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

Report stage (Hansard - continued): House of Lords
Monday 15th January 2018 Lords Chamber

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank all noble Lords again for their constructive engagement on this group of amendments. The government amendments I have tabled have been heavily influenced by the discussions we have had. Amendment 28 would require regulations to include provisions on notifying a person once designated and how to publicise designations. I am happy to say that government Amendment 27 does exactly that. When a person has been designated, or had their designation varied or revoked, the Minister must, without delay, take such steps as are reasonably practicable to inform the person. Sanctions regulations may also include further provision as to the specific arrangements for notification or publicity. In this regard, I am extremely grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their assistance.

Amendment 29 would require a person to be informed of their designation and to be given the fullest possible account of the reasons for designation and the steps required to address the concerns. Amendment 30 covers similar ground, while also requiring that the designated person be given the evidence underlying the designation or a gist of any evidence that is withheld for reasons of national security. In response, government Amendments 32, 37 and 59 make provision across the Bill to provide a statement of reasons to designated persons. When a person is designated, the Government will be obliged to provide a statement of the matters that the Minister knows, or has reasonable grounds to suspect, have led to the designation. I am sure noble Lords will appreciate that the Minister’s statement may exclude some matters, for reasons which I know noble Lords will understand and respect, such as when it is in the interests of national security. If a challenge is made in court, on those rare occasions when sensitive information is used to underpin a designation, the closed material procedure will apply. The courts, such as in the case of AF (No. 3), have long required the gist of sensitive material to be disclosed to enable an individual to understand the case against them. We accept that this is and will continue to be the case and the Bill does not seek to make any changes to the existing disclosure burden on the Government in such cases.

Amendment 38 would insert a new clause into the Bill requiring the appropriate Minister to exercise the power to designate only to the extent that it is proportionate to do so, having regard to the purpose of the designation and the impact on the person concerned. The government amendments I have tabled in response—Amendments 31, 36 and 58—use very similar language. They would require Ministers to consider that a designation is appropriate, having regard to the purpose of the regulations and the likely significant effects of the designation on the person concerned. I am again grateful to the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for supporting these government amendments. While there seems to be a meeting of minds on this important issue, it may also be helpful if I briefly explain the thinking behind the Government’s revised language.

First, the European Convention on Human Rights entrenches individual rights, obliging the Government to consider the impact on an individual’s rights when making certain decisions. Section 6 of the Human Rights Act 1998 further ensures that the appropriate Minister must act in line with those convention rights, as informed by Strasbourg case law. We consider that this includes satisfying himself that the designation is proportionate, where convention rights are engaged, and I have been clear on this in relation to this Bill, including in Committee. Secondly, given that the Human Rights Act already requires proportionality to be considered where convention rights are engaged, a court might interpret the use of the word in the Bill to mean something different. Our amendments have tried to preserve the spirit of the intention underlying this amendment, without creating any difficulty of interpretation. As a result, the government amendments provide for a balancing test for designations between the purpose of the regulation and the impact on the individual, while avoiding an explicit reference to “proportionality”.

Amendment 50 requires the Government to provide specific guidance produced by the Crown Prosecution Service about the prosecution of sanctions breaches. The Government wholeheartedly support and have publicly committed to producing clear and accessible guidance on sanctions implementation and enforcement, both in this House and throughout our consultation on the White Paper. The Crown Prosecution Service already publishes guidance on how the public interest is taken into account in any decision to prosecute and this test is the same one that will be applied in decisions to prosecute sanctions offences. The procurator fiscal in Scotland and the Public Prosecution Service for Northern Ireland publish similar guidance. The Government’s view is that no additional public interest guidance is necessary simply for a sanctions prosecution decision.

The Bill will provide for the Government to issue guidance on the content and implementation of sanctions. Clause 36 requires Ministers to issue guidance about any prohibitions and requirements imposed by sanctions regulations. There will be a mandatory requirement to provide comprehensive guidance for all those affected by sanctions implementation. Clause 36 is a more comprehensive duty than that specified in the amendment to Clause 16 which I have said is unnecessary. It has been drafted so as to allow comprehensive guidance on all sanctions prohibitions and requirements to be prepared and consulted on by the appropriate sources of expertise. For financial sanctions, the Office of Financial Sanctions Implementation has already published a comprehensive guidance document setting out its general enforcement approach. This will be fully updated to reflect the new sanctions Bill regime.

Amendment 53 requires the Minister to respond,

“as soon as reasonably practical”

to a request to vary or revoke a designation. Government Amendments 56 and 61 are fully in line with this proposal.

Finally, government Amendments 51, 52, 57 and 60 make technical changes consequential on these changes, and I hope they will be accepted. I beg to move.

[Lord Pannick (CB)]

My Lords, I have tabled, with the support of the noble and learned Lord, Lord Judge, the noble Lord, Lord Collins of Highbury, and the noble Baroness, Lady Northover, a number of amendments in this group on the subjects of procedural fairness and proportionality. The Minister acknowledged in Committee that these were topics that he and the Bill team would need to consider before Report. Given the adverse consequences of being designated, the Bill must provide for procedural fairness and the provisions must be applied in a proportionate manner. Again, I thank the Minister and the Bill team for some very helpful meetings on these subjects, and for tabling these amendments, which address my concerns.

In particular, government Amendments 31, 36 and 58 will require the Minister to be satisfied that any designation is appropriate, having regard to both,

“the purpose of the regulations … and … the likely significant effects of the designation”,

on the person concerned. That addresses the substance of my Amendment 38 on proportionality. It does not use the word “proportionality” but that does not matter. It contains the essence of proportionality and I am grateful to the Minister for confirming in his opening remarks that that is indeed the purpose of these government amendments.

Government Amendments 32, 37, 59 and 61 are also very important in placing in the Bill a requirement of procedural fairness; that is, that the person designated is entitled to a statement of the reasons why he or she has been designated. That is absolutely fundamental to any fair sanctions procedure. I recognise that the government amendments exclude any right to information the disclosure of which would harm interests such as national security, but they rightly provide that these exclusions will not allow the Minister to provide no statement of reasons. I would be grateful if the Minister could confirm that the intention here is to ensure that a person who is designated will always be entitled to at least a statement of the essence of the reasons for the designation, albeit that details which affect national security or other protected interests cannot be disclosed.

In the light of these government amendments, I am satisfied that the Bill now makes it clear that procedural fairness and the substance of proportionality are part of the administrative machinery. The Minister made it clear in Committee that this was always the intention and he made it clear—and I respectfully agree with him—that the courts would in any event hold Ministers to such basic standards of the rule of law. I am pleased that the Minister has recognised that it is appropriate to include these matters in the Bill and I thank him.

[Baroness Northover (LD)]

My Lords, I apologise if I caused hiccups by not moving Amendment 20. That was deliberate on my part. I did not mean to cause any hiccups, though. I thank the Minister for engaging with these issues. This is yet another example of co-operation right around the Chamber on this part of the Bill.

--- Later in debate ---

[The Deputy Speaker (Lord Brougham and Vaux) (Con)]

I must advise the House that if this amendment is agreed to, I cannot call Amendment 46 and that, in the same grouping, if Amendment 47 is agreed to I cannot call Amendments 48 or 49 due to pre-emption.

[Lord Pannick]

Perhaps I may add one brief point to what was said so powerfully by the noble and learned Lord, which is to remind the House of what was said by your Lordships’ Constitution Committee, of which he and I are members. The committee’s eighth report of this Session, which was on the Bill, stated in paragraph 21:

“We are deeply concerned that the power in clause 16 may be used to create an offence for which a sentence of imprisonment for up to 10 years may be imposed, and that rules on the evidence to demonstrate that the case is proved, and defences to such charges, are subject to ministerial regulation. We consider that such regulation-making powers are constitutionally unacceptable and should not remain part of the Bill”.


The Minister has dealt in Amendment 46 with the second part of that criticism, which is the quite extraordinary suggestion in the original Bill that a Minister, by regulations, should have power to alter defences to charges and to address rules on evidence, such as the burden and standard of proof. This was a quite extraordinary suggestion and I hope that the House will never again see such a provision presented in a Bill by Ministers. However, to his credit the Minister has accepted in Amendment 46 that that provision should be removed. What remains is the suggestion that Ministers should have the power to create offences for which a sentence of imprisonment of up to 10 years is imposed—and on that I entirely agree with what the noble and learned Lord said.

[Lord McNally (LD)]

My Lords, perhaps I may intervene here as a non-lawyer because I see our lawyers fluttering into their places, rather like that scene in Hitchcock’s “The Birds”. I would like to make a wider point to the House, which is one I have made over the last 20 years in Parliament. It is that one of the crucial roles of this Chamber is to defend the constitution and, above all, to defend it in terms of the relative powers of the judiciary, the Executive and the legislature.

Just over 10 years ago I was on the Cunningham committee, which looked at conventions between the two Houses. If I left a mark on that committee, it was in the clause that states and retains the right of this House to say no. It is the most important power that this House has. It is a nuclear power and something not to be used very often, but it makes the other place come into dialogue and it makes Governments think again. What worries me about the process now under way is that because of the sheer volume of Brexit legislation that will come our way, with a whole flotilla of Bills, it is quite clear that the members of whatever team is looking at this in the Cabinet Office have said, “We can only do this by using secondary legislation and Henry VIII powers on an unprecedented scale”. If they were successful in doing this we would, in my submission, tilt the balance away from the legislature to the Executive in a way that was not intended—and certainly not intended by those who argued for Brexit as a way of returning power to this Parliament.

This is one of the early tests of it. Funnily enough, the earliest test was in the little-noticed Space Industry Bill where there was a whopping great Henry VIII clause which, after the intervention of the noble and learned Lord, Lord Judge, the Government withdrew. By voting for and carrying this amendment today, right at the start of this process, we will send a message that will make the Government think again—and think more imaginatively and more constitutionally—about how they are going to deal with this legislation without adopting these practices, the dangers of which the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, so eloquently explained.

It is a real danger. If we are forced in Bill after Bill to carry amendments, the House of Lords will be accused of exceeding its powers. I do not think that we are exceeding our powers. We are doing what Lord Hailsham referred to almost 40 years ago: trying to avoid the dangers of a democratic dictatorship where the other place simply argues that we must obey. We must not just obey, particularly with clauses such as this which tilt the balance away from the way in which law, and in particular criminal law, is made, in a quite unacceptable way. By voting for this amendment tonight, we will send a message which will avoid a constitutional car crash further down the road.

--- Later in debate ---

Moved by

[Lord Pannick]

54: Clause 20, page 16, line 43, leave out “3 years” and insert “1 year”

[Lord Pannick]

My Lords, Amendment 54 is in my name and that of my noble and learned friend Lord Judge, the noble Baroness, Lady Northover, and the noble Lord, Lord Collins of Highbury. It proposes that the obligation under the Bill on Ministers to review a designation every three years should be reduced to one year.

I have reflected on this matter in the light of very helpful meetings with the Minister and the Bill team. In the light of the right of the person concerned to request a review if there are new significant matters and of the duty on Ministers under Clause 26, to be amended by government Amendment 55 in this group, themselves to review regulations every year and to place a report for Parliament, I shall not pursue Amendment 54. Simply to enable other noble Lords to participate in this short debate if they so wish, I beg to move.

[Baroness Northover]

I am glad that to some extent the Government have moved in this area and I hope that, in the light of the vote that we have just had, that spirit of co-operation around the House will extend to other sections of the Bill that still need addressing.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for his amendment. As he has already indicated, it would oblige the Government to conduct a re-examination of each designation on an annual basis. I agree completely on the need for sanctions designations to be based on solid evidence. The UK has pushed hard for that in the EU, and that is widely recognised—for example, in the recent report of the House of Lords EU Committee. We are committed to maintaining these high standards.

The Bill as drafted includes a robust package of procedural safeguards, which will be further reinforced by the government amendments I have tabled, including Amendment 55. The combined package will provide a high level of protection for designated persons, at least as strong as current EU standards. The Government would review all sanctions regulations annually and present the results in a written report to Parliament. Amendment 55 makes that clear on the face of the Bill; I know that noble Lords raised that point. If the report concluded that there were no longer good reasons for maintaining a UK sanctions regime, we would lift it. Any changes made to the equivalent sanctions regimes of the EU or other international partners would be examined closely as part of the annual review.

Alongside the annual review of the regulations, the Bill requires the Government to put in place a dynamic process to reassess designations upon request; the triennial review is not the only opportunity. A designated person can request a reassessment of their designation at any time, and a further reassessment when there is a significant matter that has not been previously considered by the Minister. I take the point that a designated person, once they had requested a reassessment, challenged it in court, and failed to establish any unlawfulness, would not have a further review until either there was a significant new matter or a triennial review. But what would the purpose of a further review be when the designation has been established to be lawful and nothing has changed since then? If there are new arguments to be tested, or if the passage of time has changed the situation, a further reassessment can be requested. If not, there is no need to do so.

In response to feedback from noble Lords in Committee, I am proposing to strengthen these safeguards through government amendments. The Minister would have to deal with a request for reassessment as soon as reasonably practicable, and inform the person of the decision and reasons as soon as reasonably practicable after a decision had been made. Ministers can also instigate a reassessment at any time—for example, if the person concerned has been delisted by the EU. Ministers would have every interest in initiating reassessments proactively, both in the interests of justice and to minimise the risk and cost of legal challenges. In any case, when the EU decided to revoke the designation of a person also designated in the UK, I would certainly want to reassess the corresponding UK designation.

Taken together, these provisions will ensure that UK sanctions are under constant scrutiny and the Government are obliged to respond swiftly to new information and challenges. The triennial review then provides a further backstop, ensuring that each and every designation is looked at afresh on a regular cycle. This aligns with current practice in Australia and would put us ahead of countries such as the United States and Canada, which have no such process. It does not prevent more frequent reviews, and we have mechanisms in place that oblige us to do so when appropriate. Requiring the Government to conduct these reviews every year would be extremely resource-intensive; we have had those discussions in the bilateral and constructive meetings with the noble Lord. There are finite government resources, and the noble Lord appreciated that that would take away from other important areas. However, the amendments that we have tabled ensure that the protections the noble Lord was after have been afforded. I am thankful for his co-operation in that regard.

[Lord Pannick]

My Lords, I am grateful to the Minister. I beg leave to withdraw the amendment.

Amendment 54 withdrawn.

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Moved by

[Lord Pannick]

62: Clause 32, page 23, line 16, at end insert—
“( ) In relation to a decision under subsection (1)(c) concerned with the designation of a person by reason of an obligation of the United Kingdom under a UN Security Council Resolution, the court must proceed in the following manner—(a) if the court concludes that it would otherwise be appropriate to set aside the decision of the Minister, it must give judgement explaining its reasons and make a declaration to that effect but grant no other relief at that stage;(b) on the making of such a declaration, the Minister must use his or her best endeavours to secure that the person’s name is removed from the relevant UN list as soon as reasonably practicable;(c) if the Minister’s best endeavours under paragraph (b) fail to succeed within a reasonable time, the court must then have power to set aside the decision of the Minister.”

--- Later in debate ---

[Lord Pannick]

My Lords, Amendment 62 in my name and the names of the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover, raises an important and difficult issue about the rule of law. The Bill provides, by Clauses 21 and 32, that if a person is designated in this country as a result of being placed on a UN sanctions list, the only remedy that the person concerned can obtain from the courts of this country is to require the Secretary of State to use best endeavours at the UN to have that person removed from the UN sanctions list. If those best endeavours fail, the domestic court has no power to quash the domestic designation, however strong the arguments are by the person concerned that she is the victim of procedural unfairness because the UN will not say why her name has been added to the UN list, or however strong the person’s argument that the UN has made a serious error of substance in adding her name to the UN list—for example, by confusing her with another Baroness Northover.

The exclusion of the powers of the domestic court to quash the domestic designation in such circumstances is very troubling. To be designated under this legislation will have a very damaging effect—devastating, indeed—on the life of the person concerned and their family. A number of noble and learned Lords are in the House, as well as a number of noble Lords with an expertise in law. I for my part cannot think of any other comparable context where there is no judicial review remedy in this country to quash action taken by Ministers which is directed at, and imposes a serious detriment on, a specified individual. This is all the more troubling because the person concerned has no remedy before any judicial body, or indeed any quasi-judicial body, at the UN, except in terrorist cases. There is no judicial system at the UN to which you can take your plea. The remedy for procedural unfairness or an arbitrary decision will depend, in almost all cases, on political pressure. The justice of the individual case may not—I put this point as politely as I can—be a matter of the highest priority for the UN. Let us be realistic. We are, after all, talking about an organisation whose Human Rights Council includes Saudi Arabia.

The Minister will say—and there is force in the point—that this country is committed to international law and that, if a person’s name is on the UN sanctions list, this country must faithfully abide by such a ruling until it is changed at international level. The Minister will also say, and again there is substance in the argument, that we need to be very careful indeed about suggesting to other countries that they can pick and choose whether to implement UN resolutions on sanctions. I recognise all of that, and that is why this issue is so difficult.

My answers to these points are as follows. First, under this amendment, a conflict between the UN ruling and the domestic court will occur very rarely indeed; I would hope never. The amendment provides that, if the court here concludes that the listing is a breach of the rule of law, the court in the first instance can do no more than so declare. The Minister will then use best endeavours at the UN to secure change. Only if that fails will the court have a power—I emphasise, a power not a duty—to quash the domestic listing.

Secondly, the very existence of judicial power in this country will help the Minister in using best endeavours at the UN. The risk of a judge here quashing the domestic listing will ensure that the rule-of-law concerns are given proper consideration in the political forum of the UN. Thirdly, the European Court of Justice in the Kadi case asserted its jurisdiction to quash a listing under EU law even though it was based on a UN resolution. I see no reason why the judges in this country should be denied a power which the Court of Justice in Luxembourg enjoys, especially when the very purpose of the Bill is to create domestic procedures to replace EU ones when this country leaves the EU.

Fourthly, the court in this country will take fully into account the importance of complying with international law. It would only be in a very plain case that a domestic designation based on a UN listing would be quashed by our judges. If there is a case where our judges are persuaded that a person has been designated by Ministers in this country because of a UN listing which is in defiance of basic rule-of-law standards of fairness and rationality, the judges of this country must have power to provide a remedy for the domestic designation. Your Lordships’ Constitution Committee, of which I am a member, so recommended in paragraph 27 of its 8th Report of this Session.

It comes to this: the Minister’s reliance on international law cannot take priority over the rule of law. The rule of law in this country cannot be subcontracted to the political processes of the United Nations. I beg to move.

[Baroness Northover]

My Lords, given that I have been named here and therefore have a key interest, I ought to address this in case I get sanctioned in the place of another Baroness Northover. I am sure my kids would think that was an extremely interesting situation for me, but I am not sure that I would. The noble Lord, Lord Pannick, has made a very powerful case on this matter, as he did in Committee. If an error is made with a designation as a result of UN sanctions being imposed then, as he said, the ECJ could, at the moment, protect that person within the EU and allow it to be challenged. There clearly should be a way of doing this. As the noble Lord said, it is a matter of the rule of law.

We have been told that the rights of British citizens will not be lessened if we leave the EU. This protection should, therefore, be carried over into British law. I clearly have an interest here and I support the amendment in the name of the noble Lord, Lord Pannick.

--- Later in debate ---

[Lord Pannick]

My Lords, I am grateful to the Minister. I recognise, as I said in opening this debate, the force of the arguments in favour of the Government’s approach. However, we have to be clear about what it comes down to. Justice for the individual who is designated, in circumstances where the High Court of Justice in this country regards the designation as arbitrary or as in conflict with the rule of law, must be sacrificed to the interests of the UN, our participation in the UN and the international legal order. There is no right answer to that question. I happen to believe that to obtain justice for the individual in that case, if and when it occurs, who is being designated in this country and who is suffering the consequences—their bank account is frozen, they cannot travel, and they are experiencing whatever the other adverse consequences are—they must have a legal remedy. There is no legal remedy available to them through the UN. There are political processes but there is no judicial procedure and no quasi-judicial procedure other than in terrorism cases. How can this possibly accord with the human rights principles and with the principles of the rule of law, which I know the Minister respects and which the Government are so keen on promulgating, and rightly so?

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, Clause 39, to which this group of amendments refers, has been included to allow the UK to impose new types of sanction measures in response to new, unforeseen circumstances. Let me summarise why we think it is needed and then explain the government amendments that I have tabled. I note that this was one of the issues highlighted in the report of the Delegated Powers and Regulatory Reform Committee, and I know that several noble Lords have received and considered carefully my letter of last week specifically responding to the committee’s recommendations.

The familiar types of sanctions include asset freezes, travel bans, arms embargoes and prohibitions on aviation and maritime transport. These types of sanctions are included in the Bill. It is not possible to predict all the types of sanctions which may in the future be useful or necessary. We all know that as technology advances and those who wish to do us harm find ever more sophisticated ways of doing so, we may need to be able to react in an agile manner. The Government intend to continue to play a leading role in the development of sanctions as a foreign policy tool. Wherever possible we will do this through the UN to ensure that the measures have global impact. On occasion, however, we will need to work with like-minded partners outside the UN framework and may need to adapt our own sanctions toolkit to keep pace with allies. On both Iran and Russia, for example, transatlantic co-operation resulted in sanctions that were substantively different from anything previously agreed.

The power in Clause 39 is designed to provide the necessary flexibility in cases where we are acting outside the UN framework. Regulations under this clause would be subject to the draft affirmative procedure as befitting a Henry VIII power of this kind. However, having listened to the concerns expressed in this House and having reflected carefully on them, I have tabled government Amendment 69, which would further restrict the use of this power by stipulating that it may be used to create new types of sanctions only where the UK is or has been subject to an international obligation to put in place sanctions of that type. This means that the new types of sanctions created by this power can only be those developed by the international community. This power, as amended, will no longer enable the UK unilaterally to put new types of sanctions in place, which was a concern that was expressed.

Government Amendment 70 also makes it clear, as requested in Committee, that Clause 39 cannot be used to alter the purposes of the sanctions regulations specified in Clauses 1 and 2. We think that this was the effect of the original drafting, but we are happy to make it explicitly clear in the Bill. I believe that this is a substantial move forward on the Government’s part, and I hope noble Lords will acknowledge this and support it. I beg to move.

[Lord Pannick]

Again, I am very grateful to the Minister and the Bill team. Government Amendments 69 and 70 respond positively to the concerns that I and others expressed in Committee. Therefore, I will not move Amendment 71.

Amendment 69 agreed.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

[Baroness Northover (LD)]

My Lords, when the Minister introduced the Bill at Second Reading, he described it as “technical”. It was, of course, about issues on which we all agree: enabling us to have a sanctions regime and to counter money laundering. No sooner were those words out of his mouth than he and all of us registered how important the Bill was in constitutional terms. It is indeed a forerunner of the massive legislation coming our way in the European Union (Withdrawal) Bill, and much else besides.

I therefore thank the Minister for his mental and political flexibility in realising the significance of the way in which this Bill has been drawn up, but above all for being so ready to engage. I thank him today for his latest statement that he will address the inconsistencies on criminal offences immediately in the Commons. My thanks, too, to the Bill team for its equal readiness to engage with us, even responding to emails on Sundays—I think that was Jonny and Louise—when it was clearly beyond the call of duty.

Issues in the Bill included the usual kind of areas where we sought improvements. We failed to take forward the amendment tabled by the noble Baroness, Lady Stern, but I am sure we will return to that. In other areas we have made progress, either in the Bill or through promises that the Minister made in regard to actions that the Government will take; for example, in relation to NGOs working in fragile states and those who may or may not bank them.

However, of most importance were the constitutional issues. Here we are absolutely indebted to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for the clarity of their thinking and their determined engagement. I also think that we owe a huge debt to my noble friends Lady Bowles and Lady Kramer—I thank the Minister for that acknowledgement—for spotting quite how much needed to be addressed on the anti-money laundering side of Bill, and setting about reconstructing it. The best result is indeed when the Government bring forward amendments in response to such concerns.

I am extremely grateful to those in my group who have engaged on this Bill. I can hardly describe myself as leading them—they are far too experienced and knowledgeable to need leading. My special thanks go to my noble friends Lord McNally and Lady Sheehan as well as to my noble friends Lady Kramer and Lady Bowles for the extraordinary amount of work they put in. I also thank the noble Lord, Lord Collins, who has been his usual wonderful self throughout this Bill, and his colleagues, the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Lennie. The Bill signals much beyond what it aims to cover, and we have worked collectively around the House, including with the Government. I thank the Minister for ensuring that that work was in the end so productive. He is now temporarily liberated from the Bill—the Bill team, of course, is not—until it returns to us in due course, hopefully in a very sound fashion.

[Lord Pannick (CB)]

My Lords, I add my thanks to the Minister and the Bill team for what the Minister accurately described as the collaborative co-engagement on the Bill. It has been quite remarkable and exceptional, and I am very grateful to him. My only regret is that, personally, I prefer a good argument—it may be my professional training—but I realise we are not here for my personal gratification. I very much look forward—perhaps the Minister may communicate this to his colleagues on the Front Bench—to the same collaborative engagement, co-operation and desire to accommodate concerns when we consider any other Bill that may come before this House in the weeks ahead.

[Lord Patten (Con)]

My Lords, your Lordships may need reminding that, before this excellent Bill was introduced, between April and June last year, some 30,000 people and companies were asked for their views. Just 34 responded with any views in writing. Since its introduction, however, the Bill has received the line-by-line scrutiny expected of your Lordships’ House in Committee. Even I had a go, once or twice.

No one could fairly say that it has not been scrutinised thoroughly before it journeys to another place. There certainly have been some tussles but, below the surface, it has received broad all-party support. This is welcome from the Opposition Benches and Cross Benches, of course—just as some of us, a few years back, in opposition, spoke in equally strong support of the eventual Bribery Act 2010, when ably introduced to Parliament by the then Justice Secretary Jack Straw, whose contribution certainly should not be forgotten. I believe the Bribery Act is still the toughest anti-corruption legislation anywhere in the world, raising the bar far above the earlier US Foreign Corrupt Practices Act. Similarly, if passed by another place and then passed by us again, the Sanctions and Anti-Money Laundering Bill will become its absolute twin, as it were, giving us again another globally tough measure to match the Bribery Act, and marching in step with it.

We must remember that bribery, sanctions breaking and money laundering are very often in practice very closely intertwined. One key test of the legislation before your Lordships’ House is its ability to go beyond the big or top players, right down through the supply chains of corruption via intermediaries, and then down through them to minor actors and mere runners—indeed, that cascade of responsibility referred to so aptly by the noble Baroness, Lady Bowles of Berkhamsted. How right she was. The Bill as amended by your Lordships does just that, as globally we work against terrorism and in favour of maintaining and strengthening the integrity of our financial system, as we have since 1989, when the UK as a key player was one of the G7, which first set up the Financial Action Task Force.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Pannick Excerpts

Ping Pong (Hansard): House of Lords
Monday 21st May 2018 Lords Chamber

[Lord Hain (Lab)]

My Lords, I, too, welcome government Amendment 1 and its associated amendments and applaud the Minister for the way he has spoken forthrightly on the human rights agenda and stewarded the Bill, which is a case study in how a Government and a Minister should and can respond to amendments from the Opposition, the Liberal Democrats and Cross-Benchers.

At the same time, I crave the indulgence of the Minister, the Whip sitting next to him and your Lordships’ House in returning to a subject which I have raised before—which, I am authoritatively told, has had some impact on the welcome change in the leadership of South Africa. This week marks South African President Cyril Ramaphosa’s first 100 days in office. I will be brief, but the official state money laundering and corruption virus he inherited from President Zuma is significantly more virulent and pervasive than even Ramaphosa could have anticipated, made immeasurably worse by the complicity of UK-based global corporates.

Take Hogan Lovells, the international law firm headquartered here in London and in Washington, its role starkly exposed in documents recently released to the parliamentary finance committee in South Africa. In your Lordships’ House, Report on the Bill on 15 January, I first criticised its role for whitewashing corruption by Tom Moyane, chief of the South African Revenue Service, now suspended by the new President. According to these documents, Hogan Lovells kept silent even when its findings related to money laundering and corruption by Moyane’s former deputy, Jonas Makwakwa, and even after Moyane misled the South African Parliament. Through its despicable, fee-grabbing complicity, Hogan Lovells spared these two notorious perpetrators of state capture in South Africa from accountability for their complicity in, and cover up of, serious criminal behaviour, including money laundering and corruption.

At the same time, Hogan Lovells has been undermining the criminal justice system in a series of other cases, as proven by the fearless Forensics for Justice NGO investigator, Paul O’Sullivan. Effectively, Hogan Lovells was acting as former President Zuma’s legal fudger-in-chief.

Brave investigative journalist Pauli van Wyk has exposed lies by the senior partner of Hogan Lovells in South Africa, Mr Lavery Modise. In the Daily Maverick, she pointed out:

“Despite having the benefit of the report by Price Waterhouse Coopers (who actually conducted the investigation), Modise and his team ultimately charged Makwakwa with everything he could explain, and with exactly nothing that he previously struggled to explain, or simply refuse to account for”.


Indeed, the more serious allegations in the PwC report were carefully filtered out of Hogan Lovells’s report, and the firm did not point out that Moyane was preventing critical evidence from being given to PwC.

Hogan Lovells’s most specious piece of lawyer sophistry was to claim that it could look only at the employer-employee issue involved and not at any criminal issue, giving the excuse that the employee, Makwakwa, could otherwise implicate himself. Surely all good employers, and indeed employees, should report on any criminality at their workplace, and surely even more so in the vital state revenue agency when the crime relates to money laundering and tax evasion. Effectively, Hogan Lovells turned a blind eye to the looting of the tax agency. It took a fat fee and ignored the truth. Most astonishing to me is that Hogan Lovells still refuses to acknowledge, let alone apologise for, its complicity, thereby actively supporting those still trying to undermine President Ramaphosa’s reform programme.

The behaviour of Hogan Lovells in South Africa is a classic example of a British-based company obfuscating its behaviour, using the complexities afforded by the law, including client confidentiality, to conceal the crimes of money laundering and corruption. Hogan Lovells fits exactly the behaviour exposed by investigator Pauli van Wyk when she concluded:

“The tale of State Capture ... co-exists in a mutually parasitic relationship where the public purse is the feeding ground and corporates are the enablers and agents of whitewash”.


British based corporates such as Hogan Lovells should be supporting, not thwarting, President Ramaphosa’s anti-money laundering agenda.

The Solicitors Regulatory Authority has now declared that Hogan Lovells South Africa is a “connected party” to its UK firm and I therefore request—I hope that I will have the Minister’s support—that the SRA withdraws recognition from Hogan Lovells UK and suspends its UK senior partners from practising here for its scandalous activities in South Africa. I also ask British Ministers to ensure that Hogan Lovells UK receives no more UK public sector contracts until it at least apologises for its shameful and shameless South African role. Additionally I can report that, after I raised this matter at Second Reading in November, the Financial Conduct Authority has recently informed me that it is engaging with the whistleblower who has supplied evidence that I believe should see HSBC prosecuted for conspiracy for facilitating money laundering.

I conclude: unless Ministers ensure that there are penalties for UK-based corporates like Hogan Lovells, HSBC, the Bank of Baroda, Standard Chartered, Bell Pottinger, KPMG, McKinsey—and who knows how many others?—for their complicity in protecting criminals engaged in money laundering in the South African case, I am afraid this legislation will not be worth a candle.

[Lord Pannick (CB)]

The Minister was asked about safeguards. Can he confirm that the safeguards in the Bill, which we debated at great length in its various stages to ensure fairness to those listed, will apply in exactly the same way to those persons accused of human rights violations as they apply to all those listed for other reasons under the Bill?

[Lord Collins of Highbury (Lab)]

My Lords, I will be very brief. The noble Lord, Lord Anderson, asked the questions that I considered appropriate. I will not delay the House, but will repeat what the noble Lord, Lord Pannick, said in terms of an amendment we jointly agreed to, ensuring that fair process is considered in relation to this aspect of the Bill.

I very much join other noble Lords in welcoming the Government’s change of heart. There was opposition from the Government on these principles, and we had a successful amendment on human rights being the centre of foreign policy.

I welcome completely the noble Lord’s commitment. My honourable friend Helen Goodman also took the rather unusual step of signing the Government’s Magnitsky amendments, despite the fact that, in Committee, the Government had opposed her own amendments. I welcome very much the new consensus and hope that it is a sign that we can move forward with greater clarity in terms of foreign policy and human rights.

--- Later in debate ---

[Baroness Northover]

My Lords, as the Minister will know, and as the noble Lord, Lord Collins, expressed, the Delegated Powers Committee was very concerned about Amendments 11 and 12. I must say that I found it astonishing to read that yet again, at this late stage of the Bill, the same issues are coming up that we had at the beginning, and to hear the Delegated Powers Committee noting,

“the Department’s failure to explain the width of the powers being granted, and why it is not possible to limit the powers … and to specify on the face of the Bill the persons who are to exercise the powers”.

I hear what the Minister says. I note that the Delegated Powers Committee is reluctantly saying that, if the Lords accepts the way that these amendments have come forward, the powers should be subject to the affirmative procedure in both cases. I wonder what the noble Lord, Lord Pannick, makes of the amendments.

[Lord Pannick]

I am very disappointed—at other noble Lords are—at the approach of the Government. All these points were fully debated at Second Reading, in Committee and on Report, and the constant theme across the House was that it was vital to constrain the powers that Ministers were giving themselves in relation to the Bill. The Minister was very receptive to those concerns and accepted a number of amendments, and it is therefore very disappointing that at this very late stage we see again the same vice. So I share the disappointment and regret that, given the stage we are at, it is too late to do anything about it. But I hope that the Minister will take back to his department our concern and the promise—it is not a threat—that, if similar powers are put before us in another Bill, no doubt noble Lords will have more to say about it.

[Lord Ahmad of Wimbledon]

My Lords, I thank noble Lords for their comments on this amendment and, of course, I have noted what all noble Lords said and the concerns they expressed. Let me assure them once again—I mention in particular the noble Baroness, who mentioned Amendments 11 and 12—that I will address specifically the powers of the Minister, and give the assurance once again that a detailed response will be provided to the Delegated Powers Committee. I am seeking to ensure that this response will be provided before the Recess.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, we now come to the important issue of criminal offences. This group of amendments would allow powers in the Bill to be used to create criminal offences and penalties in regulations for both sanctions and money laundering breaches, subject to new safeguards.

I say at the outset that I recognise that your Lordships’ House had serious concerns about the inclusion of these powers, and the noble and learned Lord, Lord Judge, in particular, remains very concerned. I assure all noble Lords that once the Bill left your Lordships’ House we continued to listen to those concerns and have sought to address them. That is why these amendments also include an important new procedural safeguard of a requirement to report to Parliament, meaning that the Government have to inform Parliament specifically about the use of the powers to create criminal offences in secondary legislation. This is intended to enable Parliament to be better informed about the use of these powers and to be able to properly hold the Minister to account.

I shall go through each of the amendments in more detail. Amendments 9 and 21 restore the ability to provide for criminal offences and penalties in sanctions and money laundering regulations. In tabling these amendments, I acknowledge your Lordships’ recognition of the importance of rigorous anti-money laundering and sanctions regimes. In order to ensure the robustness of future sanctions and anti-money laundering regulations, corresponding powers to create criminal offences for breaches of those future regimes are necessary so as to preserve the ability of future Governments to impose effective and dissuasive sanctions for breaches of regulations.

I recognise that some in your Lordships’ House had concerns about the scope of these powers when the Bill was first introduced. These amendments address those concerns through additional safeguards, which must be met before the powers can be used. When I come to Amendments 31, 32 and 34, I shall elaborate upon the safeguards, which the Government have discussed with noble Lords since the Bill’s passage through this House.

The amendments restore our ability to enforce sanctions. As noble Lords are aware, sanctions are used to prevent serious threats to national and international peace and security. It is therefore right that breach of them is a criminal offence, and it is also right that penalties should be set at a level that acts as a proper deterrent for these serious crimes. The Bill gives us the ability to set penalties at up to 10 years’ imprisonment, but that does not mean that we will set them at the maximum in every case.

In respect of trade sanctions, offences for breaches of prohibitions made under the Export Control Act 2002 all have maximum penalties of 10 years’ imprisonment. That does not apply to the trade sanction prohibitions created under the European Communities Act 1972, which are capped at two years’ imprisonment, despite the breaches being just as serious a matter. This Bill will enable us to remedy that disparity by harmonising maximum penalties for breaches of all trade sanctions at 10 years.

Currently, breaches of financial sanctions can be punished by up to seven years’ imprisonment, and we plan to continue to set penalties at this level for financial sanctions. We also plan for breaches of other sanctions, such as transport sanctions, to have penalties set to match this level. There will also be offences, such as the failure to provide information when required to do so by law, that require lesser penalties, such as up to two years’ imprisonment, and we do not plan to increase penalties in those areas either.

I have set out in previous debates how the enforceability of new regulations would be seriously weakened without the power to create criminal offences, and how it is not unusual for requirements in delegated legislation to be enforced using criminal penalties. I now turn to the procedural safeguards we have introduced, which I hope will constitute sufficient reassurance to noble Lords who have expressed concerns.

Amendments 10, 25 and 32 introduce the important safeguard of requiring the Government to lay a report before Parliament whenever criminal offences are created or amended in sanctions regulations made under Clause 1 or in anti-money laundering regulations made under Clause 43. The amendments require the report to be laid at the same time as the regulations are laid or when the draft statutory instrument containing the relevant regulations is laid, depending on which parliamentary procedure is used. The report will facilitate effective parliamentary scrutiny of future use of criminal offences in sanctions regulations and goes further than the status quo in enabling Parliament to scrutinise the creation of criminal offences through sanctions or money laundering regulations.

The amendment specifies what elements should be included in these reports. Specifically, this will include: first, the details of the offences that have been created and the requirements to which they refer; secondly, the good reasons why a breach of these requirements should be enforced via criminal offences; thirdly, the maximum prison terms for any offences created which are punishable by imprisonment; and, fourthly, the reasons why those maximum terms have been set at the level they have. I trust noble Lords will agree that these reports will provide increased transparency as to the reasons for creating future criminal offences, and so give both Houses of Parliament a new and solid basis for holding the Government to account on the use of these powers when debating regulations made under the Bill. Nevertheless, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter and not one to be undertaken lightly. We hope that these amendments address that.

I would also like to take this opportunity to assure your Lordships’ House that the requirement contained in Amendment 25—for a Minister, when for whatever reason a report is not laid on time, to make a statement about that failure to the House—does not in any way circumvent the obligation to make the statement. It is an additional requirement, meant to create a further obligation to Parliament that if, for example, there has been some administrative error in publishing a statement, Ministers must provide an explanation to Parliament for that failure.

Amendment 31 is consequential to new paragraph 20A inserted by Amendment 32. The envisaged paragraph 20A(1) of Schedule 2 clarifies the scope of potential offences created for the purposes of the enforcement of requirements imposed by or under regulations under Clause 43.

Amendment 32 also makes the power to create criminal offences in money laundering regulations subject to the requirement for a report to Parliament along the same lines as the amendments for Part 1 of the Bill. This amendment clarifies that the scope of the power for creating future offences is restricted to offences for the purposes of enforcing future anti-money laundering regulations. It is both necessary and, importantly, proportionate.

Amendment 34 ensures that references made to regulations made under Clause 43, with respect to paragraph 15 of Schedule 2, and requirements imposed by regulations made under Clause 43, with respect to paragraph 20A of Schedule 2, also include reference to or requirements imposed by the Money Laundering Regulations 2017. This amendment ensures that new money laundering offences can be created by amending the Money Laundering Regulations 2017. It will therefore enable the Government to create new offences in order to respond, for example, to emerging risks identified by the national risk assessment of money laundering and terrorist financing, which was published in October of last year, or in response to the ongoing review by the Financial Action Task Force of the UK’s anti-money laundering and counterterrorist finance regime. I beg to move.

[Lord Pannick]

My Lords, in the early stages of this Bill, my noble and learned friend Lord Judge, who is not in his place, expressed the concerns that many of us felt about Ministers being given a power to create new criminal offences and, indeed, to specify maximum sentences. I am very pleased that the Government have recognised a need for safeguards in this context. This is an exceptional circumstance, and I very much hope that the Government will not see this as a precedent to be used in other contexts.

[Baroness Northover]

My Lords, the potential creation of new criminal offences by Ministers was of course the subject of major debate in the Lords, and the Government were defeated. It is the Government’s compromise that we are considering here. I know that the Government and the noble and learned Lord, Lord Judge, spent a great deal of time on this, as did my noble friend Lady Bowles. Noble Lords did not quite get to where they would have liked, but I know that they thought progress had been made. We are therefore content to accept the position that we have reached. However, the noble Lord, Lord Pannick, makes an important point about this not being a precedent.