The House of Commons is today considering the Economic Crime (Transparency and Enforcement) Bill. Ministers have tabled nine amendments to the Bill that would amend the Sanctions and Anti-Money Laundering Act 2018 and are intended to streamline the process of imposing sanctions. In an article published today on the Spectator’s Coffee House blog, I consider the amendments, arguing that while they may do some good they are an indirect, overly general way to address the particular problem of imposing sanctions on particular Russian oligarchs and officials. My article comments briefly on two backbench amendments, commentary which this short post elaborates.
The two amendments both attempt to address the problem of capital flight in advance of sanctions being imposed. The first, New Clause 28, is tabled by Dame Margaret Hodge, Andrew Mitchell, Chris Bryant, Tom Tugendhat and a number of others. The clause would empower the Secretary of State (rather than the High Court, as at present) (a) to make an unexplained wealth order in relation to a person whom the Secretary of State considers meets or is likely to meet the criteria for sanctions to be imposed under the 2018 Act, and (b) to make an interim freezing order in order to prevent the risk of a subsequent recovery order being frustrated. The clause as drafted seems to specify that the power to make an unexplained wealth order only applies to a person when the Secretary of State makes an order that is approved in a resolution approved by each House of Parliament. However, I suspect this is a drafting error and the intention is to require parliamentary approval only in relation to extension of the statutory power beyond six months, when it otherwise expires.
This clause aims to avoid capital flight before sanctions are imposed, which is sensible. It may make it somewhat easier for ministers to freeze assets before sanctions are imposed, which should be welcomed, but it is limited by the condition that the Secretary of State considers the criteria for sanctions is likely to be met. That is, for the clause to be effective, those criteria have to be loosened somewhat. Government amendments will achieve this to some extent, but there must remain a risk that the 2018 Act will be read restrictively by virtue of European human rights law.
In addition, if enacted, this new clause would be likely to prove a somewhat unwieldy power because it combines the idea of unexplained wealth orders with the idea of sanctions, which are quite different (an individual’s wealth, for example, might be transparent and legitimate and yet the individual should nonetheless be the subject of sanctions). By making the power to freeze assets contingent on the risk that a subsequent recovery order would be frustrated, the power may simply not apply to the majority of cases in which sanctions may in due course be imposed. The power would also be unworkable if parliamentary approval were required in relation to each case, as the present drafting on its face suggests. In short, while it is possible that the amendment may do some good, it is likely to prove unworkable in practice. If the clause is to be taken further, it will need to be significantly overhauled by government, likely when the Bill comes before the Lords.
The second amendment, New Clause 29, is tabled by David Davis, Dame Margaret Hodge, Layla Moran, Chris Bryant, Andrew Mitchell and others. The clause empowers the Secretary of State to publish the name of a person being considered as a subject for sanctions, which immediately imposes on that person a duty not to sell any assets they own or in which they have an interest, or to move any of their assets or funds out of the UK, on pain of criminal liability (and risk of imprisonment).
This amendment, like New Clause 28, is intended to freeze the assets of persons who may later be the subject of sanctions. However, there are some very serious problems with it. The clause would confer a very wide power indeed, for it would not be limited to cases in which the Secretary of State had reason to think the person met the criteria for sanctions set out in the 2018 Act. A power to freeze anyone’s assets and to impose criminal liability for using their assets, because a minister is merely considering imposing sanctions, is hard to justify, especially since the clause does not impose any time limit on how long assets can be frozen in this way. Strictly understood, the clause might make the 2018 Act simply redundant, including the Act’s protections for people who are the target of sanctions (procedural protections and access to funds for reasonable expenses), for ministers could freeze assets using this new power without ever turning to the 2018 Act.
In addition, there is a risk that the clause would impose strict criminal liability, that is, it would make it a criminal offence for a person to sell their own assets, or move their own funds, even if they are entirely unaware of the minister’s decision. There is also a strong risk that the clause would be incompatible with the European Convention on Human Rights, which is not necessarily a reason not to enact it, but does meant that it would likely face challenge in the courts. In short, it is a bad idea.
It bears repeating that while all these amendments have been framed in order to make it possible for government to move swiftly against Russian oligarchs and officials, the changes that are made to the 2018 Act would be of more general application. While New Clause 28 would expire after six months, which is a safeguard of a kind, New Clause 29 would make a permanent change to the law, exposing anyone, even someone who should never be the subject of sanctions, to interference with their property rights and to the risk of unfair criminal liability.
Both clauses are well-intentioned and capital flight is an obvious problem. However, Parliament should take care to avoid making changes that either will not address the problem of how to sanction Russian oligarchs and officials or that will give rise to unintended, but very real, injustices.
