Currently in a state of Parliamentary “ping pong”, the Sanctions and Anti-Money Laundering Bill is due to be considered again today in the House of Lords.
Why is new sanctions legislation required?
The Government has the tightest working majority since Harold Wilson’s re-election in October 1974, and Parliament currently faces the largest legal challenge of a generation in ensuring that the mechanics of Brexit are enacted. This rather begs the question as to why legislation on sanctions is being brought forward now. The answer is that this is, perhaps surprisingly, a Brexit-related necessity: as the Government’s response to the consultation (Cm 9490) makes clear, most of the UK’s current 30-odd sanctions regimes rely on powers in the European Communities Act 1972.
Much of our law is currently derived from European law, and the general proposal for enabling Brexit without having to enact new, specific laws to fill the void is through what was once known as the Great Repeal Bill, and is now less grandiosely called the European Union (Withdrawal) Bill. That is, of course, still being shaped in Parliament, but its general mechanism is to preserve European law as it was at the date of withdrawal, and to transpose everything in effect at that date into national law.
The scope of sanctions is constantly changing, and freezing them as at exit day will result in the UK being in breach of its international obligations in respect of sanctions.
As the Foreign and Commonwealth Office acknowledged in their White Paper and the Government’s response to consultees, this will not work for sanctions: the scope of sanctions is constantly changing, and freezing them as at exit day will result in the UK being in breach of its international obligations in respect of sanctions. These breaches could be in both directions – leaving sanctions in place that should have been withdrawn, and not being able to impose new sanctions pursuant to, for example, UN Security Council resolutions. It is clear, therefore, that a new regime of powers is required, and that is what the Bill sets out to provide.
What does the Bill do?
The Bill aims to preserve the UK’s ability to impose the three kinds of sanctions that are currently imposed: travel bans, asset freezes, and financial or trade restrictions. Currently, there are around 30 sanctions regimes enforced by the UK, the details of which can be explored in detail on a very impressive interactive map produced by the Estonian Presidency of the EU.
Some of these are imposed through the EU, and will therefore need to be replaced by new UK-specific sanctions. The existing powers to impose sanctions are inconsistent and spread across the statute book. Not all types of sanctions can be imposed under UK law as it stands without the European Communities Act powers – for example, the United Nations Act 1946 enables the Government to implement UN sanctions on travel bans and trade restrictions, but not to freeze assets. There is a specific power in the Terrorist Asset Freezing Act 2010 to freeze assets related to terrorism, and certain other very specific powers, but under the law as it stands not even all UN sanctions could properly be implemented, quite apart from other sanctions (such as the existing EU-only ones) it might be desirable to introduce.
The Bill creates broad new sanctioning powers all in one place in the statute book. Doing so necessarily involves some policy choices, which were set out in the Government’s response to the White Paper consultation, including:
1. New types of sanctions can be created through secondary legislation (a ‘Henry VIII’ power) to ensure the regime remains flexible, although the criteria for imposing sanctions cannot be changed in this way.
2. At the behest of consultees, a specific definition of terrorism where that is a threshold criterion for imposing sanctions.
3. A test of “reasonable grounds to suspect” involvement in the relevant activity before sanctions can be imposed.
4. Each UK-specific sanctions regime to be ministerially reviewed every year, and each designation within that regime at least every 3 years.
5. A regime of administrative review to designation or re-designation or on application by a designee with fresh evidence or new arguments.
6. A right of statutory appeal to the High Court, which will apply judicial review principles.
7. Broader licensing powers to be given to the Office for Financial Sanctions Implementation, including a power to grant general licenses (e.g. for humanitarian aid in a region) and licenses for purposes (e.g. for living costs or legal fees). Guidance on licensing will be published to aid applicants and ensure consistent decision-making.
8. Sanctions-making regulations will specify the maximum penalties for breach, but in all cases these can now be up to 10 years’ imprisonment – the Government has stated it does not intend to increase in practice the existing maximum sentence for breaching financial sanctions regimes from 7 years.
9. There will be the power to extend sanctions regimes to the Crown Dependencies (Channel Islands & Isle of Man) and British Overseas Territories by Order-in-Council.
Most of these policies were strongly supported by consultees, and indeed one or two ideas came from them. Buried in paragraph 9.7 of the response, however, was a policy which was not consulted on, presumably because it would have met with a negative response: a proposal to limit compensation claims by those who successfully challenge sanctions, which in the Bill is drafted as only giving a right to financial redress where the tort of negligence has been committed or where there is bad faith. The response paper suggests that this will be compliant with the Human Rights Act, but fails to set out precisely why it will not breach Article 1 of the First Protocol to the European Convention on Human Rights, the right to the protection of property. The Bill does contain the requisite ministerial statement that it complies with the Human Rights Act (signed by Lord Ahmad, the Foreign Office Lords minister).
What does the Bill mean in practice?
This Bill should be welcomed – quite apart from anything else, as a rare example of an area of law where there is a comprehensive plan being put into action to deal with the impact of Brexit. It is also an example of good law-making, in that it is bringing together powers currently contained in obscure and disparate locations into one place, where they can be easily accessed, and the relatively simple drafting means that the non-lawyers who must comply with the law may even be able to understand it without expensive assistance.
This will all ease the heavy burden of complying with sanctions regimes, although since each one of the 30 or so separate, tailored regimes will still have its own piece of secondary legislation, the simplification involved in this Bill should not be overstated. That said, as a fail-safe there is to be a consistent new defence of reasonable belief in compliance which should protect unwitting breachers of sanctions in the future.
