The Minister of State, Foreign, Commonwealth and Development
Office ()
I beg to move,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 3)
Regulations 2023 (SI, 2023, No. 713), dated 27 June, a copy of
which was laid before this House on 29 June, be approved.
The regulations amend the Russia (Sanctions) (EU Exit)
Regulations 2019. The instrument was laid on 29 June 2023 under
powers in the Sanctions and Anti-Money Laundering Act 2018. The
measures in the instrument, which entered into force on 30 June
2023, have been co-ordinated with our international partners,
while refining the approach to accommodate the particular
circumstances of the UK’s legal sector. By restricting access to
additional services from the UK, they will contribute to
increasing the pressure on Putin for waging his illegal and
brutal war against Ukraine. The measures place further
constraints on the Russian economy, and therefore Putin’s war
machine. They add force to the largest, most substantial package
of economic sanctions that Russia has ever faced.
The instrument delivers on the commitment made by the UK
Government to ban legal advisory services on specified commercial
activities. That will further hamper the ability of Russian
businesses to operate internationally. The legislation will make
it illegal for any person working in the UK, as well as all
British nationals working abroad, to advise on or facilitate
certain commercial activities that would be sanctioned by the UK
Government if they involved a British national or entity, or were
taking place in the UK. In practice, that will make it harder for
Russia to benefit from the UK’s world-class legal expertise. That
goes beyond prohibitions already in place, which cover a range of
professional services, including accountancy, architecture and
management consultancy. This latest measure demonstrates our
determination to ratchet up pressure on Putin for continuing his
illegal war.
Although the legislation will close down opportunities for
Putin’s associates and supporters to benefit commercially from
the UK’s legal expertise, it is important that we ensure that
legal services can continue to be provided where they contribute
to upholding the rule of law and compliance with our sanctions
framework. By protecting the fundamental right to legal
representation, we distinguish ourselves from Putin’s oppressive
regime. By ensuring that legal advice can continue to be provided
for the purposes of compliance with our sanctions framework, we
enhance the effectiveness of our regulations and intensify the
pressure on Putin.
Legal professionals are under a strict obligation to ensure that
their services support their clients to be sanctions-compliant,
and do not stray into enabling them to circumvent restrictions.
It has become apparent, however, that the legislation can be
interpreted as having the unintended consequence of prohibiting
persons in the UK and British nationals abroad from providing
legal advice to clients seeking to comply with the sanctions
regimes of our international partners. It is not the intent of
these regulations to prohibit that type of legal service. UK
lawyers should be able to support their clients to be
sanctions-compliant beyond UK law as we work closely with our
allies to tighten the net on Russia’s economy.
We have looked at this issue thoroughly and, as an immediate
response, we are working across Government and alongside
representatives of the legal sector to implement a general
licence that will make it clear that that type of activity can
continue.
Sir (Rhondda) (Lab)
The Minister is addressing a point that the Law Society has made
to quite a few of us, and I guess quite a few of us will be
referring to it later in the debate. If this had been primary
legislation, we would have tabled an amendment. Is it not
normally better for us to do all the scrutiny of this kind of
work on primary rather than secondary legislation? Then we can
always help the Government to get it right first time.
The hon. Gentleman is generous as ever in offering to assist us
to make progress. I hope that, as we bring in the secondary
legislation, it will be another step towards tightening the
pressure on those who would wish to use legal representation for
the wrong things.
(Bromley and Chislehurst)
(Con)
I welcome the Minister’s willingness to engage on the general
licence; it is very important to the Law Society, and for good
and sound reasons. We all share the policy objective, so will she
perhaps agree to meet, at both official and ministerial level,
with representatives of the Law Society so we can thrash out the
exact detail and get it right?
I will be happy to do so. I know that we aim to have this in
place in the coming days. As I said, we are working closely with
the legal sector and are grateful for its constructive engagement
on this important issue. I am happy to commit to my officials
meeting the Law Society to hear its particular concerns and
indeed, I have no doubt, offers of its views on how we can make
the scheme as effective as possible.
Once we have issued the licence, we will consider whether
amendments to the SI to address the issue are appropriate and
necessary. We will do that in conjunction with the legal sector
and bring such amendments forward, if needed, at the earliest
opportunity.
As with all other sanctions, this latest package has been
developed in co-ordination with our international partners. We
will continue to work with the legal community to monitor the
effects of the legislation to ensure that it is achieving its
objectives. We will also continue to co-ordinate with our
international allies to identify and address any gaps or
loopholes that emerge in our respective sanctions regimes.
To conclude, this latest measure demonstrates our determination
to target those who participate in or facilitate Putin’s illegal
war of choice. Through our sanctions regime and those of our
allies, Russia is increasingly isolated, cut off from western
markets, services and supply chains. Key sectors of the Russian
economy have taken a significant hit and its economic outlook is
bleak. The UK Government will use actions to intensify the
military and economic pressure on Russia until Putin ends his
brutal invasion of Ukraine. We welcome the clear and continued
cross-party support for this action and for the sanctions regime.
I commend the regulations to the House.
14:42:00
(Cardiff South and Penarth)
(Lab/Co-op)
I thank the Minister for setting out the measures we are
debating. As the House rises for recess later this week, I am
pleased we are able to meet before that, not only to debate new
and welcome sanctions measures, but to reiterate our unwavering
commitment to and solidarity with Ukraine, its people and its
sovereignty. The NATO Vilnius summit last week underscored the
strength of feeling across our diplomatic and military alliances
that we must stand with Ukraine in all measures—economic,
military, humanitarian and diplomatic—until this war is won and
provide the guarantees that it needs.
I am also pleased that the House had the opportunity last week to
explore and debate the Foreign Affairs Committee’s report on
illicit finance, the Government’s response, the need to crack
down on dirty Russian money within our economy and the serious
problems we have had with London as a location for that and the
whole ecosystem that has facilitated it over many years. On these
measures, I want to make it clear, as I have on many occasions,
that we will support the Government where we think they have got
things right on sanctions and we will not seek to divide this
House on this measure.
However, I do have some questions for the Minister. More than 500
days into this conflict, it should not be potentially lawful for
a UK legal services provider to support commercial activities
that advance Russian state interests and the interests of those
who support the egregious and barbaric war in Ukraine, just
because said activity does not have a sufficiently tangible
connection to the UK, due to the territorial application of the
Russia (Sanctions) (EU Exit) Regulations 2019. It must be the
case that no UK person, or person in the UK, can provide legal
advisory services to an activity that would be prohibited under
our regime.
I hope the Minister can say why it has taken so long to bring
forward this measure. I accept that the sanctions regime is a
constantly evolving feast, and we have had this debate many
times, but that is obviously a significant potential risk, so I
hope she can explain what has happened with the timing.
I welcome the Minister’s clarification regarding a general
licence and the discussions that will be had. I know that other
right hon. and hon. Members have expressed, and will express,
concerns about the ability to access legal advice for positive
purposes, if I may put it that way. On the other hand, I have
some questions regarding licences and exemptions that have been
granted in the past, including for access to legal services, and
the ministerial oversight of those.
One particular case was in January this year, when it came to
light that the Treasury had issued special licences that allowed
Prigozhin, the leader of the brutal Wagner Group, exemptions and
licences to acquire legal support—in fact, I believe it was flown
to him in Russia at the time—to sue his critics here in the UK.
That is obviously completely unacceptable. I hope that the
Minister can explain, given the questions that I and others have
asked about that, what role Ministers are now taking in the
issuing of exemptions and licences.
The Minister will be involved in developing the general licence
that she talked about for legitimate purposes, but at the other
end of the spectrum there are an awfully large number of licences
that have been granted. Perhaps she could write to me and to the
House with a full list of licences and exemptions that have been
granted and for what purposes, and clarify whether Ministers,
particularly in her Department, now have oversight of those, or
whether that is just being done by officials. These are
significant matters and we do not want to see anything sneak
through that is going to facilitate or aid Russian
activities.
I would also like the Minister to explain how the Office of
Financial Sanctions Implementation is monitoring the utility of
the various exemptions issued under the sanctions regime, and
whether they are enhancing the regime or potentially, in some
instances—I hope this is not the case—undermining it. The OFSI
should be undertaking constant reflection on and refinement of
the regime and ensuring that, while we have the strongest text
for the sanctions, their actual application is being done in the
most effective way to tackle the aggressor in this case.
While I am on the subject of exemptions and loopholes, in the
last Committee debate that we had on such measures the Minister
committed to write to me regarding some serious concerns I raised
about third countries being used to avoid our sanctions regimes
in a number of product areas. That would be interesting in terms
of the services sector and the legal services we are referring to
in this debate, but it also applies to a number of goods. I hope
she can write to me before the recess with answers to those
questions, because they are significant.
As the House is about to rise for recess, I reiterate the
position of the official Opposition, the Labour party, to work
with the Government in support of Ukraine, its security, its
prosperity and its future, and to co-operate on measures against
Russia and those who would aid and abet Putin’s regime. We must
continue to do that and to see that Russia and all those who
support Putin lose. Our sanctions regimes and the way they are
applied are crucial to that. We must never again allow London to
be part of an ecosystem of lawyers, accountants, company
formation agents and others who have facilitated the very people
behind the Russian regime and are ultimately aiding and abetting
Putin.
Madam Deputy Speaker ( )
I call the Chair of the Justice Committee.
14:49:00
I welcome the tone and approach of the Minister’s remarks, and I
fully understand and support the policy objectives of the
regulation, as does every decent lawyer in this country. For
completeness, I refer the House to my entry in the Register of
Members’ Financial Interests. We want the UK legal system to
retain its reputation as an able, efficient and honest
jurisdiction, which it is. However, it is important that we get
the detail right, so, with apologies from one lawyer to another,
Madam Deputy Speaker, you will know that, if I say the detail
matters sometimes, there may be a little detail to raise with the
Minister in the context of her very welcome assurance that she
will meet, and have officials meet, to discuss what comes next. I
appreciate that the regulations have—rightly—had to be developed
at pace, and that we have sought to be aligned with our allies,
but there are some bits to which further attention needs to be
paid.
I am grateful to the Law Society of England and Wales for the
briefing that it has sent to a number of hon. Members. Given that
we all endorse the policy objective that Russia must never be
allowed to gain from its barbaric and disgraceful invasion of
Ukraine, and that Russian entities must never be able to gain
from it, we must do it in a way that retains the ability of
UK-based international law firms to advise, with the highest
level of professionalism, on the way in which clients may wish to
divest themselves of interests in Russia, for example, or on the
risks or otherwise of potential transactions that might involve
an element of a Russian entity of one kind of another. It is in
everybody’s interest that they are able to do that, but I am
concerned, as is the Law Society, that the wording of the
regulations, however well intended—I think that they are totally
well intended—may have the unintended effect of limiting it.
In particular, there is concern that the very broad language of
the regulations is broader than that of our counterparts in the
United States and the EU in terms of limitations. The Minister is
absolutely right that we should align, so that is something we
perhaps now need to revisit. Licensing may be one way, and a
revised statutory instrument may be another—perhaps the two go
together—to align the language
I will set out one or two of the practical consequences. The
language of new paragraph 8A(1)(a)(i) to schedule 3J —I think I
have got that right; it is all in the detail, Madam Deputy
Speaker—is quite important. Essentially, it prohibits advice that
facilitates or enables activity that would be prohibited if it
were conducted in the UK or by a UK person—let us call it
“UK-prohibited activity”. It then goes on to prohibit any advice
in relation to, or in connection with, UK-prohibited activity. In
that context, “advice” includes the provision of legal advice
that involves—here is the rub—
“the application or interpretation of law”.
Well, that is pretty much what lawyers do, hopefully: they advise
people about the application and interpretation of the law. Early
advice is the best way to prevent people from getting into legal
problems and prevent needless litigation. There is, I accept, an
exemption covering advice, but, as the Minister will know, there
is real concern that the exemption is narrowly drawn—too narrow,
I would argue.
On the face of it, that means in practical terms that British
companies cannot get advice from English and Welsh lawyers on
whether their activity will comply with international sanctions
regimes, for example. They could go to American lawyers for that.
Many American-based law firms have entered the UK legal markets.
It would be a bizarre situation if one could not go to the UK law
firm for that advice but could go to the New York office of the
American law firm. I do not think that was the intention behind
the policy. We must ensure that the language reflects the
intention.
In the same way, if, for example, an international company wants
to know whether a specific activity that it is contemplating for
perfectly good and legitimate commercial purposes is prohibited
by UK, EU or US sanctions—all of which vary somewhat—the UK
lawyers can answer on whether or not that activity is prohibited
by UK sanctions, but once the lawyer has said, “Yes it is,” they
are not then allowed to advise on whether it is prohibited by EU
or US sanctions. That cannot be a sensible or practical approach,
and it cannot be what the Government actually want to
achieve.
The whole advantage of UK international law firms is, of course,
that they have many multidisciplinary lawyers and people
qualified in many jurisdictions. Our strength is that people come
to us because we can advise on a range of law in a range of
jurisdictions. At the moment, however, a lawyer would be
committing an offence if they took the obvious step. Instead,
they have to say, “Okay, it is illegal in the UK, but I cannot
tell you whether it is illegal in the EU or the US.” That is
clearly not a situation that anybody wants to see. The difficulty
is that the language does not reflect the intention. Surely,
giving such advice does not enable or facilitate unlawful
activity. It allows a company to know whether, if it does the
activity, it might infringe the law, and whether the law is
applicable to it. The language does not reflect that policy
intention as it stands.
Another example is that the advice exception in regulation
60DB(3) is limited to advice on compliance with sanctions, and
not to other forms of compliance advice. The logic is that one
seeks advice from one’s lawyer on the whole range of potential
legal risks that one might run in taking a particular course of
commercial activity. The facts will be the same, and may raise
questions about sanctions compliance, but as it stands—this is of
real concern to the Law Society—a UK lawyer could supply the
client only with advice on sanctions, not on whether they comply
with other criminal offences. The strict wording of that
regulation would, on the face of it, criminalise lawyers giving
advice on whether that same form of action falls foul not just of
sanctions, but of anti- money-laundering, anti-bribery and export
control laws.
Surely we want any UK lawyer to be able to give one-stop-shop,
rolled-up advice on all the legal risks that might arise from
that activity, but at the moment, once they have established the
first part—that it falls foul of the UK sanctions regime—they
cannot go on and do the obvious and common sense thing of saying,
“And, by the way, you also fall foul of this, that and the
other.” That cannot be the intention, but as it stands, that is
where we could end up.
That is why the general licence is, in the short term, so
important. Individual licences, which were referred to by the
shadow Minister, the hon. Member for Cardiff South and Penarth
(), have been tried in the
past. Not only is there difficulty in how effective they are in
policy terms, but there are practical difficulties as well.
That is where advice about disinvestment comes in, for example,
because UK companies might very properly want to withdraw from
transactions involving Russian entities or individuals. Surely we
want UK lawyers to be able to advise them fully and frankly on
how best to disinvest. But if they have either to be caught by
the risk of a criminal sanction or to get an individual licence,
we know that Russia—not a rule-of-law country, to put it
mildly—is well able to take actions to sequester property and
prevent the return of assets to British nationals and British
companies in a way that we would never countenance in this House.
When dealing with people of that kind, we do not have that
leisure, frankly. Once a company has taken the decision to
disinvest, they want to get the assets out quickly. Waiting for
an individual licence would not make that possible. That is why a
general licence, rather than individual licences, is
important.
That is why it is important to sit down with the Law Society,
hear the lived experience of law firms in the UK, and get the
regime right so that it sticks. Regrettably, this war, and
therefore the sanctions, may go on for longer than any of us
would wish—however long it takes to get Ukraine its freedom and
to get rid of that wretched regime in the Kremlin—so we must have
something that will stand the test of time. That is why I am so
anxious for the Minister to engage in detail with the Law Society
about this.
I have a final example. We could have a situation in which an EU
firm based in the UK can go to their Paris office for advice on
different terms of legal trade from the UK office. That cannot be
to the advantage of the UK legal system, and it does not help us
to align with our allies.
I have greatly shortened the briefing that I received because
everyone wants to get away for the summer recess. I hope I have
flagged up some serious practical points. There is an issue of
principle, but the detail matters. If we can work together to get
that right, I hope we can come back to the House after the recess
with the general licence and a revised approach to the SI, which
will give us a permanent system through which to bear down on the
evil of the Russian regime while enabling British lawyers, with
their expertise, to play their part in that fight. At the moment,
they would have one hand tied behind their back, which was not
the Government’s intention.
15:00:00
(Inverness, Nairn, Badenoch
and Strathspey) (SNP)
It is always a pleasure to follow the knowledgeable hon. Member
for Bromley and Chislehurst ( ). Given his legal expertise, I
can now take three pages out of the speech I was going to
deliver, and I hope the Minister was listening.
This is a serious issue. For the Scottish National party, our
stance has always been clear, unambiguous, and unwavering: we
vehemently support the principles of democracy, peace, and the
rule of law, and we unyieldingly oppose any entity or individual
that would act to undermine those bedrock principles. It is worth
recollecting the context here. The Russian invasion of Ukraine in
February 2022 was a blatant breach of those principles and an
affront to the international community. The unjust and unprovoked
aggression caused immense pain, loss, and destruction to the
people and the critical infrastructure of Ukraine.
There is much more that the UK Government could and should do. We
have heard from the Labour spokesman about the lack of action, in
my view, about Progozhin, and the issue of dealing with third
countries. As we have just heard, the details are important. The
issue needs to be properly scoped, and the detail needs to be
agreed as quickly as possible. Speed has been lacking in
delivering some of the sanctions that are so greatly needed.
It is in that context that we put our support behind the Russia
(Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023, which
further the United Kingdom’s stance that Russia bears full
responsibility for the damage it has wrought in Ukraine. This is
not a matter of politics: it is a matter of basic human rights
and justice. We believe that those who cause harm should be held
accountable and be made to pay restitution. By supporting the
regulations, we are not just voting for sanctions: we are voting,
ultimately, for justice for Ukraine.
We note and support the provision for a defence under section
68(1) of the Customs and Excise Management Act 1979 relating to
the prohibition on exportation of certain goods to non-government
controlled areas. That thoughtful addition will ensure that
sanctions do not inadvertently penalise innocent parties, and
provides a fair balance in extraordinary circumstances. Again, we
await the legal details.
Since the start of Putin’s invasion of Ukraine, the SNP has
consistently backed the UK Government’s sanctions regime against
the Kremlin. We see the regulations as a natural, necessary and
meaningful extension, albeit more can and should be done. In
conclusion, the SNP supports the regulations. We stand for
justice, for peace, and for holding those accountable who
disregard those values. We stand with Ukraine and will, as
indicated, support the Russia (Sanctions) (EU Exit) (Amendment)
(No. 3) Regulations 2023.
15:03:00
(Henley) (Con)
I want to comment briefly on the Minister’s remarks about
international partners and our relationship with them. The
Council of Europe recently held a summit in Reykjavik, which the
UK attended, and we also signed the resulting declaration. The
Council of Europe has always seen sanctions as a rule of law
issue, because Russia has acted illegally in invading Ukraine.
The Council of Europe has had a tremendously robust response, not
least from me: I was the first member to call for Russia to be
expelled from the Council.
The Reykjavik summit asked member states to support it on the
rule of law issue, by bringing legislation to make sure that the
changes happened. I am glad to see that we have done that, and we
are making a very good change. I hope that the Minister will
include the Council of Europe among the international partners
with which she will maintain contact, because it has a vast
amount of expertise. It is not just me, there are many
distinguished members who have enormous expertise in dealing with
Russia and these issues. I hope that she will both use that and
feed into it, because there is a lot we can do—subject to what we
have just heard—to set a model that other countries can use.
15:05:00
Sir (Rhondda) (Lab)
It is a joy to follow the hon. Member for Henley (). Since we have been in
valedictory mood today, with the Secretary of State for Defence
earlier, it is a sadness that the hon. Gentleman will not be with
us in the next Parliament. Obviously, I want Labour to take every
seat in the land, so I would not want to go too far in that. None
the less, the hon. Gentleman has been admirable in his work in
the Council of Europe in this regard and on human rights
generally across the continent. Our membership of the Council of
Europe is an important part of the structure of human rights
across Europe. It is one of the reasons I support our remaining
in the European convention on human rights and adhering to the
European Court of Human Rights, which I understand to be a
necessary aspect of our membership.
I reassure the hon. Gentleman that I hope to stay in the role for
another year.
Sir
Long may he persist.
I support the measure before us today. The Minister knows that I
and other Members have campaigned for as robust a set of
sanctions as possible. I have been critical sometimes of the
processes we have used to get there. Oliver Bullough wrote a
splendid book that lays out why it is important to deal not only
with financial instruments but with some of the people who have
effectively enabled others to bypass sanctions regimes and hide
their money from prying eyes in the UK.
It was a joy to hear the extremely learned hon. Member for
Bromley and Chislehurst ( ), not least because he
referred to “every decent lawyer”. I detected a characteristic
wink at that point, because not every lawyer is decent, m’lud. I
gently suggest—
rose—
Sir
Now look what I have done.
I have prosecuted some less than decent lawyers over the years,
so I take the hon. Gentleman’s point. But he knows just how good
the English legal system is collectively, and I know he will want
to recognise that.
Sir
I have great admiration for lawyers, especially those who advise
me, as is occasionally necessary—[Laughter.] It is a serious
point: if the UK stands for anything in the world, it is the rule
of law. The hon. Gentleman and I have often had to join cause on
occasions when we have worried that the Front Benches have not
quite seen things in exactly the same way as we do.
I will not rehearse all the arguments, which were laid out so
beautifully for the hon. Gentleman and others in the Law
Society’s note. He understood it better than I did. The important
point is that all British businesses should be withdrawing from
Russia. It is extraordinary that any British businesses are still
doing significant business in Russia. I do not wish to make any
partisan points, but I think it is still true that Infosys has a
substantial presence and has not managed to wind down its
presence in Russia. That is worrying. Mantrac is certainly still
operating in Russia, and some of the money it has earned there
will have made its way into its recent £5 million donation to the
Conservative party. We should be doing more due diligence about
these matters.
I do not understand how Unilever can still claim that it is only
selling Magnum ice creams in Russia because they are an essential
item. They might be an essential item for somebody who is going
to watch the “Barbie” movie later this year—that sort of fits—but
in all seriousness, I honestly do not think that Unilever should
still have a significant presence, or any presence, in the
Russian Federation. Its remaining there is a problem. I hope that
the Minister will be able to respond to the point about British
companies being able to advise on how to disinvest as fast as
possible. If the regulations were to make that more difficult,
that would be a bit of an own goal on our part.
I have some other, very minor, points to make. One is that the
sanctions regime is now getting very complex. These are No. 3,
the third regulations in this Session. I know that this Session
of Parliament has gone on a bit—one could argue that the whole of
this Parliament has gone on a bit, maybe a bit too long—but we
are relying on lots of statutory instruments and secondary
legislation. The amount of such legislation has grown enormously
over the past 20 years, not just since 2010 but before then, and
there is a danger that it is very difficult for lawyers to keep
up with what the law is. Of course, there is no excuse for
lawyers to say that they do not know what the law is, but none
the less, these regulations came into force on 30 June—they are
already in force. That is the problem with the way in which we
are legislating these days. When there is a Labour Government, I
hope that we will use secondary legislation much less frequently,
because we need to be able to amend legislation on the Floor of
the House or in Committee to make sure that Governments do not
make silly mistakes.
I note the subtle difference in the exemption that exists for
advice. Of course, advice can cover a multitude of sins and is
sometimes designed to do so, but I note the subtle difference
between the exemptions granted in the UK, those granted in the US
and those granted in the EU. If I heard the Minister correctly,
she attributed those to the different legal systems that exist in
those jurisdictions. That may be true, but I would like her to
expand on that and explain why it is necessary for us to make
distinctions in that way. Otherwise, the point made by the hon.
Member for Bromley and Chislehurst is absolutely right: an
international law firm could just say, “All right, I’m popping
over to Paris, Madrid, Berlin or wherever for the weekend, and we
will do it from there.” That would be a mistake. I also think
that sanctions need to be a stiletto blade, not a blunderbuss, if
they are to be truly effective in peeling away support from
Vladimir Putin within the Russian Federation.
In a previous debate on sanctions, I referred to the former
leader of UKIP. Let me be absolutely clear: I have had no
correspondence of any kind—electronic, in writing, or
digital—with Coutts bank about him, or for that matter about
anybody else, because I do not have many constituents who bank
with Coutts. I have no idea why Coutts has closed his bank
account, but I should have been more careful with the words that
I used a year ago. The figure I gave was for his total income. I
think he himself has stated that he was paid for his appearances
on Russia Today, which is of course a part of the Russian state,
and he has made clear his respect for Vladimir Putin as a
nationalist. However, I do not think that the figure I gave was
anywhere near the accurate figure, so I apologise if I have
inadvertently misled the House. I had no intention of doing so,
and I hope that puts the record straight. I had hoped that this
afternoon’s debate was going to include a debate on the Procedure
Committee’s report into allowing all Members of the House to
correct the record, rather than just Ministers, but that option
is not yet available to us. As such, Madam Deputy Speaker, I have
rather stretched your generosity in making these comments.
15:13:00
I thank all hon. Members who have made contributions this
afternoon. I will do my best to address the questions they have
raised, and as ever, where I do not have the information to hand,
I will ensure that I write to them.
This latest measure reflects the reality that legal advisory
services can play a fundamental role in facilitating border trade
and investment, and that by restricting those services, we will
further constrain the Russian economy and Putin’s war chest.
While we have worked to ensure that Russia cannot access our
legal expertise in relation to certain commercial activities, we
have not hindered work, but have helped to provide judicial
rights and access to justice. We have also not hampered legal
advice that facilitates compliance with our sanctions network and
framework, and we are working to ensure that advice in relation
to compliance with the sanctions laws of our international
partners is also permitted.
I absolutely commit to write to the hon. Member for Cardiff South
and Penarth () about the questions he has
raised, including his important point about third-party
circumvention risks. Discussions and work are ongoing with a
number of colleagues; I have been talking with colleagues
internationally about how we tackle those risks and find tools to
address the enforcement challenge they present.
As ever, my hon. Friend the Member for Bromley and Chislehurst
( ) has brought his wisdom to the
debate about this important piece of legislation. I will ensure
that he and the Law Society are able to discuss their concerns
about the detail of the general licence in the very near future,
conscious—as a number of colleagues have said—of the timeframe
over which we are keen to move it forward. He made the important
point that access to legal advice should be taken early to reduce
the risk of error or breach. We must ensure that the general
licence will work in practice, providing the right support while
constraining those who wish to abuse the system.
I put on record that the continued leadership of my hon. Friend
the Member for Henley () at the Council of Europe is
hugely welcomed and appreciated by all Members across the House.
I thank him for his offer of support and for sharing the
expertise that sits in the Council of Europe. As we continue to
work in what is a complex and, sadly, ever-changing and
ever-developing environment, we continue to get ahead of those
who wish to abuse the system.
It was good to hear the Minister confirm again that she is going
to work on the issues that have been raised about the general
licence. However, can she say whether Ministers such as herself
are actively involved in the issuing of all licences and
exemptions in relation to our sanctions regime, or is it still
just being done by officials without ministerial sign-off?
Obviously, the hon. Member would not expect me to discuss the
detail of matters that are live and ongoing. However, we work as
a team and across Government: while it is the Foreign,
Commonwealth and Development Office that holds the pen, and it is
me at the Dispatch Box today, the legislation, work, management
and enforcement issues are covered across Whitehall. We all work
together very closely on those issues, and as I say, it is a live
and continually changing environment as we keep track of what we
are trying to achieve. One part of that, of course, is ensuring
that enforcement can be monitored. The commitment of £50 million
following the integrated review refresh was an important part of
that and it will help us build even stronger enforcement tools to
ensure we make the most effective use of the sanctions we bring
in.
This, Madam Deputy Speaker, is the latest edition of our package
of sanctions. We will continue to use sanctions to keep up the
pressure until Putin ends his horrific, senseless war and Ukraine
is allowed its territories back to live peacefully once
again.
Sir
Will the Minister allow me to intervene before she sits down?
Yes, I will.
Sir
I would just like to put on the record how much we respect and
admire the team of roughly 150 people who work in the sanctions
group. It is not easy work—it is tough to get it right—and they
are magnificent. Is that in order?
Madam Deputy Speaker ( )
That is in order.
I thank the hon. Gentleman for his kind and thoughtful
intervention. They are an extraordinary team—they are working
flat out all the time. Sadly, until such time as Putin loses this
war, we will continue to work flat out to ensure that we have as
many sanctions tools available to us as possible. In the
meantime, I hope and trust that the House will support the
regulations.
Question put and agreed to.
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 3)
Regulations 2023 (SI, 2023, No. 713), dated 27 June, a copy of
which was laid before this House on 29 June, be approved.
Moved by
That the Grand Committee do consider the Russia (Sanctions) (EU
Exit) (Amendment) (No. 3) Regulations 2023.
Relevant document: 46th Report from the Secondary Legislation
Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Foreign, Commonwealth and Development
Office () (Con)
My Lords, these regulations amend the Russia (Sanctions) (EU
Exit) Regulations 2019. This instrument was laid on 29 June 2023,
under powers in the Sanctions and Anti-Money Laundering Act 2018.
The measures in this instrument entered into force on 30 June
2023.
If I may digress from my script, once again we are debating
Russia and its actions. As I came into the Room, I was catching
up on some of the news on the Black Sea grain initiative. Yet
again, we have seen tragedy; to say it is shocking is perhaps an
understatement. According to media reports, Russia has not only
scuppered the Black Sea grain initiative but attacked some of the
grain ports, destroying much of the grain held in those
warehouses. Again, it shows the tragic nature of this illegal war
and the importance of our sanctions. I say at the outset that I
appreciate the work of both Front Benches opposite and the
co-ordination and unity that we have displayed in moving through
sanctions at such a pace.
I turn to the SI in front of us. These measures have been
co-ordinated with our international partners, while refining the
approach to accommodate the particular circumstances of the UK
legal sector. By restricting access to additional services from
the United Kingdom, they will contribute to increasing pressure
on Mr Putin for waging this illegal and brutal war against
Ukraine. I know that noble Lords have been focused on this issue
in previous debates too. These measures place further constraints
on the Russian economy, and therefore Mr Putin’s war machine.
They add force to the largest, most substantial package of
economic sanctions that Russia has ever faced.
The instrument delivers on the commitment made by the UK
Government to ban legal advisory services on specified commercial
activities. This will further hamper the ability of Russian
businesses to operate internationally. This legislation will make
it illegal for any person working in the UK, as well as British
nationals working abroad, to advise on or facilitate certain
commercial activities that would be sanctioned by the United
Kingdom Government if they involved a British national or entity
or were taking place in the UK. In practice, this will make it
harder for Russia to benefit from the United Kingdom’s
world-class legal expertise. This goes beyond prohibitions
already in place that cover a range of professional services,
including accountancy, architecture and management consultancy.
This latest measure demonstrates our continued determination to
ratchet up the pressure on Mr Putin for continuing his illegal
war.
Although this legislation will close down opportunities for Mr
Putin’s associates and supporters to benefit commercially from
the UK’s legal expertise, it is important that we ensure that
legal services can continue to be provided where they contribute
to upholding the rule of law and compliance with our sanctions
framework. By protecting the fundamental right to legal
representation, we, frankly and directly, distinguish ourselves
from Mr Putin’s oppressive regime. By ensuring that legal advice
can continue to be provided for the purposes of compliance with
our sanctions framework, we enhance the effectiveness of our
regulations and intensify the pressure on Mr Putin.
Legal professionals are under a strict obligation to ensure that
their services support their clients to be sanctions-compliant
and do not stray into enabling them to circumvent restrictions.
However, it has become apparent that this legislation can be
interpreted as having the unintended consequence of prohibiting
persons in the UK and British nationals abroad from providing
legal advice to clients seeking to comply with the sanctions
regimes of our international partners. Let me assure noble Lords
that it is not the intent of these regulations to prohibit this
type of legal service. UK lawyers should be able to support their
clients to be sanctions-compliant beyond UK law as we work
closely with our allies to tighten the net on Russia’s economy.
We have looked at this issue thoroughly. As an immediate
response, we are working, first, across government and,
importantly, across the legal profession. We have met
representatives of the legal sector. My colleagues, the Lord
Chancellor and the Justice Secretary, have met members directly;
indeed, the Lord Chancellor met the president of the Law Society
this morning. I know that this is a concern that anyone would
have but I assure noble Lords that we are working closely with
the legal sector in this respect to ensure that we implement a
general licence that will make it clear that this type of
activity can continue. We aim to have this in place in the coming
days. I put on record our thanks to the legal sector for its
constructive engagement on this important issue.
We have sought here to provide a direct remedy to that possible
unintended consequence; the valuable support and input that we
have had from the professional legal sector is very much
appreciated. Once we have issued the licence, we will consider
whether further amendments to the SI to address the issue are
appropriate and necessary. Of course, I will update noble Lords,
particularly those representing the Front Benches, on this. We
will do this in conjunction with the legal sector and, if
amendments are deemed necessary, we will bring them forward at
the earliest opportunity.
As with our sanctions, this latest package has been developed in
co-ordination with our international partners, as I said. In
doing this, we will continue to work with the legal community to
monitor the effects of this legislation and ensure that it
achieves the desired objectives. We will also continue to
co-ordinate with our international allies to identify and address
any gaps or loopholes that emerge in our respective sanctions
regimes.
This latest measure demonstrates our determination to target
those who participate in or facilitate Mr Putin’s illegal war of
choice. Through our sanctions regime, and those of our allies,
Russia is being increasingly isolated, cut off from western
markets, services and supply chains. Key sectors of the Russian
economy have taken a significant hit and its economic outlook is
bleak. The UK Government will use sanctions to intensify the
military and economic pressure on Russia until Mr Putin does the
right thing and ends his brutal invasion of Ukraine. We welcome
the clear and continued cross-party support for this course of
action. I beg to move.
(LD)
My Lords, I am grateful to the Minister for introducing these
regulations in such a clear and comprehensive way. I will refer
briefly to the concerns about unintended consequences in a moment
but I will start by strongly agreeing with the Minister about
what are likely to be the consequences of the decision on grain
in the Black Sea.
Putin will again threaten the expansion to new victims of his
aggression to Ukraine across those who are least able to feed and
fend for themselves, especially as malnutrition and hunger ravage
the Horn of Africa. Those countries that are dependent on the
grain will be looking at this with doom. In a way, it is a
horrific response to the leaders of countries, when they consider
that they can effectively maintain the status quo ante relations
with the Putin regime, to know how little he holds in his
standing their people, who need this food.
18:45:00
I have comments to make only with regard to accepting the
Government’s argument that we had an issue we had to respond in
the UK in terms of our legal services. This had been highlighted
over a number of years, including the reports of the “London
laundromat” and those companies that used SLAPPs and were part of
the circumvention and subversion of the sanctions regime, so we
welcome the moves. However, in welcoming them, the Minister will
not be surprised to hear that noble Lords received a Law Society
briefing on concerns about unintended consequences. My
understanding is that the principal unintended consequence, as
the briefing said, is this: if an international company wishes to
know whether a specific activity that it is contemplating is
prohibited by UK, EU and US sanctions, a UK lawyer can answer
whether it is prohibited by UK sanctions. However, if it is
UK-prohibited activity, the lawyer cannot then advise whether it
is also prohibited by EU or US sanctions. I am grateful to the
Minister for stating that the Government are in active
consideration of how these unintended consequences will not be
brought about.
In relation to the position of having a general licence, the Law
Society has indicated that the issue is perhaps of a more
substantial and complex need rather than requiring a
sticking-plaster solution, as they put it. However, I am glad to
hear that meetings are taking place at a high level; and that the
Government have indicated that either a general licence or
amendments will be brought forward as soon as they are necessary.
We will support them when they are brought forward because we
want to avoid this issue causing more complexity when we need
more clarity both that the UK legal system will not be—indeed,
will never be—used as part of subverting the sanctions regime we
have put in place and that the UK can be a leader in many
respects. I am grateful for the Minister’s clarifications and his
offer to keep us informed of any progress in these talks.
(Con)
I am grateful to my noble friend the Minister for discussing the
proposed statutory instrument so thoroughly. I want to follow the
noble Lord, , in what he picked up
from the Law Society’s briefing. It is certainly the case, as the
statutory instrument is framed, that a lawyer who works for an
international firm but may be based in New York cannot advise an
international client on EU or US law in respect of, say,
divesting from activities in Russia. It is really quite important
to know how he can be compliant with the law. I note the
intention to have general guidance but will it be such that there
will be a lack of clarity and a concern that overseas clients
consulting UK lawyers will not be able to get advice at the same
time about where the law stands in respect of US and EU law?
(Lab)
My Lords, one of the issues we need to address is that Russia is
highly dependent on western countries for legal expertise. As a
country, we previously exported £56 million in legal services to
Russian businesses every year, so it is important that we address
this issue.
I also welcome the fact that we can use this debate to reiterate
our cross-party support for these measures to show our unwavering
commitment to and solidarity with Ukraine, its people and its
sovereignty. Following last night’s Statement repeat on NATO’s
Vilnius summit, I underscored the strength of feeling across our
diplomatic and military alliance that we must stand with Ukraine
until the war is won. It is vital that Parliament speaks with one
voice.
The Opposition fully support the steps that the Government are
taking to further strengthen our sanctions regime, prevent
evasion and ensure that the Kremlin’s capacity to conduct this
war is undermined. I stress that we recognise that this statutory
instrument is common sense and prudent. It clearly should not be
permissible that, more than 500 days into this conflict, it would
be potentially lawful for a UK legal services provider to support
commercial activities that advanced Russian interests because
said activity did not have a sufficiently tangible connection to
the UK, due to the territorial application of the 2019
regulations.
I hope the Minister can tell us what assessment the Government
have made of how effective the 2019 regulations were and how we
discovered any potential loopholes that people could get through.
This leads on to my major point about this: can the Minister
account for the delay in addressing these issues from the
application of the regulations in 2019? If this loophole has been
exploited, why has it taken us so long to address it?
I have read the Law Society’s letter and I appreciate the
Minister’s response. I welcome the fact that the law officers and
other departments are meeting with the Law Society but, to echo
the point from the noble Lord, Lord Purvis, I am keen to support
the Government in strengthening these sanctions. I do not want to
see any further escape routes for people. It is important that we
hear the Minister’s view on how effective these new regulations
will be at imposing the sort of sanctions that we believe are
necessary to limit Russia’s ability to wage war.
I know that the Minister has heard me say before that it is one
thing to adopt particular regulations on sanctions, but how we
resource them and how we are satisfied that they can be
implemented and monitored is another. Can he tell us how the
Office of Financial Sanctions Implementation is resourced? Will
it be able to police these regulations? If our sanctions regime
truly is a work in progress, we must be capable of reflection and
improvement. If exemptions are causing more issues, we need to
know about them; the assessment must be based on that.
There is one other question I will briefly raise, which is that
the regulations provide exceptions when the Act relates to
diplomatic missions or consular posts. Can the Minister give me a
practical example of that? I am not sure I understand the purpose
of it.
I have addressed the point about the Law Society. Of course, this
was also raised with the Secondary Legislation Scrutiny
Committee, which expressed the view that this issue needs to be
addressed. The committee was approached by an international law
firm.
I conclude by saying that we once again fully support the
Government’s actions. We want to see the Russian regime
sanctioned. The news I have just seen on the BBC website about
not only breaking the agreement but bombing the very facilities
that could feed Africa is absolutely atrocious. The sooner we
bring this regime to account, the better. We fully support the
Government in their actions.
(Con)
My Lords, I put on record my thanks to the noble Lords, Lord
Purvis and Lord Collins. I am sure I speak for all three of us in
saying that, when we embarked on this journey of sanctions, we
hoped that our debates and discussions would be limited. However,
it is a real tragedy of the consequences of the war on Ukraine
that we are continuing to have these debates. As I said in my
opening remarks, and as was acknowledged by the noble Lords, Lord
Purvis and Lord Collins, the fact that, even as we speak, there
continue to be not just acts of aggression but pure violations of
international law shows the nature of this war.
One point I would raise is how we amplify these points to the
sorts of countries that still sometimes challenge us directly. I
was delighted to see the noble Lord, Lord Wallace—I am not
tempting him into the debate, but I am sure he will have a view
on how we address the issue of influence directly. Quite often on
the world stage and as I have travelled, it has been said to us
that our sanctions are causing problems of food insecurity.
Russia’s actions today demonstrate what is causing the challenges
to food security. We have always worked with the UN and other key
countries to ensure that the Black Sea grain initiative is kept
on the front burner. It is regrettable and tragic that it was
not. Further, it is tragic that we have seen the consequences
culminating in this Russian aggression on the very areas that
store the grain.
That said, I thank noble Lords for their specific contributions.
To clarify the point made by my noble friend Lady Lawlor, whose
intervention I welcome, what we are seeking to introduce—we have
identified this issue—is a general licence as an immediate first
step. We are working directly with the legal profession,
including the Law Society, to ensure that any other unintended
consequences and any other loopholes that we can address directly
can also be met first hand. As I said in my opening remarks, we
will seek to bring legislation forward at the earliest
opportunity. It is important that we continue to do so.
The noble Lord, Lord Collins, raised the issue of identifying, as
things are, how we have been working to address particular issues
and the delay. As I am sure he would acknowledge, legal services
are distinct from other professional services in the
constitutional role they play within our country in supporting
and upholding the rule of law. Therefore, we carefully consider
the implications of different policy options. This is ever
evolving. In collecting an evidence base, we also work with legal
services to ensure that, as far as possible, the measures we lay
have the desired effect.
I am not saying that this is the last time we will have this
conversation. As we are imposing these sanctions and taking
further steps to restrict Russian activities, I am sure that we
will identify areas, as we have on this occasion, that will
further address those very issues. As a former person of the City
myself, I fully understand the comprehensive scope of not just
the banking services but the services industry around them. We
have previously addressed consultancy and accountancy firms and
today, in conjunction with legal representatives, we have worked
through the implications for the legal industry.
19:00:00
I share with noble Lords that our level of engagement has
included webinars. As I said earlier, I know that my colleagues
in the Ministry of Justice are working with the Law Society of
England and Wales to organise round tables with leading sanctions
lawyers, as well as holding confidential discussions directly
with firms. The MoJ is engaged in regular dialogue with
representative bodies, and this has allowed the Government to
identify key areas of concern.
As the noble Lords, Lord Collins and Lord Purvis, identified,
following the announcement of the SI, the sector raised concerns
that the exemption for advice related to compliance with
sanctions applies only to UK sanctions regulations. We are
considering this issue as a matter of urgency and, as I said,
looking to introduce this general licence to address that very
issue. As to whether the Act complies with international
sanctions imposed on Russia, including the EU and US sanctions
regime—
(Lab)
I am sorry to interrupt but regarding the exemptions, I was going
to ask about the provision of professional business services,
specifically related to auditing services. I cannot understand
why there is an exemption for that.
(Con)
As I understand it, the auditing element of it is a professional
and legal requirement, but if I can amplify that further I will
of course write to the noble Lord.
The noble Lord, Lord Purvis, and my noble friend Lady Lawlor
raised the issue of the general licence and its application.
Under the general licence, UK persons will be able to advise on
global sanctions regimes, including but not limited to the United
Kingdom, USA and EU. In response to my noble friend, the same
applies to the scenario she illustrated of a UK person working in
the USA. However, I will take all these elements and ensure that
there is a specific response because these are understandably
issues of concern.
At this juncture, I also say that our rule of law and justice
system allow for the provision of representation services. I am
sure that the fact that I did not get a question on that means
that noble Lords have acknowledged and noted that it is right
that a country such as the United Kingdom continues to protect
that right of legal representation. We may have our personal
views on particular people who seek to take advantage of our
professional services but, at the same time, every professional,
including legal professionals, will now be bound by the new
regulations that we are putting forward.
On the issue raised by the noble Lord, Lord Collins, specific to
the Diplomatic Service, I am sure that some areas of privileges
and immunities are covered in that. Again, in the interest of
completeness, I will cover that in the appropriate letter.
On auditing, as I said, audits apply to the shareholders rather
than the companies, in order to ensure that audits can take place
where they are a statutory requirement. I have just had that
confirmation from the Box—I remember some of my private sector
experience quite well. It shows that when you do things off the
cuff, you remember things from years past.
In all seriousness, we have sought to address some of the key
areas identified as these new regulations and sanctions regimes
are applied. While we have worked to ensure that Russia cannot
access our legal expertise in relation to certain commercial
activities, we have not hindered work that helps to provide
judicial rights and access to justice.
These measures are the latest addition to our package of
sanctions, which is having a damaging effect on Mr Putin’s war
machine and his regime. I know that the UK Government and all
Members of your Lordships’ House are united in keeping the
pressure on Mr Putin until he ends this horrific and senseless
war.
Finally, if, before the House rises, there are further details I
can share with noble Lords on the issuance and the date of
issuance of the general licences, I will do so. I will write to
noble Lords on the areas that I have said I will address,
particularly on diplomats. That said, I put on record my sincere
thanks to all noble Lords, including my noble friend, who
participated in this brief debate. Sadly, and tragically, I am
sure that we will have further debates on this.
Motion agreed.
