The
Committee consisted of the following
Members:
Chair:
Mr.
Edward O'Hara
†
Buck,
Ms Karen (Regent's Park and Kensington, North)
(Lab)
Cable,
Dr. Vincent (Twickenham)
(LD)
†
Cawsey,
Mr. Ian (Brigg and Goole)
(Lab)
†
Duddridge,
James (Rochford and Southend, East)
(Con)
†
Hoban,
Mr. Mark (Fareham)
(Con)
†
Horam,
Mr. John (Orpington)
(Con)
†
Ladyman,
Dr. Stephen (South Thanet)
(Lab)
Leigh,
Mr. Edward (Gainsborough)
(Con)
†
McCarthy-Fry,
Sarah (Exchequer Secretary to the
Treasury)
McGuire,
Mrs. Anne (Stirling)
(Lab)
McNulty,
Mr. Tony (Harrow, East)
(Lab)
†
Mudie,
Mr. George (Leeds, East)
(Lab)
†
Pugh,
Dr. John (Southport)
(LD)
Stanley,
Sir John (Tonbridge and Malling)
(Con)
†
Tipping,
Paddy (Sherwood)
(Lab)
†
Turner,
Dr. Desmond (Brighton, Kemptown)
(Lab)
Chris Stanton, Committee
Clerk
† attended the
Committee
Fifth
Delegated Legislation
Committee
Tuesday
30 March
2010
[Mr.
Edward O’Hara
in the
Chair]
Draft
Al-Qaida and Taliban (Asset-Freezing) Regulations
2010
9.45
am
The
Exchequer Secretary to the Treasury (Sarah McCarthy-Fry):
I beg to
move,
That
the Committee has considered the draft Al-Qaida and Taliban
(Asset-Freezing) Regulations
2010.
It
is an enormous pleasure to serve under your chairmanship this morning,
Mr.
O’Hara.
The
draft regulations are designed to set criminal penalties for breaching
the EC regulation giving effect to the United Nations asset-freezing
regime against al-Qaeda and the Taliban within the European Union, and
to give proper effect to that regulation in the UK. Members of
the Committee will be aware that the United Nations Security
Council has mandated two separate terrorist asset-freezing
regimes with different applications and procedures. The first
regime, chronologically, was established in 1999 by UN Security Council
resolution 1267 and applied an asset freeze against the Taliban. It was
subsequently broadened by successor resolutions to apply an asset
freeze against Osama bin Laden and individuals associated with al-Qaeda
or the Taliban.
After the
terrorist attacks on the US in September 2001, the UN mandated a
separate terrorist asset-freezing regime in UNSCR 1373, whereby all
states are required to identify and freeze the assets and resources of
people who commit, attempt to commit, participate in or facilitate the
commission of terrorist acts. There are two key differences between the
two regimes. The first difference is in the nature of the targets. The
UN 1267 regime applies only to Osama bin Laden and to those associated
with al-Qaeda or the Taliban. The UN 1373 regime applies more generally
to those involved in terrorism, regardless of whether they are linked
to al-Qaeda or the Taliban.
The second
key difference between the two regimes is in their geographical scope
and listing procedure. The UN 1267 regime is global in its application:
the UN holds a central list of targets, and listing and delisting
decisions are made by a committee of the UNSC; once individuals or
entities are listed, their assets must be frozen by all states. By
contrast, under UNSCR 1373, freezing decisions are taken nationally and
apply nationally, although individual states are encouraged to share
information about national freezes, so that where appropriate the
assets of those involved in terrorism can be frozen across national
boundaries.
The draft
regulations apply only to the UN al-Qaeda and Taliban regime—the
1267 regime. They do not apply to the UN terrorist asset-freezing
regime under resolution 1373. The reason for this is the different
position of the two UN asset-freezing regimes under
European law. The EU does not provide a legal basis fully to implement
our obligations under UNSCR 1373 to freeze the assets of terrorists.
That is because the EC regulation for UNSCR 1373 deals with asset
freezes only for persons who are involved in acts outside the borders
of the EU. It would not allow us to take preventive action to freeze
the assets of “home-grown” terrorists, which UNSCR 1373
also requires. Consequently, following the Supreme Court’s
decision that Orders in Council made under the United Nations Act 1946
cannot be used to give effect to UN terrorist asset-freezing
obligations, the Government are addressing our implementation of UNSCR
1373 through primary
legislation.
The
Terrorist Asset-Freezing (Temporary Provisions) Act 2010 was passed
last month and we have published a draft Terrorist Asset-Freezing Bill
to provide a durable legal basis for freezing the assets of terrorists.
Committee members will recall, as we said when the temporary Bill was
debated, that we are committed to ensuring that there is proper
scrutiny of our draft legislation. We have published a public
consultation document seeking the views of interested parties and the
general public on our draft legislation and the Government’s
approach to terrorist asset-freezing. I very much hope that interested
parties and the public will engage with the consultation.
The legal
position of the UN al-Qaeda freezing regime is different. In 2002, the
EU adopted regulation 881, which implemented the al-Qaeda regime
throughout the EU. EC regulation 881 is directly applicable in national
law, and therefore the assets of those listed under the UN al-Qaeda
regime have remained frozen in the UK through the EC regulation,
despite the Supreme Court’s decision to quash the Al-Qaida and
Taliban (United Nations Measures) Order 2006. The quashing of that
order, however, has removed the criminal penalties for breaching the EC
regulation in the UK; it is therefore necessary to reinstate the
enforcement provisions for EC regulation 881 in national law, as
intended by the draft regulations before the
Committee.
When
the draft regulations were debated in the other place, it was asked why
the consultation and the draft Bill on the terrorist asset-freezing
regime specifically exclude those covered by the al-Qaeda and Taliban
asset-freezing regime. The answer is that EC regulation 881/2002 has
direct effect in UK law and the UK is required properly to implement
it. The regulations therefore establish penalties, licensing and
enforcement mechanisms in relation to the EC regulation, so that a
regime that is already in UK law can be properly enforced and
implemented.
Mr.
Mark Hoban (Fareham) (Con):
Will the Minister elaborate on
the differences between the two regimes and on how the regimes will be
kept in lockstep as they
develop?
Sarah
McCarthy-Fry:
I do not know whether the hon. Gentleman
means the sanctions or the regimes, but the regimes are different
because under the 1267 regime, the designation of the list
is kept by, and the listing process goes through, the UN, whereas under
the 1373 regime we maintain our own listing. The 1373 regime is
maintained through our national law and EC
law.
Mr.
Hoban:
Taking that one step further, are the restrictions,
sanctions and penalties the same under both
regimes?
Sarah
McCarthy-Fry:
Under the draft Bill the maximum sentence is
seven years, but under these regulations it is two years because that
is the maximum possible under the EC regulation. We are not creating a
new sanctions regime in UK law, as our draft Bill seeks to do for the
asset-freezing regime mandated by resolution 1373. The European
Communities Act 1972 clearly provides for the creation of the
mechanisms through regulations made under the Act, and that is what we
are doing.
Given the
limited purpose of the regulations, we did not feel that a consultation
was appropriate for the regime, but the Government take the view that,
given the points raised by the Supreme Court and the obvious public and
parliamentary interest, it is right that the regulations be subject to
approval by Parliament under the affirmative procedure. We could have
introduced them under the negative procedure, but I wanted the
affirmative procedure so that we could debate them
today.
The
question of including a sunset clause in the regulations was also
raised in the other place. The timing of any amendment or revocation of
the EC regulation is a matter for the EU, so it would not be right for
these regulations to include a sunset provision. Although the
regulations, which provide the enforcement mechanisms for the EC
regulation, are limited in their scope, we would be happy to consider
the provisions again in the light of the debate on the draft Terrorist
Asset-Freezing
Bill.
Before
I go into the detail of the regulations, I should like to draw
Members’ attention to the central purpose of the al-Qaeda and
Taliban sanctions regime and to some of the issues that it has raised
about due process. The central purpose of that regime is to stop the
flow of funds to al-Qaeda, the Taliban and those associated with them,
and therefore to disrupt their operations. That is a necessary and
vital task at a time when the threat from international terrorism
remains severe and when British forces in Afghanistan are being injured
and killed by the Taliban and their allies. I am sure that the whole
Committee agrees with the legitimate purpose of the UN sanctions
regime.
The
Government remain of the view that maintaining and implementing UN-wide
asset freezes against al-Qaeda and the Taliban is important in helping
to counter the threat that those bodies pose to international peace and
security. We know that al-Qaeda and the Taliban source funds from all
over the world. The response must be global and the best way to achieve
that is by maintaining a central UN list of sanctions
targets.
Within
the UK alone, about £140,000-worth of funds are frozen under the
UN al-Qaeda and Taliban regime in addition to the £150,000 that
is frozen under the terrorism orders. The Committee will be aware that
the Supreme Court raised concerns about individuals on the UN list not
being able to challenge their listing at the UN in a court. The
Government are committed to continuing to improve the UN 1267
committee’s processes for listing and delisting and I am pleased
to say that, as a result of the UK’s work with the Security
Council partners, the UN has made great strides in recent years to
improve its listing and delisting procedures.
Reviews of all
cases must now be conducted every three years and Security Council
members are working towards reviewing all current cases on the list by
June this year. Nineteen individuals and entities have already been
removed from the UN’s list as a result of the reviews. In
December, the Security Council agreed further improvements to listing
and delisting procedures, including establishing an ombudsperson who
will be able to work with Security Council members to support the
review process. We believe that that is a significant step forward and
are pressing for the position to become operational as soon as
possible.
Although
designees can submit delisting requests for the sanctions
committees’ considerations, the committees do not provide
provisions for judicial oversight. It is important to note, however,
that EC regulation 881 does not automatically give effect to the UN
list, but establishes an EU list of targets. It means that, when
someone is added to the UN 1267 list, their name must also be added to
the EU’s list in order for the asset freeze to take effect under
the EU regulation. The EU’s practice is to follow the UN list in
adding or removing names and at present the EU’s list is up to
date in reflecting the UN list. A person who is added to the EU list
may challenge the decision to list him by the EU in the EU Courts.
Members of the Committee will be aware that such challenges have, in
fact, been brought—most notably in the Kadi case. Several
further challenges are now before the EU
Courts.
Let
me explain how the draft regulations are intended to work. EC
regulation 881 implements UNSCR 1267 freezes in the EU by: requiring
that all funds and economic resources belonging to persons listed under
the regulations are frozen; prohibiting funds or economic resources
from being made available to or for listed persons; prohibiting
deliberate circumvention of the prohibitions and requiring persons to
notify national competent authorities of a circumvention; requiring
persons to provide information that facilitates compliance and to
co-operate with national authorities; and requiring each member state
to determine effective, proportionate and dissuasive sanctions for
breaching the
regulation.
The
draft regulations set the criminal penalties for breaches of the EC
regulation. I reiterate that they do not give the UK a national power
to identify and freeze the assets of those associated with al-Qaeda and
the Taliban. We would have to refer such persons to the UN for listing
to be agreed by the Security Council. To set criminal penalties for
breaching the prohibitions in the EC regulation and to give proper
effect to the regulation in the UK, the al-Qaeda regulations need to
set out in detail to whom the sanctions apply, the nature of the
prohibitions, licensing arrangements, criminal penalties,
information-gathering powers and appeal mechanisms. That is because,
although the EC regulation sets out the requirements of the
asset-freezing regime, it does not do so with the precision and clarity
that is needed for proper implementation under UK law, in particular
regarding the creation of criminal
offences.
The
regulations before the Committee therefore take the EU regulation as
the starting point, but provide more detail with a view to creating a
regime that is clear, effective and proportionate. They do no more than
the minimum necessary to implement the EC regulation. All the
provisions of the regulations are necessary to enable us to
fulfil our EU obligations, which are to
implement the EC regulation effectively and to provide effective,
proportionate and dissuasive penalties for breaching the provisions of
the EC
regulation.
The
regulations define a designated person as someone listed under annexe 1
to the EC regulation; define the scope of the prohibitions that apply
as a result of the asset freeze; provide criminal penalties for
breaches of the prohibitions; provide a mechanism for granting
licences; and create an offence when a person knowingly or recklessly
provides false information or documents to obtain a licence or acts
outside the terms of that licence. The regulations also include
provisions for the gathering and sharing of information, create an
offence for failing to comply with Treasury requests for information,
and amend the Counter-Terrorism Act 2008 so that someone affected by a
Treasury decision made under the regulations may apply to the court to
have the decision set
aside.
Dr.
John Pugh (Southport) (LD):
As a matter of clarity, the
Minister said that the normal method of restitution—of getting
oneself off the list if one should not be on the list, or has reason to
think that one should not be—is to go to the European Court. Are
we talking here of a right being created for people to apply to British
courts to rule themselves out from the EC
regime?
Sarah
McCarthy-Fry:
The only way to get off the list is to apply
to the European Court. That applies to someone affected by the
licensing regime or by the way in which the designation is managed.
Then there is the right under the regulations to appeal to the courts
to have the terms of the licensing arrangements that we put in place
set aside. That does not relate to whether such a person is on the list
in the first place and therefore subject to the asset
freeze.
The
scope of the prohibitions reflects our intention to make the regime
proportionate and to try to limit the impact of the regime on innocent
third parties. The prohibitions mirror those set out in our draft
Terrorist Asset-Freezing Bill. The regulations set out that the
prohibition on making funds available for the benefit of the designated
person applies only when the designated person is able to obtain
significant financial benefit. The prohibition on making economic
resources available to a designated person applies only when a person
knows or has reason to suspect that the resource will be used to
generate funds, goods or services.
I hope that I
have explained to members of the Committee why it is important that the
UK fully meets its obligations to enforce the UN al-Qaeda and Taliban
asset-freezing regime. Many hon. Members may have concerns about the
UN’s listing and delisting procedures. However, the UK has been
at the forefront of action in the Security Council to improve the
procedures and significant progress has been made. The European
Union’s implementation of the UN 1267 regime provides designated
persons with the opportunity to challenge their listing in the EU, and
the right has been acted on and
tested.
I
have also explained the content of the regulations. In the
Government’s view, they represent an effective, fair and
proportionate way of giving full effect to the EC regulation within the
UK, and I commend them to the
Committee.
10.2
am
Mr.
Hoban:
It is a pleasure to serve under your
chairmanship this morning, Mr. O’Hara. There is a
sense of déjà vu, having debated the Terrorist
Asset-Freezing (Temporary Provisions) Bill last month and having read
Lord Myner’s speech on the regulations last week in the House of
Lords. The Exchequer Secretary has stuck pretty close to her script
throughout. The only notable difference between her speech and that of
the noble Lord’s was a change in terminology: she used the word
“ombudsperson”, whereas her noble Friend, who is perhaps
more unreconstructed than she, referred to the
“ombudsman”.
The statutory
instrument before us today flows from the Supreme Court’s
quashing of the terrorist asset-freezing legislation earlier this year.
One of the reasons for the quashing was that the Executive had sought
to circumvent proper parliamentary scrutiny of that legislation and
there was no firm legislative base for it to be made. We are therefore
grateful that the Minister decided that it is right to use the
affirmative procedure for the draft regulations and, through this
debate, to ensure proper parliamentary scrutiny. It would have saved us
all a great deal of time if the Government had adopted that approach
from the
outset.
We
want to have in place an asset-freezing regime with the appropriate
penalties and on a proper legislative footing. That is why we
co-operated with the emergency legislation passed last month and why we
indicated to the Government that we will be content with putting a
proper legislative framework in place before Dissolution. However, the
Government chose to reject that offer and have gone down the route of
consultation.
What seems
odd—it is entrenched by the draft regulations before us
today—is that we will end up, at the end of this year, when the
new Bill is in place, with two regimes running almost in parallel. One
has its origin in the European Communities Act 1972—the basis on
which the draft regulations are made—and the other will be based
on the permanent primary legislation that the Government have agreed to
introduce on to the statute book by the end of this year. That is why I
asked about the differences between the two regimes. People seeking to
comply with the regimes will face a challenge. There will be one set of
rules for al-Qaeda and the Taliban and potentially another set for
wholly different terrorist groups. We are in danger of missing an
opportunity. Putting the regime on a proper legislative footing should
have given us the opportunity to bring the two regimes together, so
that they march in lockstep and people know exactly how the two regimes
work.
What
we are putting in place—the Minister identified this in response
to an intervention—is different penalties. Someone who breaches
the statutory instrument in front of us today will be liable to up to
two years in prison, whereas if they breach the other asset-freezing
legislation, they may be imprisoned for up to seven years. I am not
sure what sort of message that is meant to send out to people who aid
and abet terrorists. It almost gives the impression that we take one
lot of terrorists less seriously than another, although I am sure that
that is not the Government’s intention.
The
Government should think carefully about the provisions of the
regulations and whether, as a move towards a single legislative base,
the two regimes should
be harmonised, including the terms of licensing, the exceptions and,
importantly, the penalties for breach of the licences. Having a
differential penalty regime sends out contradictory messages to people
about the seriousness with which the Government engage in the
issue.
I have a more
detailed question about the terms of the draft regulations. The
Minister stated that they set out that the prohibition on making funds
available to benefit a designated person applies only where the person
is able to obtain a “significant financial benefit”. Will
the Minister elaborate on what is meant by “significant”?
A rather extreme example used in the previous debate was that someone
who paid the bus fare for someone subject to the regulations would be
at risk of prosecution if there were no de minimis threshold. The use
of the word “significant” creates such a threshold
without being specific as to what it is. I would be grateful if the
Minister gave some guidance on how whether the benefit was
“significant” will be determined in such cases.
The Minister
also said that the prohibition on making economic resources available
to a designated person applies only when “a person knows or has
reason to suspect that the resource will be used to generate funds,
goods or services.” What would happen if someone was paying the
rent on a flat used by a person subject to a freezing order and that
flat was being used as a base for the latter to plot terrorist attacks?
Would the person who is paying the rent, who may be a third party, be
liable to prosecution if they suspected that the resident might be
having other people, whom the person paying the rent did not know
about, around the flat? What degree of proof is required to demonstrate
that someone has reason to suspect that a resource is being used to
generate funds, goods or services?
We support
the regulations and want them to be put on a proper legislative base.
However, I am concerned that we will be headed towards two regimes on
asset freezing if the Government do not change track, which will only
serve to confuse either the people subject to them, or those who need
to operate them in
practice.
10.9
am
Dr.
Pugh:
There is no disagreement between any of us about the
objectives, importance or thrust of the legislation. There is and has
been a dispute in the other place, however, about the process of
legislation. Process is important, because any Government taking
special measures should put them up for further scrutiny. The debate in
the other place, which, like the hon. Member for Fareham, I have
studied, was largely about the legislative history—not so much
about the financial and economic aspects, but more a question of legal
scrutiny.
The statutory
instrument makes EC regulation 881, which in turn implements UN
resolution 1267, work in the UK. It is set alongside other similar UN
resolutions, such as resolution 1373, and is coupled with the emergency
legislation of the Terrorist Asset-Freezing (Temporary Provisions) Act
2010, draft legislation, and issues relating to the Ahmed case before
the Supreme Court. Considering that complexity, the Government have
made a dog’s dinner of the process. It is not elegant and looks
clumsy, although it is arguably necessary.
My major
concern relates to the possibility of legal redress if somebody is
wrongly captured by the legislation, which is being made in such great,
albeit necessary,
haste. On the face of it, there seem to be sufficient, if slightly
onerous, methods of redress—I do not mean redress for people who
are suspects or whom we have reason to suspect, but third parties who
may be captured by events and whose funds may be affected by the
freezing of assets not their own. Indeed, the Minister mentioned
innocent third parties. As I understand it, any sort of redress must
take place via EU Courts, not British ones. The SI does nothing to
change that. The only other means of redress that I identified in what
the hon. Lady said was the UN review process, which can remove somebody
from designation, but that is a lengthy, laborious and drawn-out
process.
I could be
assured, following parliamentary scrutiny of the draft legislation and
some consolidation, that there will be sufficient redress for an
innocent party, but the provisions are a little vague at the moment and
concerns and unease remain. How effective is such legislation, and how
easy is it to circumvent? How much resource will it actually take from
the Taliban and al-Qaeda? The answers, I guess, are for a ministerial
statement, rather than for an SI’s impact assessment. I would,
however, welcome some reassurance from the Minister on the position of
people, such as the innocent third parties whom she mentioned, who may
be caught in a process that has severe economic effects on them.
Although such people may be entirely innocent, they may none the less
want to sort the matter out in an effective way before a
court.
10.13
am
Sarah
McCarthy-Fry:
I am sure that we all recognise the threat
to the UK from international terrorism and the reasons why
asset-freezing regimes are in place. I welcome hon. Members’
support for the regulations, which enable us to fulfil our
international obligations to implement the UN freezes and the EC
regulation.
The
main point made by the hon. Member for Fareham was on the difficulties
relating to the two regimes operating in parallel. The reason is that
each regime has a different source: one requires us to have domestic
laws to give effect to UN Security Council resolution 1373, while the
other, which relates to al-Qaeda, is given effect by EU law, which is
directly effective in the UK. The regimes are consistent in that we
have drafted the regulations’ prohibitions to be consistent with
the main draft Bill. The difference, as I pointed out to the hon.
Gentleman, is the different penalties, which unfortunately reflect the
terms of the European Communities Act 1972. However, if the
penalties under the regulations are shown not to be effective or
dissuasive, we could review the situation and go back to the EU. I
believe that, if we were to enforce greater penalties, that would have
to be done in conjunction with the EU, because of the legal basis of
each of the regimes and because we are acting through the effect of an
EC
regulation.
Mr.
Hoban:
Surely the difference in penalties is a prima facie
reason to go back to the EU? Clearly, the Government believe that,
under the UN-based measures, seven years is a dissuasive penalty; if
they believed that that was disproportionate, they would reduce that to
two years, if they felt that was dissuasive. If the Government believe
that seven years is dissuasive, proportionate and
effective for one regime, surely they should argue with the EU that two
years is not sufficiently dissuasive and proportionate to the offence
committed?
Sarah
McCarthy-Fry:
I take the hon. Gentleman’s point,
but the intention of the regulations is to get the criminal penalties
in place as quickly as possible. During the passage of the draft
terrorism Bill, we can debate the matter further, looking to the
future. To ensure that we have the prohibitions and sanctions
in place to be able to properly implement the measure, we will
stick with the European Communities Act 1972 for now, but that is a
point that we can debate on the draft terrorism
Bill.
The
hon. Gentleman asked about the question of significant financial
benefit. As in all of these cases, that will be done on a
case-by-case basis. We are trying to get the balance right. The
prohibitions are not intended to prohibit a person’s everyday
living. That is the balance that we have to get right and that is why
the licensing regime has changed over the years. The other example he
gave was of someone paying a designated person’s rent and the
flat or property being used as a base for plotting terrorism. The
required level of knowledge or suspicion uses the criminal
standard—beyond reasonable doubt—but, again, it depends
on the facts of the individual case.
The hon.
Member for Southport was concerned about those who may be wrongly
captured under the regime. I re-emphasise that there is no recourse to
the British courts for people’s designation, because they have
not been designated under British regulations. Designation is made by
the UN and takes effect in this country under the EU regulation. As the
EU implements the UN designation by a separate mechanism, that person
has recourse to the EU Courts. The place of the British court relates
to licensing and prohibitions, which is where the point about innocent
third parties comes in. If people feel that they have been unfairly
picked up by the prohibitions, they can appeal to the British court on
the prohibitions and licensing arrangements, but not on the designation
of the listed
person.
We
need a proper framework to implement the EC regulation effectively and
provide penalties for non-compliance. I therefore commend the
regulations to the
Committee.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the draft Al-Qaida and Taliban
(Asset-Freezing) Regulations
2010.
10.19
am
Committee
rose.