Fragmented and incoherent: the UK’s sanctions policy Contents

1Lack of clear Government strategy

Muddled responses on key issues

5.In the light of the UK’s departure from the EU, witnesses emphasised the need for the Government to have a clear strategy and set of objectives for sanctions policy.7 Asked whether the UK had a such a strategy, Tom Keatinge of the Royal United Services Institute (RUSI) told the Committee:

Not obviously is, I suppose, where I would start… The standard phraseology is sanctions being an extension of foreign policy, being part of a toolkit, etc. I think we are all used to hearing from all Governments when it comes to sanctions. But in terms of what the strategy is and what we are trying to achieve, that is not clear at this stage.8

6.We asked Sir Alan Duncan, Minister of State at the FCO with responsibility for sanctions, to set out the goal of UK sanctions policy. He said:

There are two aspects to this. One is to make sure that we have our own policy regime once we have left the EU. An essential part of the policy is the structure of sanctions. The other is about the efficacy, as we would wish to see it, of sanctions. It is to promote our wider foreign policy objectives and values across the world, bear down on those who we think offend those values in a number of ways across the world, and work in concert with our partners and allies wherever we can, as we have done within the current structure of the EU and UN… The purpose is to deter, change behaviour and restrict the actions of people we believe should be the focus of sanctions. This has led to the designation of individuals and entities, and things like that. They are designed to change unacceptable behaviour by coercing or constraining a target’s ability to carry out such behaviour.9

7.While the Minister’s description of the basic objectives of economic and financial sanctions is unobjectionable, it does not constitute a strategy or a clear statement of how the UK believes sanctions should be deployed in concert with other foreign policy instruments. The Government’s lack of coherent strategy in this area was further illustrated by the muddled answers we received on three core elements of Government activity on sanctions since the passage of SAMLA: the legal process for rolling over EU sanctions, the introduction and use of Magnitsky powers, and the development of a plan for post-Brexit co-operation with the EU.

Rolling over EU sanctions

8.Since SAMLA received Royal Assent in May 2018, the FCO’s main priority on sanctions has been to roll over existing EU sanctions regimes so that the UK can continue to implement them even if it leaves the EU with no deal. This process has two main elements: the replication of EU regimes via Statutory Instruments, and the replication of EU designations of individuals.10 Sir Alan and Mr Qudsi Rasheed, Head of the Sanctions Unit and the UK’s Sanctions Envoy at the FCO, confirmed to the Committee that, as at 14 May 2019, these processes were either complete or nearing completion.11 Sir Alan also assured us that, had the UK left the EU with no deal on 29 March or 12 April 2019, there would have been no gap in UK sanctions policy.12

9.We noted in the evidence session that the Government laid the Statutory Instrument for rolling over the EU’s sanctions regime on Russia, imposed in response to the annexation of Crimea and Russian support for separatists in Eastern Ukraine, on 10 April 2019. Asked why this vital legislation was laid so late, Qudsi Rasheed said:

The reason we had it is that we were ready to lay it in advance of 29 March, but because we knew a few days earlier that 29 March was not going to be exit day and that we had the two-week extension, we were ready to do it for 12 April. That is why we laid it in advance of the 12 April deadline… These SIs are obviously contingent on a no-deal scenario, so if we know there is not going to be no deal, then we do not need to rely on these pieces of legislation.13

He later added:

The Act came in in May [2018], so we could not do anything before May, and it has been a considerable amount of work. Our intention was to try to do them by exit day; it was pretty clear quite early on that we could not. If you look at the Russia piece of legislation for later today, it is 100 pages and probably four or five months’-worth of work just on that one piece of legislation.14

10.We welcome the FCO’s diligence in ensuring that there would not have been a gap in UK sanctions regimes if the UK had left the EU with no deal in March or April 2019. We also recognise the technical complexity of this process and the hard work of the FCO’s sanctions team in completing this task against a strict deadline. We are concerned, however, that vital elements of this work were completed mere days before that deadline. Given that the SI process has evidently taken up the vast majority of the FCO’s capacity on sanctions over the last year, we question whether sufficient resources have been allocated to a policy area that is essential to the UK’s role in upholding the rules-based international system.

UK power to implement Magnitsky sanctions

11.Since SAMLA received Royal Assent in May 2018, we have repeatedly asked Government representatives whether the UK has the power to make and implement its own sanctions on individuals accused of human rights violations while it is still a member of the EU (and during any possible implementation period after exit). As the table below demonstrates, the answers we have received have been at best unclear, and at worst have appeared to contradict one another outright.

Table 1: Government responses on UK Magnitsky powers

Witness

Date

Comments

The Rt Hon Jeremy Hunt MP, Foreign Secretary

31 October 2018

The Magnitsky legislation, which is obviously in the Sanctions and Anti-Money Laundering Act, does not come into force until we have control of our own trade policy, which is obviously a post-Brexit measure.

Sir Simon McDonald, Permanent Under-Secretary at the FCO

13 November 2018

We have looked into this since the Foreign Secretary’s evidence session and, as you say, the Bill is now an Act, but the SIs that are needed to implement the Act are not yet in place. It will be some months before the full structure is in place… there are a group of SIs in support of the Act, which will take some time to put in place. My understanding is that that time cannot be before the end of March next year, so in effect it is the same thing [as saying the UK cannot use Magnitsky powers before exiting the EU].

Mr Qudsi Rasheed, Head of Sanctions at the FCO

14 May 2019

What we are saying is that there are some limitations by virtue of being an EU member state; there are questions around EU competence and the duty of sincere co-operation. Those are precisely some of the issues that we are trying to resolve at the moment, before we can bring forward any proposals.

Sources: Oral evidence taken on 31 October 2018, HC 538, Q357; Oral evidence taken on 13 November 2019, HC 1711, Qq162-174; Q425

12.William Browder, CEO of Hermitage Capital Management, sent a written submission on this question authored by Tim Otty QC, of Blackstone Chambers, and Maya Lester QC, of Brick Court Chambers. Mr Otty and Ms Lester concluded:

The use of Magnitsky powers does not seem to us to conflict with EU law. The fact that the EU does not itself have a “Magnitsky list” does not mean that the UK is somehow breaching EU law by doing so, indeed the EU regularly imposes sanctions on regimes / individuals for undermining human rights and the rule of law. We have not seen it suggested that the Magnitsky powers are inconsistent with EU law, nor on what basis this could be the case… For those reasons, in our view there is no legal impediment to the “Magnitsky powers” in the Sanctions & Money Laundering Act 2018 being brought into force before the United Kingdom leaves the European Union.15

13.When Ms Lester appeared before the Committee, we asked her to elaborate on her views regarding whether the UK could legally impose Magnitsky sanctions while still an EU member state.16 Asked why Estonia, Latvia and Lithuania have their own Magnitsky legislation and have designated lists of individuals under those laws, she said:

They are, indeed, taking the view that there is nothing stopping an individual member state from imposing sanctions unconnected with the regime for human rights abuses—in colloquial terms, from having their own Magnitsky list, even when the EU does not have one. My joint legal opinion, which you have seen, is that there is nothing legally stopping us from doing that either. My understanding, but I might be wrong about this, is that the Foreign and Commonwealth Office do not disagree with that, but you will have to ask them… I don’t understand there to be a principled or legal objection to starting to have UK listings, even if we are still a member state.17

14.Asked whether she thought the FCO might be dragging its feet deliberately, Ms Lester said:

I have no idea. You will have to see what they say about this, but my understanding is that at this stage there is not a principled objection to beginning these designations now. It has simply been a question of time pressure—they have prioritised doing what they have to do in a very compressed time period to prepare for a potential no-deal scenario, but they will come on to this. My understanding of the Foreign Office’s position is different from the Committee’s, so it might be useful to clarify with them whether their view now is that they simply cannot do this, or whether they have not had time to do it.18

15.We asked Sir Alan Duncan whether the uncertainty around whether the UK can implement Magnitsky sanctions resulted from a political decision to de-prioritise or avoid introducing them. He said that

it is more about the legal preparation and the legal work that needs to be done through the resources that we have—who have been going full tilt, and still are, as we will see with the Russian SI later—to put all this in place. We are not going slow for any reason other than the burden of work.19

Later in the session, Sir Alan added:

I point out that we have had to go on a bit of a journey of working out what we can and can’t do, as the whole Brexit process and debate has unfolded. Working out quite what we would be able to do autonomously, given what may or may not be happening with the process of withdrawal, has been something we have had to have the lawyers on in some considerable depth.20

Sir Alan then committed to sharing with the Committee the legal advice on which the Government has based its assessment, which he said had been drawn up after consultation with internal (but no external) legal expertise.21 In a letter sent to the Committee on 29 May, he promised to write to us on this matter “in due course”.22

16.In oral evidence, the Minister of State noted that SAMLA requires the Government to lay before Parliament an annual report on human rights sanctions, “as soon as reasonably practicable after the end of each reporting period”. The first reporting period ended on 22 May 2019, a year after SAMLA received Royal Assent. In his follow up letter of 29 May, the Minister of State committed to laying this report in June. We expect him to do so.

17.The Government has repeatedly failed to give the Committee clear answers about whether the UK can adopt and implement Magnitsky-style sanctions against individuals who have committed human rights abuse while it is still a member of the EU, and during any potential implementation period following UK withdrawal from the EU. We accept that there is legal debate around these questions and were somewhat reassured to learn that the Government’s incoherent responses to our questioning reflect the fact that it has not yet arrived at a settled legal position, rather than a deliberate political choice to delay the use of Magnitsky legislation. In our view, however, the Government’s obfuscation has damaged the UK’s credibility in the international community and risks signalling to human rights abusers that the UK is reluctant to use its powers to sanction them.

18.The Government must rectify its mistakes as soon as possible by agreeing on a clear legal position regarding the UK’s ability to adopt and implement Magnitsky sanctions while still an EU member and during any possible post-Brexit implementation period. We call on the FCO to publish that position either in a letter to the Committee or in its response to this report. In any event it should do so before the end of June: the Government’s confusion in this area has dragged on for too long.

19.The Home Office has not provided a list of people who are prevented from entering the UK as sanctioned individuals. In particular it has not published the names of those to whom entry visas are denied by virtue of their involvement in human rights abuses, money laundering and corruption. We believe it would be far more effective to publish this list so as to demonstrate beyond doubt the UK’s commitment to the rule of law.

Conflicting assertions on co-operation

20.The Government has asserted that it aims to maintain close co-operation with the EU on sanctions policy after Brexit, although it has thus far been vague on details about how that co-operation might work in practice.23 The desire to ensure continued co-operation echoes the overwhelming majority of our witnesses, who emphasised that sanctions are by far the most effective when closely co-ordinated and implemented with allies.24 It also reflects the conclusions of our 2018 report on Moscow’s Gold: Russian corruption in the UK.25 Asked what structures have been put in place to facilitate post-Brexit co-operation, Sir Alan re-iterated the Government’s desire to co-operate closely with the EU and other allies, although he conceded that talks have not yet begun on precisely how that will be organised post-Brexit.26

21.Asked whether the UK might adopt a more aggressive autonomous sanctions regime against certain actors after Brexit, Sir Alan said:

I don’t think I am going to make judgments of that sort in this Committee on the hoof. That has to be a considered matter of policy through the National Security Council, and should be debated in Parliament. I am not going to redesign sanctions priorities at the flick of a switch today.27

Later in the session, however, Sir Alan said that

if we were to apply our autonomous sanctions, when we are able, we could strike out differently from the way we behaved, or were able to behave, within the EU. It is possible that we could determine our sanctions to be tougher or more individually focused if we so chose.28

22.Sanctions are most effective when applied multilaterally. We therefore welcome the Government’s commitment to co-operate as closely as possible with the EU and other allied nations on sanctions policy after Brexit. We also accept in principle that there may be circumstances under which it would be appropriate for the UK to enact tougher sanctions on its own, particularly given the UK’s leverage as a global financial services hub. We are deeply concerned, however, that three years after the referendum so little high-level thought appears to have gone into considering the UK’s strategy and policy approach to these issues. What are the costs and benefits of divergence on key sanctions regimes? How can the UK make the most of its power in financial services? Where do UK interests most closely align with those of our key international partners? How will we influence their decision-making in future? We have seen no evidence that the FCO or wider Government have even begun to explore these questions.

23.Sanctions are too essential to the preservation of the rules-based international system and the defence of our national interests to be treated as an afterthought. The National Security Council (NSC) must designate sanctions strategy to be an urgent priority and must allocate time and resources accordingly. We call on the NSC to begin an urgent review of UK sanctions strategy, consulting both internal Government stakeholders and external experts, and to report its findings to Parliament by the end of 2019.


7 Q2; Royal United Services Institute (FSP0012); Dr Matthew Moran (FSP0003); Dr Erica Moret (FSP0004); UK Finance (FSP0008); United Nations Association - UK (FSP0011)

8 Q1

10 The FCO set out this process in more detail in paras 50-55 of its written evidence to this inquiry: Foreign and Commonwealth Office (FSP0015).

11 Mr Rasheed told us that there were 15 sanctions regimes that had not yet been rolled over, but that the FCO was confident these could be replicated based on retained EU law, rather than requiring secondary legislation, in a no-deal scenario. The Minister said that some individual designations might not be carried over if they did not meet the threshold of evidence set by SAMLA, but said these were “one or two cases” only. Qq405–414.

15 Bill Browder (FSP0019)

22 Foreign and Commonwealth Office (FSP0020)

23 Department for Exiting the European Union, Foreign policy, defence and development - a future partnership paper, 12 September 2017, p 18; Government response to House of Lords EU External Affairs Sub-Committee report on “Post-Brexit Sanctions”, 8 February 2018, p 3; Foreign and Commonwealth Office (FSP0015)

24 Professor Paul James Cardwell (FSP0007); europeansanctions.com (FSP0014); Royal United Services Institute (FSP0012); UK Finance (FSP0008); Mr Neil Whiley (FSP0002); Dr Erica Moret (FSP0004); Dr Matthew Moran (FSP0003)

25 Foreign Affairs Committee, Eighth Report of Session 2017–19, Moscow’s Gold: Russian Corruption in the UK, HC 932, para 30




Published: 12 June 2019