3Libya’s frozen assets
24.The Head of North Africa at the Foreign and Commonwealth Office and Department for International Development Joint Unit, Mr Nicholas Williams, told us that the UK holds frozen Libyan assets exceeding £12 billion in value.46 Frozen assets are assets (such as property or investments) that are owned by an individual or an organisation but cannot be sold or used in any way. Many of these assets were held by Gaddafi or Gaddafi’s inner circle but were frozen to prevent their theft or misuse during the Libyan Civil War. Libyan assets have been frozen since 2011 by the United Nations Security Council (UNSC) resolution 1973 of 2011.47 The EU’s Libya sanctions regime was created in 2011 to reflect the UN Security Council sanctions.48
25.These assets are now largely owned or controlled, directly or indirectly, by the Libyan Investment Authority (LIA), a government-managed sovereign wealth fund and holding company headquartered in Libya, and the Libyan Africa Investment Portfolio (LAIP), an international investment portfolio focused on strengthening the Libyan economy. These organisations requested the freezing of assets to combat the threat posed by individuals and entities who would otherwise have access to misappropriated state funds which could be used to threaten peace, stability and security. They are limited in what they can do with the assets, as they are unable to sell or redistribute them under the UNSC resolution. However, they can provide input into business management if the shares afford positions within an organisation. The United Nations Security Council has clarified that these assets remain frozen.49
The taxable status of Libya’s frozen assets
26.The Government has confirmed that it cannot touch the capital held, nor the interest raised, on the assets under their legal interpretation of the Security Council resolutions.50 Furthermore, to access the assets could set a precedent and potentially open other assets to claims by victims. To access the Libyan assets in order to fund victims of IRA sponsored terrorism may therefore lead to calls from other victims’ groups who were victims of other nations or organisations with assets frozen for these to be accessed.
27.The Department’s evidence, however, raised uncertainty surrounding the taxable status of Libyan frozen assets.51 Under normal circumstances, assets are subject to Capital Gains Tax or other taxes when taxable income, capital gains or financial transactions are made. When asked about the taxable status of the Libyan assets, there was initially uncertainty about what tax liability might be attached.52 The Minister subsequently wrote to the Committee on 11 December 2018 stating that “designated persons are not exempt from tax as a consequence of having their assets frozen”.53
28.Following this correspondence, the Chair wrote to the Chancellor of the Exchequer to clarify what form the frozen Libyan assets take and whether the Government has been receiving tax on any of the frozen Libyan assets.54 The Committee requested to be informed of the total amount of tax taken by the Government from the designated persons or bodies holding Libyan assets, over the entire period assets have been frozen in the UK; and projections for the future tax liability on the Libyan assets over the next five years.55
29.We received a response from John Glen MP, Economic Secretary to the Treasury, on 24 January 2019.56 The letter outlined that the assets include cash, properties and securities but was not forthcoming about the specific form that they take.57 The Economic Secretary wrote that:
Whether or not tax is paid on a particular frozen asset would depend on the nature of the asset and any relevant circumstances and transactions concerning that asset. Where taxable income or gains are made, in relation to frozen assets, a tax liability will arise, regardless of the assets’ frozen status.58
30.The Treasury refused to provide any information on the amount of tax received by the UK Government in respect of frozen Libyan assets, even when pressed. Mr Glen stated that:
HMRC’s duty of taxpayer confidentiality means that it is unable to disclose detailed tax information about individuals and businesses.59
31.The Committee continued to question the Government on this issue. The Chair responded to the Economic Secretary and sought confirmation on whether tax is being paid on any of the assets, what the total amount of tax that HMRC has received from these assets is and what amount it receives annually.60
32.In response John Glen MP stated that, under section 18(1) of the Commissioners for Revenue and Customs Act 2005, HMRC is not able to release information on the amount of tax collected.61 We have written to the Office of Financial Sanctions Implementation to seek further information on this matter and to explore what options are available to the Committee.
33.We do not accept the argument that HMRC’s duty of confidentiality means that this information cannot be released and the responses we received from the Treasury did not answer the points that we raised. We only wish to know, definitively, whether HMRC has collected tax on these assets, the aggregate total amount of any tax HMRC has received, and the amount it receives each year. We hope that the Office of Financial Sanctions Implementation will be able to provide more information on this issue. The Government should release information on how much tax has been collected from Libya’s frozen assets. If tax is being collected, then the Government must explain why this money is not being used to finance a victims’ reparations fund.
Licences to release frozen assets
34.In November 2018, sections of the media reported that the Libyan Investment Authority had named the UK among five EU countries which do not view the dividends and interest on holdings as frozen under the UN sanctions. One article noted that a UK Treasury spokesperson declined to say whether the UK Government had released frozen funds.62
35.During our evidence session, Mr Williams told us that, as far as he was aware, the Government had not released any interest on frozen assets.63 The Minister later wrote to the Committee to explain the procedure for releasing assets clarifying that the Treasury did not release assets itself but could permit others to do so:
HM Treasury may grant permission for frozen funds to be released, by issuing a licence where relevant derogations apply, however a licence does not compel financial institutions to release funds and the decision to do so is theirs alone.64
This did not answer the substantive question posed as to whether the Treasury has ever released funds or the interest or dividends accrued thereon.
36.The Treasury later confirmed that, in contrast to Mr Williams’ comments, several licences had, in fact, been issued:
I can confirm that HM Treasury issued 15 licences to deal with Libyan frozen assets or to make funds or economic resources available to designated persons for specific purposes between April 2017 and March 2018.65
The information provided by the Treasury, however, also did not address several substantive points that we raised. The individuals or organisations to whom licences are issued remains unknown, with the Treasury citing data protection principles as the reason not to release the information.66 Furthermore, the Government has not disclosed whether those financial institutions have acted upon those licences and released funds.
37.We received contradictory information from the Government on the issuing of licences and we have subsequently learned that licences have been issued. This alone illustrates the need for an individual tasked with ensuring greater cross-government working in this area. The issuing of licences releasing the interest or revenue from frozen Libyan assets is a worrying trend, it is clear that these assets are being more actively managed than previously thought. It will be most unjust if all Libyan frozen assets are issued such licences and therefore released before a compensation package is agreed for victims of Libyan sponsored IRA terrorism. The Government should release as much information as legally possible on who licences are issued to and whether these financial institutions have in fact released the funds. In the future, the Government should inform Parliament via a Written Statement when HM Treasury intends to issue a licence for any frozen Libyan assets to be released.
Conclusion
38.Whilst the rhetoric of this Government has been supportive of the victims of Gaddafi-sponsored IRA terrorism, this is yet to translate into tangible progress in supporting and compensating those affected. This contrasts sharply with the actions of the governments of the United States, Germany and France who have secured compensation for victims. During our predecessors’ inquiry, witnesses spoke of the terrible human consequences of Gaddafi’s support and the suffering victims still endure. Many victims have died and will never receive the compensation they deserve. Compensation cannot undo the damage caused by Gaddafi’s support, but it could help to alleviate the suffering of victims. The Government has a moral duty to act to support these individuals.
39.We welcome Government action in appointing an individual to assess the level of compensation necessary for victims. However, the Government can do much more, namely empowering the adviser to have a role in securing compensation for victims and engaging in direct government-to-government negotiations with the Libyan authorities. The Government should also release clear information on the taxable status of, and taxes collected from, Libya’s frozen assets and outline whether the case has been considered for compensating victims from this. The information requested on licences issued for accessing frozen Libyan assets should also be made publicly available, and the House should be notified when they are issued. The Government should carefully consider decisions to issue licences in the future when linked to compensation for victims.
47 United Nations Security Council, Resolution 1973, 17 March 2011
49 United Nations Security Council, ‘Implementation Assistance Notice # 6’, 17 December 2018
50 Q43–44 [Nicholas Williams, Head of North Africa at the Foreign and Commonwealth Office and Department for International Development Joint Unit]
51 Q68 [Nicholas Williams, Head of North Africa at the Foreign and Commonwealth Office and Department for International Development Joint Unit]
52 Q68 [Nicholas Williams, Head of North Africa at the Foreign and Commonwealth Office and Department for International Development Joint Unit]
53 The Rt Hon Alistair Burt MP, Minister of State for the Middle East and North Africa, Letter to the Chair, 11 December 2018
54 The Rt Hon Philip Hammond MP, Chancellor of the Exchequer, Letter to the Chair, 18 December 2018
55 The Rt Hon Philip Hammond MP, Chancellor of the Exchequer, Letter to the Chair, 18 December 2018
56 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
57 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
58 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
59 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
60 Andrew Murrison MP, Chair, Letter to John Glen MP, Economic Secretary to the Treasury, 24 January 2019
61 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 13 February 2019
62 “Libya fund: 5 EU countries think Gaddafi account interest not frozen”, Politico, 16 November 2018
63 Q12 [Nicholas Williams, Head of North Africa, Foreign and Commonwealth Office and Department for International Development Joint Unit]
64 The Rt Hon Alistair Burt MP, Minister of State for the Middle East and North Africa, Letter to the Chair, 11 December 2018
65 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
66 John Glen MP, Economic Secretary to the Treasury, Letter to the Chair, 24 January 2019
Published: 9 April 2019