Legislative Scrutiny: The Sanctions and Anti-Money Laundering Bill Contents

4Due process for designated persons

33.When the Bill was introduced, there was no requirement placed upon Ministers to ensure that individuals were notified of designations or given reasons for their designation. We welcome the amendments that were agreed at Report stage in the Lords that rectified these deficiencies.

34.However, there are a number of provisions in the Bill which restrict the rights of designated persons. Firstly, the Bill relieves the Government from its current obligation to conduct annual reviews of designation decisions, and replaces this with a requirement for triennial reviews. Secondly, the Bill removes existing full appeal rights and limits the jurisdiction of the courts to the application of judicial review principles. Thirdly, the Bill further restricts the courts’ powers to award damages, by limiting this to cases where the impugned decision was taken in bad faith or negligently. Fourthly, the Bill repeals the oversight of the Independent Reviewer of Terrorism Legislation in respect of terrorist-related sanctions.

The right to review of designation decisions

35.The Bill provides for various powers of review by the appropriate Minister and various rights of designated individuals to request variation, revocation, or review of their designation. A person’s right to challenge a designation depends upon whether the sanctions derive from the UN, the EU or the UK autonomously.

Autonomous sanctions (UK)

36.Clauses 19 and 20 provide individuals with a right to request variation or revocation of designations and a power for Ministers to vary or revoke designations made under regulations at any time. Whilst this right is welcome, no guidance is given as to the exercise of this power.

37.Clause 21 of the Bill introduces a periodic review of designation. Currently designations are reviewed annually to ensure that they continue to be justified. However, clause 21 of the Bill reduces the frequency to a triennial review. A shorter time frame can be applied, but this is discretionary. The Government states that the other safeguards in the Bill provide a robust package of safeguards so an annual re-examination of each designation is unnecessary as well as resource intensive.43

38.Annual review is an important mechanism for ensuring that sanctions remain necessary and proportionate. David Anderson QC noted in his final report on TAFA that “annual review of all designations continues to be an effective mechanism”.44 As a point of comparison, TPIMs can be imposed for a maximum of two years (after which they expire unless new circumstances arise) and must be reviewed annually. In Ahmed, Lord Brown stated that financial sanctions could be “even more paralyzing” than control orders (now replaced by Terrorism Prevention and Investigation Measures (TPIMs)).45An annual ministerial review of the regulations made under clause 1 is set out in clause 26 of the Bill, but this is a “high level political review of the overall regime”46 rather than a review of the evidence underpinning each designation. We do not consider this to be sufficient to replace the annual reviews of individual designations which are currently required under TAFA. We also note that the number of designation decisions under the TAFA regime is relatively low. We have seen no evidence that annual reviews are currently unsustainable. We recommend that clause 21 is amended to require annual reviews of designation decisions. (See Appendix 1).

EU Sanctions

39.The EU has autonomous powers to target persons independently of the UN, in addition to its power to implement UN sanctions.47 The EU can establish sanctions regimes under which it can list and de-list individuals, freeze assets and impose travel bans in response to nominations made by Member States or third states to tackle particular terrorist groups or regimes.

40.Clauses 29 to 32 set out temporary powers which apply for two years after the UK’s exit from the EU. These powers allow changes to be made to the EU sanctions regimes which have been retained in domestic law after exit, allowing Ministers to add or remove names from the lists of designated persons designated at the EU level.

41.We note that the House of Lords EU Committee has recently conducted a short inquiry into the legality of EU sanctions, following a number of decisions by the EU courts to strike down sanctions on the basis of a failure to uphold due process rights as set out in the Charter of Fundamental Rights. In their report, the Committee raised a number of concerns, particularly with regard to the EU’s re-listing practices, including: a) that annulment of sanctions by a court is often rendered ineffective by the practice of relisting individuals or companies; b) that some re-listings occur before a judgment has been issued on the original sanctions; and c) that relisting is often on the basis of slightly different wording as opposed to materially different matters.48 The Lords EU Justice Committee undertook correspondence on these issues with the FCO, and will conclude its deliberations in early 2018. We look forward to the outcome of their correspondence.

42.Under clauses 29–32, persons on retained EU sanctions lists have a right to request their removal from the list. Clause 30 provides that the requesting person must be treated as if they are removed from an EU sanctions list if the Minister does not have “reasonable grounds to suspect” that the designated person is involved in a specified activity or that the designation is not “appropriate”. Our concerns regarding the threshold test in relation to domestic sanctions apply equally to transitional retained EU sanctions lists.

43.However, we understand the desirability of consistency in the sanctions regimes between the UK, the EU, and the UN as far as possible. Nonetheless, we regret that to achieve an effective international regime it is necessary to accept a weaker standard of proof than the UK applies to its autonomous measures.49 We urge the Government to use its influence to ensure that international sanctions do not interfere unjustifiably with human rights. As the Lords Justice Committee has highlighted in its correspondence with the FCO, there is room for significant improvement in the EU regime.

UN Sanctions

44.The UK currently implements UN designation orders through EU law. The Bill therefore gives effect to UN sanctions following the UK’s exit from the EU. However, the right to challenge designation under a UN sanction regime is very limited. At UN level, there are sanctions targeting countries, regimes, and Al Qaeda and ISIL affiliated terrorism. The latter sanctions regime has had some due process developments over recent years and is largely run by the Sanctions Committee (also known as the 1267 Committee)50

45.The Sanctions Committee has the power to designate and remove persons on request of Governments. States can raise objections to the ‘Focal Point for De-Listing’ which are then communicated to the Sanctions Committee. However, this process has been found to be an ineffective remedy by the European Court of Human Rights.51 The Office of Ombudsperson has power to assist with the assessment of de-listing requests in relation to Al-Qaida and ISIL-related sanctions, but Professor Clive Walker notes that these inquiries are secretive, lack judicial credentials, and have been held to be insufficient guarantees of due process by both the CJEU and the European Court of Human Rights.52

46.Clause 13 enables designation where the UK has an obligation under international law to designate persons on UN lists. Regulations made under the Bill must provide that persons named on a UN list are designated.53 The UK is under a binding obligation in international law to designate persons on UN lists and cannot therefore unilaterally revoke the designation. There is very little scope for an individual to challenge these designations. Clause 22 provides a right of review for persons on UN lists but this is limited to requiring the appropriate Minister to using their “best endeavours” to persuade the UN to remove the person from the UN list. Under the Counter Terrorism Act 2008, individuals can apply to the High Court to have UN sanctions set aside,54 although these proceedings can only be initiated against the Treasury and will have no impact at the UN level.55

47.We recognise that the UK is bound by international law to implement UN listings. However, where there is scope within the domestic system to strengthen due process rights, this should be done. Regular periodic review of designations is essential for ensuring that decisions remain justified, necessary, and proportionate and do not interfere with rights for longer than required.

Restricting the jurisdiction of the courts to judicial review principles

48.Clauses 33–34 of the Bill set out the provisions relating to court reviews. Clause 33 provides a right to challenge various Government decisions as a measure of last resort. Individuals must first seek variation or revocation before commencing litigation. Clause 34(2) removes the power of the courts to award damages unless the impugned decision was made in bad faith or negligence.

49.Currently, under TAFA, an individual subject to an asset-freeze can exercise full rights of appeal. However, when TAFA was first introduced, the Bill circumscribed the court’s jurisdiction to one of judicial review. Judicial review confines the court to review whether the decision was unlawful, unreasonable, or procedurally unfair, but does not allow it to conduct a full merits review. However, at Committee stage, the Bill was amended to allow challenges to interim and final asset-freezes by way of full appeal to the High Court or Court of Session. Noting the civil liberties concerns that had been raised at Second Reading debate, Lord Sassoon tabled an amendment acknowledging that challenges to decisions to impose, vary or renew asset freezes should be heard by the courts under an appeal rather than a judicial review procedure to ensure “that there will be a robust, in-depth review by the courts of the Treasury decisions.”56

50.The current Bill has regressed from this position by limiting the courts’ powers to judicial review.57 We are concerned that this standard of review is inadequate and may risk interference with the right of access to a court. Article 6(1) does not guarantee the right to access a court of full jurisdiction but it does require “sufficiency of review” of administrative decisions. Judicial review is not always sufficient. In Tsfayo v UK, the European Court of Human Rights made clear that where the original decision maker was responsible for taking an assessment largely based on factual determinations, the flaws in the decision making process cannot be remedied on judicial review, which is incapable of reassessing the facts of any case.58

51.In assessing whether there is “sufficiency of review” for the purpose of Article 6(1), the court will take into account a number of factors as set out in Fazia Ali v UK:

a)the powers of the judicial body;

b)the subjectmatter of the decision appealed against, in particular, whether or not it concerned a specialised issue requiring professional knowledge or experience and whether it involved the exercise of administrative discretion and if so, to what extent;

c)the manner in which that decision was arrived at, in particular, the procedural guarantees available in the proceedings before the adjudicatory body; and

d)the content of the dispute, including the desired and actual grounds of appeal.59

Whether judicial review is sufficient for the purpose of Article 6(1) will therefore depend upon consideration of the whole legislative scheme and the safeguards involved.

52.In ‘traditional’ judicial review cases, the courts are unable to make their own determination on the facts. They are limited to making a determination as to the lawfulness, reasonableness, and procedural fairness of the decision. However, the High Court has previously treated its judicial review jurisdiction over control orders (the precursor to TPIMs) as tantamount to an appellate jurisdiction due to the severity of the impact on individuals. For example, in Secretary of State for the Home Department v GG, a case concerning the imposition of a control order, the High Court considered section 3(11) of the Prevention of Terrorism Act 2005 which required them to “apply the principles applicable on an application for judicial review”. Mr. Justice Collins held that he “had to consider all evidence, whether or not known to or reasonably ascertainable by the SSHD at any stage during the subsistence of the order, to make any necessary findings of fact and then to decide whether the order or any renewal or any obligation could reasonably have been imposed … ..The statutory provision is poorly drafted since the principles of judicial review normally preclude reliance by a claimant on facts unknown and unavailable to the decision maker when the decision was made. That, as I have said, cannot apply in these cases.”60

53.We also note that the provisions of sections 66–68 of the Counter-Terrorism Act 2008 (CTA) will apply to any judicial review claims brought under clause 33. These provisions enable special rules of the court to be made in respect of “financial restrictions proceedings”. Such rules are set out in Part 79 of the Civil Procedure Rules (‘CPR’), and provide that a designated person is “entitled to adduce evidence and to cross-examine witnesses”.61 We accept that where these special rules apply, the jurisdiction of the court is wider than in traditional judicial review cases. It is therefore likely that, regardless of the limitations in clause 33, the courts will interpret their jurisdiction more widely than traditional judicial review constraints and will apply an “intense scrutiny” to designation decisions. However, this is not reflected on the face of the Bill. The powers in clause 33 at present must be interpreted by reference to the Counter-Terrorism Act 2008, Part 79 of the Civil Procedure Rules, and to case law.

54.In our view, it is undesirable to leave any room for uncertainty as to the courts’ jurisdiction. In cases involving severe interferences with the fundamental rights of individuals, they should have a full right of appeal. We therefore recommend that clause 33(4) is amended to provide for a full right of appeal for designated persons. (See Appendix 1).

Limitations on the right to a remedy

55.Clause 34 of the Bill provides that the court can only award damages in where the impugned designation decision was made in bad faith or in negligence. This applies to designations made autonomously and under the UN regime. This limitation on awards of damages engages Article 13 (right to an effective remedy). However, the Government states that this restriction is compatible with the Convention for four reasons.62

56.Firstly, the Government states that removal from the designation list would place the person in the position they would have been in had the breach not occurred. There is no need for a further remedy.63 We disagree. Section 8 of the Human Rights Act 1998 enables a UK Court to grant such relief or remedy, within its powers, as it considers just and appropriate. Section 8 then places further restrictions on the awarding of damages, requiring that the Court be “satisfied that the award is necessary to afford just satisfaction”. In determining any award of damages, that section then requires a UK Court to “take into account” the principles applied by the European Court of Human Rights in relation to the award of compensation under Article 41 of the Convention. The fundamental principle of an award of just satisfaction under the Convention is restitutio in integrum. The applicant should, in so far as possible, be placed in the same position as if his Convention rights had not been infringed. Removal from the designation list might not place the person in the position they would have been in had the breach not occurred. They may have suffered pecuniary and/or non-pecuniary loss that cannot be adequately compensated by simply quashing the designation decision. The courts are instructed to have regard to any other remedies or relief granted when determining whether an award is necessary, but a remedy of another kind by no means precludes an award of damages.64 It is not therefore correct to state that “there is no need for another remedy”.

57.Secondly, the Government states that an award of damages under Article 41 ECHR is discretionary and only arises where “necessary”.65 We agree, but note that the Bill, as drafted, removes the court’s discretion to determine what is “necessary” and we therefore consider that there could be gaps falling short of the Convention requirements.”.

58.Thirdly, the Government states that an award of damages “may depend upon whether the breach was inadvertent, or arose from a misunderstanding, or was the result of a conscious decision to breach ECHR rights”.66We accept this has been stated in Clayton and Tomlinson and cited by the courts. However, this has not been used as authority for only allowing damages where breaches were based on bad faith or negligence. We would emphasise the operative use of the word “may”. Whether there is fault, and to what extent, is among the factors for the court to take into account when determining what is appropriate.

59.Fourthly, the Government states that in Wainwright, the House of Lords said that whether or not a remedy in damages is required may depend on whether the act complained of was done “intentionally, negligently or accidentally.”67 However, the statement relied upon in Wainwright is an obiter statement of Lord Hoffman who appeared to suggest there would be no damages unless the wrongdoing was intentional. This statement is rebutted in Clayton and Tomlinson who point out that this view cannot be reconciled with Convention case law as awards of just satisfaction are not confined to intentional breaches. Section 8(4) HRA requires the domestic court to take into account the jurisprudence of the European Court of Human Rights when deciding whether an award of damages is necessary to afford just satisfaction for violations of a Convention right.

60.We are mindful of the risk that a culture of prohibitive damages could prevent the ability of the Government to use sanctions as a useful tool to seek to combat horrific human rights abuses in third countries. However, we also underline the importance of compliance with the right to an effective remedy, as protected by Article 13 of the Convention. It would not be helpful for Parliament to pass a Sanctions Bill that was then subject to successful (and costly) judicial challenge before the UK Courts or the Strasbourg Court for failure to adequately provide for effective remedy under Article 13 of the Convention. Colleagues may wish to test the Government’s thinking on this matter further in the course of their legislative scrutiny. We therefore propose a probing amendment to clause 34(2) dealing with the right to an effective remedy. This may establish why the Government does not appear concerned that, as drafted, the Bill would seem to be vulnerable to challenge as non-compliant with Article 13 of the Convention.

Closed material proceedings

61.Closed material proceedings (CMPs) are permitted by clause 35 of the Bill. The compatibility of CMPs and special advocates with the right to a fair trial has been the subject of a number of judicial decisions. In general, the right of access to a court is only meaningful if the person who is the subject of the sanction has sufficient information about the case against them to be able to give effective instructions to those representing them. In Bank Mellat, the Court of Appeal considered CMPs in the context of sanctions cases and held that “the requirements of article 6(1) are such that the information to be provided by the Treasury must not merely be sufficient to enable the Bank to deny what was said against it. The Bank must be given sufficient information to enable it to actually refute, in so far as possible, the case made against it.”68 Similarly, in Kadi, the CJEU held that unless the individual subject to an asset-freeze has a proper opportunity to answer the case against them and to put their case, they are deprived of the right to effective judicial protection.69 Although this legal standard has been set out by the domestic and EU courts, it is not set out in the Bill itself.

62.In order to ensure compliance with Article 6, the standard of disclosure should be sufficient to ensure persons challenging their designation are given sufficient information to enable them to refute, as far as possible, the case against them. We expect that Ministers, when giving a “statement of reasons” as required by clauses 11(8) and 12(8), will adhere to this standard.

Removal of independent oversight

63.By virtue of section 31 of TAFA, the Independent Reviewer of Terrorism Legislation is under a statutory duty to report annually on the implementation of that Act. During the consultation on the Bill, several respondents advocated the independent review of sanctions or an ombudsperson model. However, the Government has stated that administrative and judicial review provides sufficient procedural protection for designated persons.70 By repealing TAFA and not replicating s.31 of TAFA in the Bill, the Government has removed independent oversight of terrorist-related sanctions.

64.In evidence to the Committee on 31 January 2018, Max Hill QC (the current Independent Reviewer of Terrorism Legislation) explained that whilst his remit was limited to terrorist designations as opposed to the entire sanctions regime, he did not believe that it was the Government’s intention to remove his oversight of any measures relating to domestic counter-terrorism. He further explained that he was seeking clarification from the Government on the matter and was grateful for the assurances he had received thus far. However, he agreed that “looking at the black letter of the draft law and even at the correspondence that I have seen, no solution has yet been provided.”71

65.In addition to the limitations placed on the courts, the Bill has removed existing independent oversight arrangements in relation to terrorist-related sanctions. We see no reason for the removal of this oversight function and invite the Government to provide this. Pending any such explanation we recommend that the powers of review currently vested in the Independent Reviewer are retained and set out clearly on the face of the Bill. (See amendment in Appendix 1).

Lack of grounds for licensing and exemptions to sanctions

66.The Bill allows for exemptions and licenses to be granted to disapply the effect of sanctions in particular circumstances.72 For example, an exemption may be granted to allow the export of equipment for use in an humanitarian operation. Licenses may be granted to allow persons to take actions which would otherwise breach the prohibitions in the regulations. This is particularly important for ensuring that interferences with the rights of designated and associated persons, as well as those operating in affected regions, are strictly necessary and proportionate. In the absence of licences and exemptions, such powers would fall foul of the requirements of human rights law, as well as being contrary the UK’s foreign policy and trade interests. The licensing and exemption process enables crucial activities to continue unhindered by sanctions, such as the delivery of aid and humanitarian work taking place in sanctioned regions or countries. Licensing and exemptions are key mechanisms for guarding against unlawful interference with Convention rights. However, the Bill does not set out the grounds or criteria for issuing such exemptions or licenses. The Explanatory Notes to the Bill offer some examples of licensing grounds, such as payments necessary for basic expenses, humanitarian purposes, or diplomatic missions.73 However, it is not clear on the face of the Bill how the licensing process will work as the detail will be contained within regulations. The Law Society notes that the licensing process is “extremely important in terms of access to justice (as it enables designated persons to access legal advice) and in relation to humanitarian work”.74 We understand from correspondence with the Government that their intention is to publish guidance on the matter,75 but the absence of detail in the Bill precludes scrutiny of this important regime.

67.In evidence to the Committee on 31 January 2018, Max Hill QC commented that a number of leading charities have expressed to him the need for safeguards for their work and that they are currently “anxious at the moment lest any support seems to be ex post facto or piecemeal.” He further commented that, “unless, in advance, there is some general licence that can be provided and assurance provided for those NGOs, the valuable work, resource and input into the project could fall at a late hurdle, and that would be counterproductive.”76

68.We recommend that the publication of the guidance regarding licensing and exemptions is expedited.

43 Letter from Lord Ahmad of Wimbledon, Minister of State for the Commonwealth and the UN, to Rt Hon Harriet Harman MP QC, Chair, Joint Committee on Human Rights, 15 January 2018, p 4

44 David Anderson QC, Fourth Report on the Operation of the Terrorist Asset Freezing Act 2010, March 2015, p 30, para 6.2

45 HM Treasury v Ahmed, [2010] UKSC 2, para 192

47 See Council Decision CFSP 2016/1693 and Council Regulation 2016/1686 of 20 September 2016

48 House of Lords, Report of the Select Committee on the European Union Committee Justice Sub-Committee, Session 2016–17, HL Paper 102

49 Clause 30 adopts the “reasonable grounds to suspect” threshold.

50 Established by UNSCR 1267 of 15 October 1999 to deal with the Taliban but later extended to include Al-Qaida, and ISIL.

51 Al-Dulimi v Switzerland, App. No. 5809/08, 26 November 2013, para 118

52 Professor C. Walker (SAB0004), para 2.4

55 Professor C. Walker (SAB0004), para 2.5. Article 103 of the UN Charter provides that “In the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail.”

56 HL Deb, 6 October 2010, col 120 [Lords Chamber]

58 Tsfayo v UK [2006] ECHR 981

59 Fazia Ali v UK (Application No. 40378/10)

60 Secretary of State for the Home Department v GG [2016]. [2016] EWHC 1193 (Admin)

61 Civil Procedures Rules, Part 79, rule 79.22

62 Foreign and Commonwealth Office and HM Treasury (SAB0005)

63 Foreign and Commonwealth Office and HM Treasury (SAB0005), para 45

64 Human Rights Act 1998, Section 8(3)

65 Foreign and Commonwealth Office and HM Treasury (SAB0005), para 46

66 Foreign and Commonwealth Office and HM Treasury (SAB0005), para 46

67 Foreign and Commonwealth Office and HM Treasury (SAB0005), para 47

68 Bank Mellat, [2010] EWCA Civ 483

69 Kadi v European Commission, Case T-85/09, (30 September 2010) at paras 171–181

70 Foreign and Commonwealth Office, HM Treasury, Department for International Trade, Public consultation on the United Kingdom’s future legal framework for imposing and implementing sanctions, Government response, Cm 9490, August 2017, p 15

71 Oral evidence taken on 31 January 2018, HC (2017–19) 765, Q 6 [Max Hill QC, Independent Reviewer of Terrorism Legislation]

74 The Law Society (SAB0001)

75 Letter from Lord Ahmad of Wimbledon, Minister of State for the Commonwealth and the UN, to Rt Hon Harriet Harman QC MP, Chair, Joint Committee on Human Rights, 15 January 2018

76 Oral evidence taken on 31 January 2018, HC (2017–19) 765, Q 6 [Max Hill QC, Independent Reviewer of Terrorism Legislation]

1 March 2018