Examination of Witnesses (Questions 80
- 88)
TUESDAY 4 JULY 2006
DR KERN
ALEXANDER
Q80 Lord Oakeshott of Seagrove Bay:
This is all very interesting. Can I understand how it works? I
think you are saying that US sanctions do apply extra-territorially
but British or EU ones would not. If you are Goldman Sacks in
London, you can either be told what to do by the Americans or
you can be told what to do by the British here, but if you are
Barclays Bank in New York, you cannot be told what to do by the
British Government. Is that correct? It is completely unbalanced.
Dr Alexander: Exactly. All US economic sanctions
are not equally extra-territorial. Some are more so than others
for instance, the Dutch bank ABN Amro was fined $80 million by
the US Federal Reserve Board last December for facilitating payments
to Iranian banks in the Netherlands, not in New York.
Q81 Lord Oakeshott of Seagrove Bay:
Did they pay?
Dr Alexander: They paid the fine. They have
a big operation in New York, of course. They do not want to jeopardise
their business in the US. This applies to money laundering as
well. You have the Patriot Act that allows the Treasury Secretary
to impose so-called special measures on foreign jurisdictions,
foreign banks, foreign transactions and foreign accounts if they
are deemed by the US to be a special money laundering concern,
and so very similar to the economic sanctions legislation, but
the ABN Amro case was the case of a Dutch bank involved in facilitating
transactions for Iranian banks in violation of extra-territorial
US financial sanctions.
Q82 Lord Oakeshott of Seagrove Bay:
Is this whole question being discussed at an EU level? The significance
of it is that if the Americans do that, they are basically saying,
"We know better than you in the EU what is terrorism and
what is not, and we are going to arrogate to ourselves the right
to decide and you are not going to". It does seem a very
strange way to conduct international affairs, to me. That is what
they are saying, is it not? That is the logic of it.
Dr Alexander: That is the result of it, yes.
Q83 Lord Oakeshott of Seagrove Bay:
Is this being seen by the EU? It is outrageous.
Dr Alexander: I do not know. I do know that
after the Helms-Burton Act was adopted in 1996 the EU adopted
a blocking regulation, similar to Britain's Protection of Trading
Interests Act. It was a regulation that prohibited any EU business
or person from complying with the Cuban Trade Embargo and with
the Iran Sanctions Act. It had to be implemented throughout the
EU. That has not been done with respect to these particular sets
of sanctions or regulations. The EU could do that. They could
say, "We are going to issue an order to prohibit a European
bank from complying with these United States sanction requirements,"
but if they did the bank would probably lose its licence in the
US and the bank would probably say, "Look we'll just pay
the fine."
Q84 Lord Oakeshott of Seagrove Bay:
That is why the bank cannot stand up to it, so it has to be a
political decision.
Dr Alexander: Exactly, it has to be political.
Q85 Lord Macdonald of Tradeston:
On the other hand, a determined United States policy has proved
to be more effective in the fight against terrorism than the rather
disorganised and ineffective European response that we have seen
in the past. Might not this be one of the catalysts for a more
effective united front against terrorism?
Dr Alexander: It could certainly bring together
the EU Member States to try to co-ordinate their policies either
in response to the problem of terrorism or in response to the
US. In fact, I think a policy suggestion might be for the EU to
engage in negotiations with the US and say let us enter into an
agreement so that we can allocate jurisdiction over these global
transactions. This is what happened in competition law. After
the US was unilaterally applying anti-trust law in the 1980s,
upsetting European countries, the Justice Department and the EU
Competition Commission came together and entered into a series
of bilateral agreements that said if we both are going to prosecute
firms that are doing business in each other's jurisdictions for
things they did in the other jurisdiction, we should have an agreement
on how to co-ordinate the investigation, co-ordinate the enforcement
action and basically to allocate on a jurisdictional basis what
is going on. This should be done with sanctions but it is not
and so you get the US acting unilaterally. The US would say that
they are engaging in multilateral negotiations trying to get the
European partners to come on board, but if they do not get full
support, they are going to do what they are going to do anyway.
Lord Oakeshott of Seagrove Bay: We do
not call that partnership.
Q86 Lord Layard:
On money laundering, I just wanted to check there is the asymmetry
that has been suggested. Supposing the EU decided somebody was
a terrorist who America did not think was a terrorist and some
American bank was handling their account, could the Europeans
prosecute that American bank in a European court?
Dr Alexander: The answer to your question for
criminal prosecutions is no. My reading of the Terrorism Act 2000
and the Anti-Terrorism, Crime and Security Act 2001 is that the
third party liability provisions for financing terrorism are not
extra-territorial under UK law, and that is correctly so. It is
probably too difficult to try to go after bankers in the Middle
East. You want to try and focus on people in the UK and co-ordinate
through EU Member States. The UK could amend the legislation and
make it more extra-territorial regarding people abroad who are
facilitating financial transactions with so-called terrorist groups,
but they would want to co-ordinate that with other countries and
do it in a multilateral fashion. The US has not really done that.
The US did give British pressure to designate the Real IRA and
some of the other Irish terrorist groups as terrorists under US
law, but there was some political resistance towards that.
Q87 Lord Oakeshott of Seagrove Bay:
That is why they will not ratify the current treaty in the Senate,
which is the whole NatWest case. That is why it is so outrageous.
There is no suggestion there of terrorism, as far as we know.
It is extraordinary.
Dr Alexander: Exactly.
Q88 Chairman:
Has everybody finished? Sir, it has been a fascinating exposition
and I am very grateful to you for coming along and talking to
us and helping us at this relatively early stage in our inquiry.
We are very grateful indeed to you, thank you very much.
Dr Alexander: Thank you very much, my Lord Chairman.
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