Sanctions and Anti-Money Laundering Bill [HL] Contents

Chapter 2: Delegated powers

Sanctions regulations

4.The Bill envisages the use of delegated, or ministerial, powers at two levels: the legislative level (in terms of making regulations) and the administrative level (in terms of making decisions in individual cases using powers conferred by regulations made under the Bill). Taken in combination, these ministerial powers are significant; their use is liable to have a substantial impact on the lives of those affected. The Supreme Court drew attention to this when, in HM Treasury v Ahmed,1 it struck down regulations that had purportedly been made under the United Nations Act 1946 for the purpose of freezing the assets of certain suspected terrorists.

5.Clause 1 creates a new statutory power authorising ministers to make ‘sanctions regulations’. The power is triggered when a minister considers it appropriate to make regulations for one or more of the following purposes: complying with UN or other international obligations; furthering the prevention of terrorism; pursuing the interests of national security or of international peace and security; and furthering a UK Government foreign policy objective.

6.Clause 1 is a Henry VIII power. This is a consequence of clause 44(2), which provides that clause 1 regulations may make “supplemental, incidental, consequential, transitional or saving provision,” including “provision amending, repealing or revoking enactments (whenever passed or made)”; this includes enactments of the devolved legislatures. (An equivalent provision is made in respect of money laundering regulations made under clause 41.) The Bill imposes no requirement to consult devolved institutions before this power is exercised so as to amend devolved legislation. We noted a comparable issue in the Space Industry Bill2 and the Wales Bill 2016–17.3 If it is the Government’s intention that it would, in practice, liaise with the devolved administrations prior to the exercise of this power, such a requirement could be written into the Bill.

7.The Government said recently that a similar power “reflects well-established reciprocal arrangements” that enable Welsh or Scottish ministers to amend Acts of Parliament.4 However, these arrangements are not fully reciprocal, as Welsh and Scottish legislation can authorise devolved ministers to amend UK legislation only within devolved competence, whereas UK legislation can authorise UK ministers to amend enactments of the devolved legislatures in ways that would trespass upon devolved competence.The House may wish to consider whether the consent of the devolved legislatures should be required when this power is used to amend or repeal legislation enacted by them—as, for example, is the case for certain statutory instruments made under the Legislative and Regulatory Reform Act 2006 and the Public Bodies Act 2011.

8.A number of different types of sanctions regulations can be made under clause 1. They are enumerated in clauses 2–7:

9.Clause 14 confers significant additional regulation-making and other powers on ministers to, in effect, selectively apply sanctions regimes provided for by regulations made under clause 1. The effect of clause 14 is to extend the regulation-making power conferred by clause 1 in three ways, by enabling ministers to: (i) create exceptions to requirements or prohibitions set out in clause 1 regulations; (ii) create a licensing regime so as to make lawful activities that would otherwise be unlawful under clause 1 regulations; and (iii) provide for requirements in clause 1 regulations to be subject to such exceptions as are directed by ministers. A related power is conferred by clause 35, which enables ministers to make ‘suspending regulations’ which suspend requirements or prohibitions contained in clause 1 regulations.

10.Clause 39(1) enables Part 1 of the Bill (which is concerned with sanctions) to be amended by regulations “so as to authorise regulations under section 1 to impose prohibitions or requirements of kinds additional to those for the time being authorised by Chapter 1.” Clause 39(2) goes on—”without prejudice” to the generality of clause 39(1)—to authorise the making of regulations that amend the definition of “sanctions regulations” in clause 1(4). This means that new types of sanctions regulations can be added to those specified in the Bill. This is a significant power, which would enable new forms of sanctions to be established by ministers without the need for new primary legislation. Clause 39(2) stipulates that it is not to be taken to authorise additions or amendments to the overarching purposes for which sanctions regulations can be made (as set out in clause 1(1) and (2)). However, it is not clear that this restriction applies to regulations made under clause 39(1) (as distinct from regulations made under clause 39(2)).

11.We do not consider it appropriate for ministers to have powers as broad as those conferred by clause 39. In particular, we consider it constitutionally inappropriate for ministers to have the power, by regulations, to create new forms of sanctions. Further, clause 39 should be amended to make clear that the proviso at the end of clause 39(2) (concerning the amendment of clause 1(1) and (2)) applies to the power conferred by clause 39(1) and (2).

12.The Bill therefore confers substantial delegated powers. In practice, a delegated powers model is inevitable, given the practical difficulties that would arise if Parliament had to legislate to create and amend individual sanctions regimes. Indeed, sanctions are currently implemented by secondary legislation as a result of the ECA. However, given that the purpose of the Bill is to address the need for domestic powers to impose, amend and revoke sanctions after Brexit, it is important to ensure that there are sufficient safeguards and there is adequate parliamentary scrutiny to make the delegated powers constitutionally acceptable.

Designation powers

13.The effect of clauses 2–7 is that regulations imposing sanctions will often apply to ‘designated persons’. For this purpose, ‘persons’ can be natural or legal, and the definition extends to associations and combinations of persons. Clause 9 authorises ministers to include ‘designation powers’ in regulations made under clause 1, and provides that such regulations need not require a person whose designation is contemplated to be warned of that fact.

14.Clause 10 deals with powers that authorise the designation of named individuals. Such designation is permitted only when the minister considers it appropriate (with reference to the purpose of the regulations) to designate a person and when the minister has reasonable grounds to suspect that the person is an ‘involved person’ (e.g. because the person has been involved in an activity specified in the regulations). The current legal test applied by the UK courts and the Court of Justice in Luxembourg, in part by reference to the European Convention on Human Rights, is to ask whether designation is proportionate in all the circumstances, including the effect on the individual. At second reading, the Minister, Lord Ahmad of Wimbledon, said that “where human rights are affected, a minister will always need to comply with the European Convention on Human Rights and Strasbourg case law, and that will include an assessment of proportionality.”6 We are grateful for the Minister’s confirmation that an assessment of proportionality will be required when making a designation affecting an individual’s human rights. We recommend that this important limitation on ministers’ powers should be stated expressly on the face of the Bill.

15.Clause 11 allows for the designation of persons by description as opposed to by name. This is a change from sanctions currently in operation under the ECA, as EU law requires the naming of persons or entities subject to sanctions. Otherwise there is the risk of uncertainty for the persons concerned and for those who have to apply the sanctions—in particular banks required to freeze the assets of individuals. Clause 11 raises constitutional concerns, given that legal certainty is a central to the rule of law. Lord Ahmad of Wimbledon said at second reading that “Designation of persons by description is necessary to deal with members of proscribed terrorist organisations who, for example, conceal their identities. We will also provide as much detail as we can so that businesses and banks can carry on their business.”7

16.We invite the House to consider whether, given the need for legal certainty, ministers should have the power to designate by description as well as by name. We further invite the House to consider whether, if ministers are to have the power to designate by description, the Bill should include additional safeguards. Such safeguards might, for instance, further limit the circumstances in which designation by description is permitted (e.g. by stipulating that the power must be used only when designation by name is impracticable).

17.Clause 2(1) allows for financial sanctions to be imposed on persons “connected with a prescribed country”, with clause 50(4) giving the minister power to make regulations specifying the relevant connection. Lord Ahmad of Wimbledon explained:

“This is necessary to ensure that broad sectoral measures can be imposed which restrict general access to financial persons and markets. There are other elements within this and exemptions that may be applied, so I will write to the noble Lord and place the letter in the Library as well.”8

18.We are concerned about the breadth of the power conferred on ministers by clause 2, read with clause 50(4), to impose financial sanctions on “persons connected with a prescribed country”. The House may wish to consider whether it is appropriate for ministers to enjoy such a broad power, which is not confined to persons who have committed acts of misconduct or who have a personal responsibility for the policy of a repressive state or who have a particular status in that state.

Criminal offences

19.Clause 16 concerns the enforcement of sanctions. It allows the clause 1 regulation-making power to be used to provide for the enforcement of relevant requirements and prohibitions. This extends to creating criminal offences punishable by up to 10 years’ imprisonment. The regulations may also make provision “dealing with matters relating to those offences, including defences and evidentiary matters.”9 Clause 41 provides a similar power in respect of money laundering, with a maximum penalty of two years’ imprisonment.

20.We have recommended previously that delegated legislation should not be used to create new criminal offences.10 The Delegated Powers and Regulatory Reform Committee said in 2014 that “Where the ingredients of a criminal offence are to be set by delegated legislation, the Committee would expect a compelling justification.”11

21.We are deeply concerned that the power in clause 16 may be used to create an offence for which a sentence of imprisonment for up to 10 years may be imposed, and that rules on the evidence to demonstrate that the case is proved, and defences to such charges, are subject to ministerial regulation. We consider that such regulation-making powers are constitutionally unacceptable and should not remain part of the Bill.

1 HM Treasury v Ahmed [2010] UKSC 2

2 Constitution Committee, Space Industry Bill [HL] (2nd Report, Session 2017–19, HL Paper 18), para 8

3 Constitution Committee, Wales Bill (5th Report, Session 2016–17, HL Paper 59), para 88

5 Terms such as ‘funds’, ‘economic resources’, ‘financial services’ and ‘freeze’ are defined in broad terms elsewhere in the Bill (Sanctions and Anti-Money Laundering Bill [HL] clauses 48–49 [HL Bill 69] (2017–19).

6 HL Deb, 1 November 2017, col 1422

7 Ibid.

8 Ibid.

10 See, for example, Constitution Committee, Co-operative and Community Benefit Societies and Credit Unions Bill (19th Report, Session 2008–09, HL Paper 158); Constitution Committee, Deregulation Bill (4th Report, Session 2014–15, HL Paper 38)

11 Delegated Powers and Regulatory Reform Committee, Special Report: Quality of Delegated Powers Memoranda (7th Report, Session 2014–15, HL Paper 39), para 38

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