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Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022

Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022

Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022

Debated on Monday 21 March 2022

The Committee consisted of the following Members:

Chair: Derek Twigg

† Aiken, Nickie (Cities of London and Westminster) (Con)

† Ali, Rushanara (Bethnal Green and Bow) (Lab)

† Baynes, Simon (Clwyd South) (Con)

Betts, Mr Clive (Sheffield South East) (Lab)

† Bhatti, Saqib (Meriden) (Con)

† Buchan, Felicity (Kensington) (Con)

† Cleverly, James (Minister for Europe and North America)

† Doughty, Stephen (Cardiff South and Penarth) (Lab/Co-op)

† Green, Damian (Ashford) (Con)

† Hammond, Stephen (Wimbledon) (Con)

† Harris, Rebecca (Lord Commissioner of Her Majesty's Treasury)

† Jones, Gerald (Merthyr Tydfil and Rhymney) (Lab)

† Levy, Ian (Blyth Valley) (Con)

Osamor, Kate (Edmonton) (Lab/Co-op)

† Ribeiro-Addy, Bell (Streatham) (Lab)

† Russell, Dean (Watford) (Con)

† Smith, Alyn (Stirling) (SNP)

Bradley Albrow, Amna Bokhari, Committee Clerks

† attended the Committee

First Delegated Legislation Committee

Monday 21 March 2022

[Derek Twigg in the Chair]

Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022

I beg to move,

That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022 (S.I. 2022, No. 203).

With this it will be convenient to discuss the Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022 (S.I. 2022, No. 205) and the Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022 (S.I. 2022, No. 241).

Good afternoon, Mr Twigg. It is a pleasure to serve under your chairmanship. Copies of the statutory instruments were laid before the House on 1 and 8 March this year. The instruments before us were laid under the powers provided by the Sanctions and Anti-Money Laundering Act 2018, also known as the sanctions Act. These instruments came into effect under the affirmative procedure.

Side by side with our allies across the world, the UK has executed the largest package of sanctions ever imposed. These new regulations ratchet up the pressure to further isolate Russia and degrade its economy in order to starve Putin’s war machine. With your permission, Mr Twigg, I will tackle each of these statutory instruments in turn.

I turn first to the maritime statutory instrument. On 1 March, befitting our maritime heritage, we led the response and were the first country to turn any Russian vessels away from our ports. We introduced new restrictions barring all ships that are Russian-owned, Russian-operated, Russian-controlled, Russian-chartered, Russian-registered or Russian-flagged. The regulations go further, providing new powers to direct Russian vessels out of British ports and to detain Russian vessels already in port. This is a powerful new tool against oligarchs and wealthy individuals closely associated with Vladimir Putin’s regime.

Finally on this statutory instrument, anyone connected with Russia can no longer register a vessel and will have any existing registrations terminated in the UK. This strips away the competitive advantage provided by being a member of the UK’s ships register, and we are working closely with the ports sector to support it in upholding the regulations. We have issued detailed guidance to support that on the ground.

The second of the regulations is the Russian central bank statutory instrument, which was also laid before the House on 1 March. It introduces restrictions that prohibit any UK individual or entity from providing financial services relating to foreign exchange reserves and asset management involving the Central Bank of Russia, the Russian national wealth fund and the Ministry of Finance of the Russian Federation. This action, taken in close co-ordination with the United States and the European Union, prevents the Russian central bank from deploying its foreign reserves in any way that undermines the impact of the sanctions imposed by the UK and our allies. It undercuts the bank’s ability to make foreign exchange transactions to support the Russian rouble. Alongside the existing draft of financial sanctions, this locks down the most severe of our other restrictions.

The third and final SI concerns aviation, space and insurance products, and it was laid before the House on 8 March this year. We introduced a new suite of aircraft sanctions and established new Government powers to detain Russian aircraft in the UK. At the same time, we extended the existing ban on Russian aircraft from the UK, making it a criminal offence for any Russian aircraft to fly here or land here. The ban includes any aircraft owned, operated or chartered by anyone connected with Russia and any individuals operating in UK airspace.

The new powers will also allow the Government to remove aircraft belonging to designated Russian individuals from the UK aircraft register. The statutory instrument builds on the critical industry trade prohibitions that came into force on 1 March this year. It will go further by extending those prohibitions to cover all aviation and space goods and technology, and related services, as well as the provision of insurance and reinsurance services. Together with similar actions taken by our partners, these measures are designed to severely constrain Russia’s commercial air operations and logistics, and that will have an impact on its economy.

The regulations represent some of the most significant sanctions implemented by the UK, but we have imposed, and will continue to impose, further sanctions on Putin and his regime, as promised. We will continue to ratchet up our sanctions until Putin ends his outrageous, unprovoked attack on Ukraine, which represents a clear breach of international law and the UN charter.

We are grateful to organisations from banks to oil companies, from football leagues to singing competitions, for making it clear that Putin and his allies must be isolated from the international community for their actions. On 10 March, my right hon. Friend the Foreign Secretary announced a full asset freeze and travel ban against seven of Russia’s wealthiest and most influential oligarchs. The following day, we sanctioned 386 members of the Duma for their support for the Ukrainian breakaway regions of Luhansk and Donetsk, and for their complicity in Putin’s war of choice. On 15 March, my right hon. Friend announced more than 370 new sanctions, made possible thanks to our new, urgently passed Economic Crime (Transparency and Enforcement) Act 2022. Those designations take the UK’s total number of designated persons, entities and subsidiaries to 1,000.

Together with our allies, we are making Putin and his allies pay the price for their aggression. Our unity demonstrates the strength of opposition to Russian aggression. I end by reiterating our unwavering support for the people of Ukraine. We hold them in our hearts and minds at this most terrible moment in their nation’s history. As a free and democratic country, Ukraine has the right to determine its own future. It is clear that the Russian Government were never serious about engaging in diplomacy; they were only ever focused on their territorial ambitions. The UK and the international community stand against this naked aggression, and for freedom, democracy and the sovereignty of nations around the world. Our new and upcoming sanctions regulations and measures will continue to show Putin that his abhorrent war is a massive strategic mistake. We pay tribute to the Government and people of Ukraine. I commend the regulations to the Committee.

It is a pleasure to serve under your chairpersonship, Mr Twigg. I thank the Minister for the points that he has set out; indeed, I thank the whole team at the Foreign, Commonwealth and Development Office, and those in other Departments who are working on bringing in these sanctions measures. I do not intend to detain the Committee long; in line with the approach that we have taken on these matters to date, we wholeheartedly support the Government’s efforts to target the Putin regime in response to its unjustifiable, unprovoked attack on Ukraine, and the heinous aggression and atrocities that we see almost daily.

I have a number of questions for the Minister, which I hope he can answer. Let me begin by reiterating that we Labour Members stand in utter condemnation of President Putin’s invasion, and in complete solidarity with the people of Ukraine, who are showing extraordinary courage and resilience, and are making extraordinary sacrifices, in resisting this onslaught. I am sure that the Minister met, as I did, the four Members of the Ukrainian Parliament who came here. They are remarkable women who are speaking up, and who undertook the journey here at great risk to themselves. They had powerful messages for all of us in this House about what is needed. I hope he has taken on board many of the issues that they raised with him and others on all sides of the House.

We have pledged to work with the Government at speed to ensure the House can pass the necessary legislative measures. We urge the Government to continue to go faster, further, broader and deeper, not least because as Russian forces encounter the courageous Ukrainian defence, the fighting has got bloodier and increasingly indiscriminate. We have seen absolutely appalling scenes in Mariupol in the last few days—utterly horrific attacks on civilians and the attack on the shopping centre in Kyiv overnight. Let us remember that we are here passing these sanctions because of the Russian regime’s unprovoked and indiscriminate aggression against the people of Ukraine.

We cannot afford to have a sanctions gap. At some points during this process, we have been critical of the speed with which the Government have introduced measures. The Minister gave some details of the number of measures that have been brought in, but they were all lumped together in one group. It would be helpful if the Minister set out the exact number of measures that have been introduced and the exact number of individuals and entities that have been targeted, perhaps with a breakdown by date. He mentioned that things had sped up since the introduction of the Economic Crime (Transparency and Enforcement) Act, which we supported, but I am keen to see details on how quickly that has happened. The reason we made those changes in the first place was to give the Foreign, Commonwealth and Development Office more legal ability to sanction individuals without challenges such as it has experienced.

I want to ask the Minister about the resourcing of that unit and the other implementing units. Passing the sanctions is one thing, but we must inform all the relevant sectors, some of which are complex, and enforce the sanctions across all those sectors. They will affect many companies and individuals who may have had interactions with individuals or companies linked to the regime. What is being done to staff up the FCDO and, crucially, the Office of Financial Sanctions Implementation? I understand that it has only 37 full-time equivalent staff. What are the Government’s plans to increase that number urgently and ensure we have the maximum amount of resources for drafting and, crucially, implementing these measures?

Will the Minister update us on the situation in the overseas territories and Crown dependencies? I draw attention to my declaration of my recent visit to Gibraltar, where I asked questions about implementation in the overseas territories. They are crucial to ensuring that we tackle the individuals who have sought to hide their money and move their assets around. Is it his understanding that all the OTs and CDs have implemented these measures all in their different legislative and constitutional ways? That is critical, not least when it comes to measures on financial services and shipping, given the role that OTs and CDs play in those things.

On shipping, I welcome the measures that are being taken. This issue has been raised repeatedly by MPs in Ukraine and others—a number of Members have received briefings on it in recent days. Could the Minister clarify what is being done about maritime insurance for cargoes? I understand that nine out of 10 of the main shipping firms operating in and out of Russia are now not undertaking operations there, although the Chinese shipping firm COSCO is still doing so. Given the role of the UK, and particularly Lloyd’s of London, in maritime insurance, can the Minister explain whether insurance companies are providing insurance for Russian cargoes? Without those crucial insurance and reinsurance services, it will not be possible to transport those cargoes. It would be helpful for the Committee to understand that.

The Minister mentioned the measures relating to aerospace and space activities. Could he provide an update on the reports over the weekend of an aircraft that was allegedly seized at Biggin Hill airport? I know the Transport Secretary was dealing with that, but has there been any resolution? Have there been other examples of aircraft or air transport trying to use UK airspace, particularly at general aviation airports and others away from the main cargo hubs, or of oligarchs attempting to flee from the measures we have introduced? What implementation has there been? Implementation is critical.

We will have all seen the remarkable scenes of the cosmonauts boarding the international space station, and we have all raised concerns about the company OneWeb and the proposed launch of its satellites from the Russian facilities. I understand that there have been updates in recent hours about plans to move that launch. Does the Minister have any information about that? Given our role in space activities, and in satellite technology in particular, it is crucial that we are not subtly funding Russian space activities through our own commercial ventures. Of course, we have co-operation with the European Space Agency, with its spaceport in Guiana. It is crucial that we are using that, and other American launch facilities. We should not be using an agency that may have had some incredibly proud cosmonauts, but whose own head has said some frankly appalling things in recent days.

The Minister mentioned a range of companies affected by the sanctions. While a number of the big name companies—especially those with UK links—have stopped operating in Russia, which is welcome, we are aware of a substantial list of major brands located elsewhere in Europe. I will not name individuals; I am sure that the Minister is aware of whom I am referring to. What discussions is he having with our allies in European Union member states, and indeed non-European Union member states that are allies none the less, about what pressure is being put on some of those big brand names to cease their operations in Russia? Quite rightly, many Ukrainians have been raising the matter with Members of this House, and asking how some of those organisations are still operating and bankrolling the Russian regime by the back door.

I am grateful to my hon. Friend for giving way. The Treasury Committee recently received evidence from a number of experts about sanctions. One of the issues that has come up is that some of the companies need further guidance and advice. They are self-sanctioning, which is welcome, but they could do with more advice, guidance and support from the Government. It would be great if the Minister could pick that up, in terms of next steps.

I thank my hon. Friend for making an important point, which relates to the questions I raised about enforcement and implementation bodies, and particularly the Office of Financial Sanctions Implementation. They have got to be resourced to engage not only in enforcement, but in the provision of education and information to companies that want to do the right thing. These are incredibly complex matters that are moving at speed.

On countries that are not currently sanctioning, some of which we have alliances and relationships with, can the Minister provide an update about what diplomatic efforts we are making to bring them into the global coalition against the Putin regime? The Minister will be aware—we raised the matter in Westminster Hall the other day—of threats to a number of the countries that are sanctioning, including in the western Balkans. What steps are we taking to reassure and reinforce them?

I have two final questions. The Government have previously referred to an intention to limit the deposits that can be made by Russian nationals. I raised the matter with the Minister on 1 March. Is that now included in these measures, or is it a further measure to come? There is also a constant question, which other Members may raise, about Scottish limited partnerships. Can the Minister provide an update on how that issue is being dealt with?

The Opposition’s broad intent is to support the Government on these measures and to support them in acting in the toughest way possible against the Putin regime. We will not seek to divide the Committee, but I hope that the Minister will be able to provide some important clarifications.

It is a pleasure to serve under your chairmanship, Mr Twigg. I am conscious when making any speech that nobody ever criticised a speech for being too short, so I too do not intend to detain the Committee. We support the measures. We have called for them, we urge the Minister to greater efforts and he has our support.

The SNP stands foursquare with the people of Ukraine—an innocent people who have suffered a terrible act of aggression from their neighbour. It really is poignant that we are debating the technicalities of legislation while they are fighting for their lives and homeland. It is a moment when we should all stand together.

While we support the measures, I would like to make a couple of general points. I am concerned about the British overseas territories and the territorial extent of the measures. I am concerned that we could be creating loopholes that will be taken advantage of really quickly, unless the approach is really comprehensive. Particularly given the extreme mobility of planes, boats and money, I think there is a real risk. Again, the Minister has our support in closing those loopholes, but they should be on our agenda.

On the complementarity of the sanctions that the UK is implementing, vis-à-vis the EU and the US sanctions, different places obviously have proceeded at different paces, according to their own domestic legislative circumstances—I understand that—but could the Minister assure us that the aim is to mirror exactly the EU and US efforts, and that we will get there in due course? It is an open question as to how different places have dealt with this, but the aim surely has to be a global coalition in which we are doing the same stuff, and the same people should be sanctioned by everybody, regardless of who did it first.

On the general sanctions, I support this package, but I am concerned about its extent, and the lack of sunset clause for any of this. A huge amount of power is being given to the Executive to sanction individuals. I would be grateful for an assurance that the Government’s view is that these measures will be time-limited. I am not asking for a date at the moment—that would be irresponsible—but an assurance that these measures will not be a permanent addition to the armoury would be very welcome to those of us who are concerned about long-term overweening consequences.

I echo the comments by the Labour spokesperson, the hon. Member for Cardiff South and Penarth, on compensation, particularly in relation to the Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022, on financial measures. I note that a full impact assessment has not been produced for that instrument, but it says that costs are likely for UK businesses. Where is the thinking on compensation? I am thinking particularly of the smaller operators. Some organisations just should not have been doing the business they were doing—they can suffer the consequences—but a number of smaller operators will be in deep trouble because of this. An assurance that there will be more advice available and a flexible approach to compensation—I am asking not for the details of it but for a commitment to that principle—would be useful today.

Beyond those points, I reiterate that we are happy to support these measures. I suspect that they will not be the last ones that we see, but the Minister has our support in these endeavours. We should all stand together at this time.

I am very glad to put on record the Government’s recognition of the constructive tone that has been taken by both Her Majesty’s Opposition and the SNP, not just in today’s statutory instrument debate but throughout this process. I recognise that there is a duty on Opposition parties to push the Government and to hold the Government to account, and in this instance, it has been done in a genuinely constructive way that is designed to reinforce what we are all hoping to achieve, which is to put meaningful pressure on the right bits of the Russian system, so that we close down the financial freedom of those individuals who are propping up Putin and his regime and helping to fund his war effort. I recognise that sometimes in opposition it is easier to be completely focused on opposing for the sake of opposition, and that sometimes supportive opposition is harder to execute, but the tone that the Opposition parties have taken has been noticed and recognised.

In relation to specific details—times, dates, locations and so on—if the hon. Member for Cardiff South and Penarth, my shadow, does not mind, I will write to him on that. Actually, I will rephrase that: I will either write to him or ensure that the information is deposited in such a way that the whole House can see it, because that is important. On his point about enforcement, which was brought up on the Floor of the House, there are institutions, businesses and individuals who want to do the right thing, but we are indeed in uncharted waters and unprecedented times; they want to ensure that they do not inadvertently fall foul of our sanctions system, and we want to help them with that.

Ultimately, enforcement of the sanctions will be done by different bits of Government. The hon. Gentleman referred to the Office of Financial Sanctions Implementation; I will return to the staffing numbers, and whether they are secondments or permanent posts. It is part of the enforcement regime, as are HM Treasury and the Home Office. Obviously, the Department for Transport has a big role to play in relation to both aviation and ports. We will continue to liaise closely with ports and airports to ensure that they understand exactly what they need to do. The hon. Gentleman mentioned a specific instance about small airfields. We are conscious that elite air travellers tend not to use Luton, Gatwick or Heathrow so much. We are very focused on smaller airfields, and will be working with them to ensure that people do not use them to slip through the net. I will not go into the details of that incident, but we are absolutely aware of what he is talking about, and we are seeking to take effective action.

Both hon. Gentlemen asked in various ways about overseas territories and Crown dependencies. The sanctions regime applies in all UK Crown dependencies and overseas territories, either by Orders in Council or through the jurisdictions’ own legislative processes. We are working with them to ensure that the regime is put in place quickly, and that there are no loopholes or opportunities to move between regimes.

Will the Minister tell us, or perhaps write to us about, where that has got to? I understand that for some jurisdictions, the changes were effectively automatic—in fact, some of them were ahead of us—but for some, the changes took longer. Obviously, we cannot allow loopholes in this process, particularly within our British family.

As the hon. Gentleman says, there are different processes in different parts of the Crown dependencies and overseas territories. I assure him that they all have a genuine desire to get things done quickly. As he says, in some instances, they moved ahead of the UK. I have no doubt that the process will be quick enough to prevent any leakage of the kind that he suggested.

The hon. Member for Bethnal Green and Bow (Rushanara Ali) spoke about working with the financial and business sectors to help implementation. I have covered that, and we will continue to work with those sectors.

While the Minister is at it, can he look at how we can bolster the staff make-up in the Office of Financial Sanctions Implementation? I appreciate that things are happening very quickly, but can we ensure that expertise is brought in as quickly as possible, and that we learn lessons from other countries, such as the United States, on this issue?

We are looking to make sure that the implementation is effective, because we have seen that in most instances, sanctions have a deterrent effect. People do not attempt to breach the sanctions, because they know that we are keeping a close eye on them. We need an effective enforcement regime, and we will make sure that it is as effective for these sanctions as for the initial sanctions regime.

The hon. Member for Stirling spoke about close co-ordination with our international friends and allies. I am glad he raised the point that our various legal jurisdictions and processes are not identical, so the initial responses were necessarily slightly different. At all stages, we have worked very closely with our international partners. Indeed, at the meeting of G7 Foreign Ministers in Liverpool in December last year, we agreed what our collective sanctions response would be in the event of an invasion; it feels like a lifetime ago, even though it was only a few weeks ago. However, the initial action, and vote in the Duma, fell short of the threshold that had been discussed.

Internationally, we all responded in our respective ways, but there was absolute unanimity of purpose. Since then, we have relatively quickly, and with the help of the Opposition parties, taken Acts through Parliament. We can now co-ordinate even more tightly. We can take our allies’ preparatory work on sanctions and use it to bring forward our own, which massively speeds up the process and increases co-ordination. My right hon. colleagues at various levels of Government will be working once again with their G7 counterparts later this week, examining what pan-G7 sanctions packages would look like.

The hon. Member for Stirling raised the question of how we de-escalate from this, which is a legitimate point. At the moment, we are not speaking much about what a de-escalation process would look like—understandably, I think. Our message is very clear: the sanctions will bite harder and get more painful the longer this continues, and if the Russian regime wants sanctions to ease, it has to cease its invasion and its attack against Ukraine and remove its troops. Then we will consider how we de-escalate. As for what protections will be in place in future, as the hon. Gentleman said, these sanctions powers are rightly powerful, and the House will of course want to make an assessment of what enduring level of power is appropriate for a Government. That is a very important argument, but it is an argument for a different point in time.

We will continue to apply more pressure to Putin’s regime, including through further sanctions.

I sense the Minister may be coming towards the end of his remarks. Before he sits down, could he say something about the crucial question of maritime insurance of cargos? If he is less well equipped to respond to that question, perhaps he could come back to us in writing. It is a critical issue, particularly given the role of the UK in the maritime insurance market.

The hon. Gentleman makes a very good point and, ever the gentleman, has allowed me the elegant “get out of jail free” card that is the option of writing to him on this important subject. Let me check very quickly—[Interruption.] No, that is not the right answer. I will write to the hon. Gentleman on this issue, because I do not want to get “nearly but not quite”; I want to absolutely nail it.

When it comes to applying sanctions, the unanimity of voice from those across UK politics, in every part of the UK, and in the international community should send a very clear message to Vladimir Putin: he cannot, and will not, be successful in his attack against Ukraine. He should now cease that attack and withdraw his troops, and I am glad that the UK’s sanctions will increase the pressure on him until he does so. I thank the Committee for its contributions, and for its support for the sanctions.

Again, I do not want to run ahead of what has been publicly committed to, but I take the point the hon. Gentleman has made about supporting businesses and, indeed, countries that are doing the right thing. Those countries will perhaps feel a much greater financial impact than we will in the UK. We will ensure that we stand in solidarity with not just the Ukrainian people at this difficult time, but with the companies, individuals and countries that have chosen to do the right thing, knowing that it will bring them a degree of financial and economic pain. I assure the hon. Gentleman that we will look at that issue very seriously. I commend the regulations to the Committee, and hope that Members will support them.

Question put and agreed to.


That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022 (S.I. 2022, No. 203).



That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022 (S.I. 2022, No. 205).—(James Cleverly.)



That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022 (S.I. 2022, No. 241).(James Cleverly.)

Committee rose.