Clause 2 : Treasury’s power to make final designation
1: Clause 2, page 2, line 28, at end insert–
“( ) For the avoidance of doubt, “person” in subsection (1)(a)(i) means–
(a) United Kingdom nationals as defined in section 33(2);(b) A body incorporated or constituted under the law of any part of the United Kingdom;(c) Persons or entities within the territorial jurisdiction of the United Kingdom.”
My Lords, the purpose of Amendment 1 is to clear up an ambiguity that emerged only during Report on the Bill. The amendment thus falls within the type of amendment that is normally allowed on Third Reading.
The question is whether Clause 2, which gives Treasury Ministers the power to designate a person and freeze his assets, has extra-territorial effect. On Report, the noble Lord, Lord Sassoon, argued that Clause 2 has such effect; indeed, that was a crucial step in his argument generally, as it was in the argument of the noble Lord, Lord Bach. The noble and learned Lord, Lord Wallace of Tankerness, made the same point in Committee when he told us that the Treasury had designated many individuals outside the jurisdiction in the past. I do not know whether they were British subjects, but the fact that something has happened does not necessarily mean that it was lawful. My argument was that Clause 2 does not have extra-territorial effect, so “person” in Clause 2 means a British subject or foreigners within the territorial jurisdiction. Whether I am right or wrong about that, I had hoped that we could have cleared up the point before the Bill went to the Commons. I had hoped the Treasury might table an amendment to say what its understanding of Clause 2 is. After a longish discussion on Friday morning, the Treasury failed to do that so I felt obliged to table this amendment late on Friday afternoon.
What does “person” in Clause 2 mean? The noble Lord argues that it includes foreigners outside the jurisdiction. Of course, Parliament can legislate to cover foreigners outside the jurisdiction; there is no question about that. However, the presumption is that Parliament does not intend to do so unless very clear words are used. That presumption has been around for a very long time, as I hope to show. It is stated in section 130 of Bennion’s Statutory Interpretation. The presumption has also been applied in so many cases that it is difficult to know which to pick, so let me choose one case—about the meaning of the word “debtor” in the Bankruptcy Act of 1869—that I think illustrates the point.
The case concerns two Chilean subjects who carried on business in Liverpool. They had assets here within the jurisdiction and they incurred debts within the jurisdiction but they were not resident here. An English creditor wished to start bankruptcy proceedings against the Chileans. It was argued that the general word “debtor” in the 1869 Act should be given a wide meaning so that it included debtors all over the world, just as it has been argued that “person” in Clause 2 covers persons everywhere. That argument was, however, decisively rejected by the Court of Appeal. It was held that “debtor” covered only British nationals or foreigners within the jurisdiction, which of course the Chileans were not. That case—I refer to ex parte Blain, decided in 1879, volume 12, Chancery Division, at page 522—has been followed on innumerable occasions ever since. There is no doubt that the presumption to which I refer exists and is applied as a matter of course.
What is the reason for the presumption? The answer was given by Lord Justice James in the same case when he said that it rests on the broad general principle of comity, the comity which should exist between independent states. Applying that to the facts here, I ask whether, if the French authorities were to designate a British subject resident in England and freeze his assets because they believed him to be a terrorist, we would regard that as a friendly act. Clearly, we would not. The same must also apply the other way round. If the noble Lord, Lord Sassoon, is right and Clause 2 has the extra-territorial effect that he suggests, the Treasury could designate a French subject, freeze his assets here in London and require him to come to London in order to appeal against the designation under Clause 26. If a Treasury Minister did that, how would it play in France? It may be argued that in the real world we would never dream of designating a French subject. That might be right—I hope it is—but it is the power to designate contained in Clause 2, if the noble Lord’s construction is right, that is repugnant to comity. There is no doubt that the presumption exists and it is based on a sound principle of international law.
The presumption is reinforced on the facts of this particular case by what is contained in other provision of the Bill. Clause 33 gives extra-territorial effect to offences committed under Clauses 11 to 15 but not to Clause 2. That is a strong indication that Clause 2 was not intended to have extra-territorial effect. Clause 3 provides for notification and it works well in the case of foreigners within the jurisdiction, but how does it work in relation to foreigners in Afghanistan? How does Clause 17, “Licences”, work in relation to foreigners resident abroad? Quite apart from the presumption, which is what my argument rests on, all the indications in the Bill are that it was not intended to have extra-territorial effect.
How does the noble Lord, Lord Sassoon, put his case? He cannot say that the presumption is excluded by clear language because there is no such language in the Bill. Instead, he says that the presumption is excluded by necessary implication as it is incompatible with our international obligations under Security Council regulation 1373 of 2001. With respect, that is where the basic error lies. The presumption is not incompatible with regulation 1373—quite the contrary—as one can see from what the regulation says. Regulation 1373 imposes an obligation on all states individually to criminalise the provision of funds by their nationals or in their territories—that must mean foreigners in their territories as you cannot criminalise a fund. Exactly the same applies to the freezing of assets. Each state is responsible for designating its own subjects and freezing their assets. Each state is responsible for designating foreigners within its jurisdiction and freezing their assets. Nowhere is it provided that states should designate foreigners outside their territorial jurisdiction. Indeed, there is nothing to suggest that that was ever the intention.
I accept that an increasing number of international conventions confer what is called “universal jurisdiction”, but no one suggests that regulation 1373 has that effect. If the Treasury has reason to believe that a fund in London is held by a French terrorist who is not resident here, it must simply inform the French authorities who, if they agree, will take the necessary action by designating the individual and freezing his assets. It is as simple as that. I accept that some countries are unwilling to designate their subjects as terrorists, but that cannot affect the meaning of the word “person” in Clause 2. I beg to move.
My Lords, to achieve its purpose this Bill needs to confer powers in relation both to persons and to assets within the jurisdiction. I understood the Minister to assure the House on Report that the Bill, as currently drafted, covers both categories of case. I do not understand that to involve extra-territorial effect, although the descriptive term may be less significant than the substance. My concern is where we find in the Bill a clear statement to the effect that a person may be the subject of a designation order because he has assets in this country even though he otherwise has no connection with this country. I hope the Government will give further thought to that matter as the Bill proceeds through the other place.
My Lords, I cannot bring the same academic knowledge to this debate as the noble and learned Lord and the noble Lord, Lord Pannick, but I start with the question of what this Bill aims to achieve and what it is directed at. As I understand it, it deals with assets that are in the UK. For me, other questions flow from that. I agree with the noble Lord, Lord Pannick, that if there is a query over the scope of the Bill, it should be clarified. One would hope not to have an argument such as this repeated either in the other place or, indeed, in court. However, having been involved with this Bill and its predecessor, I do not have the anxieties that have been expressed this afternoon.
My Lords, on behalf of the Opposition, I too would not dream of seeking to put myself in the same category of argument as the noble and learned Lord and the noble Lord who have spoken on these issues. The Minister has an argument here that he will need to respond to effectively. We in the Opposition thought that most of these issues were covered effectively on Report by the Minister. Like the noble Baroness, Lady Hamwee, who has expressed her reservations about other aspects of this Bill in the past, we see no argument for this amendment at present. Therefore, if we were to move to a Division, the Opposition would support the Government if, as I anticipate, they present an accurate and effective case for the rebuttal of this amendment.
My Lords, I am grateful to the noble and learned Lord, Lord Lloyd of Berwick, for introducing this debate. I am also grateful to other noble Lords for their contributions. I am particularly grateful to the noble Lord, Lord Davies, and my noble friend Lady Hamwee for indicating that, subject to what I may say, they are generally satisfied with the position which the Government have adopted.
This amendment goes back to the debate we had on Report about the scope of Clause 2 and whether it should allow the Treasury to designate non-UK persons who are outside the United Kingdom. We are grateful to the noble and learned Lord for having written to my noble friend Lord Sassoon, following our debate on Report, to explain his concerns with the clause as drafted, and for having taken the opportunity to discuss the matter in some detail with officials before he tabled his amendment. I readily recognise that this amendment stems from the noble and learned Lord’s very strong belief, which he clearly expressed in moving his amendment, that it is the right and responsibility of each country to make laws that affect their nationals and those within their jurisdiction. Generally, we would not dissent from this principle but, if the House will permit me, I will explain why we cannot accept the noble and learned Lord’s amendment.
The noble and learned Lord referred to United Nations Security Council Resolution 1373, which requires that states shall,
“Prohibit their nationals or any persons … within their territories from making any funds, financial assets or economic resources or financial or other related services available, directly or indirectly, for the benefit of persons who commit or attempt to commit or facilitate or participate in the commission of terrorist acts”.
I think it is clear that a key aim of Resolution 1373 is to prevent acts of terrorism anywhere in the world. To that end, the definition of terrorism in this Bill is borrowed from the Terrorism Act 2000 and is used in other legislation. The definition makes it clear that terrorist activity anywhere in the world against persons or Governments falls within the scope of the legislation.
It is also clear that Resolution 1373 puts an obligation to prevent terrorist finance not only on the state where particular terrorists and terrorist groups reside but on the states from which the funding of those terrorists may originate. If, for example, a foreign terrorist holds assets within the United Kingdom or relies on funding coming from the United Kingdom, it is not only right but essential that the United Kingdom should be able to freeze those assets and prevent funds being transferred for terrorist purposes. That is what the language of United Nations Security Council Resolution 1373, which I have just quoted, clearly requires.
Relying purely on the country where the terrorist resides to take action has two fundamental drawbacks. First, that country cannot control funds or other assets that may be available for use overseas by the terrorist. This is why the Security Council resolution is worded as it is. Secondly, we know, as was acknowledged in our short debate, that terrorists are often based in countries where the authorities cannot or will not take action: for example, in failed states or in states where the authorities turn a blind eye to terrorism.
Clause 2 therefore provides the Treasury with a power to identify those whom we consider to be terrorists, based on activities that could take place anywhere in the world. The effect of the designation is twofold. First, any funds and economic resources within the United Kingdom of such persons are required to be frozen. It will be a criminal offence for anyone in the United Kingdom to deal with such assets without licence from the Treasury.
Secondly, persons in the United Kingdom will be prevented from providing any funds or economic resources to designated persons. I shall try to make it clear; the fact that some persons designated by the Treasury are ordinarily not in the United Kingdom does not give extra-territorial effect to the provisions. The effect of listing such a person is to freeze only their United Kingdom assets and prevent persons within the United Kingdom or United Kingdom citizens abroad assisting them. It has no further effect.
The noble and learned Lord, Lord Lloyd, asked what would happen if we were to designate a terrorist who was in France. He suggested that it might lead to a breakdown of international comity. That we are taking these measures in pursuance of a United Nations Security Council resolution indicates where the balance of international comity may lie; it is in United Nations member states taking the resolution and implementing it. We have not so far designated a French national. However, if we were to do so, I would certainly expect close co-operation between United Kingdom and French authorities in such a matter. The French might indicate to the United Kingdom that a French national was a terrorist of concern to them, whose assets they wanted to freeze. Working with French counterparts, the United Kingdom’s law enforcement agencies would identify whether that suspected terrorist held assets in the United Kingdom that the French Government then wished to be frozen. The French would provide United Kingdom authorities with the relevant evidence to support a UK designation, showing that there was at least a reasonable suspicion that person X was involved in terrorism and that a UK asset freeze was necessary for protecting the public from the risk of terrorism.
Finally, a Treasury Minister will consider the case and, if the legal test that is set out in this Bill is met, will designate person X, with the Treasury taking the necessary steps to inform the financial sector and to freeze person X’s assets within the United Kingdom. We accept that other countries may use domestic asset-freezing powers to designate United Kingdom nationals, but again we would expect this to be done in co-operation with United Kingdom authorities.
The power in Clause 2 relates to designated persons, including non-UK nationals; it is not a radical departure. Sanctions legislation is by its very nature often targeted at persons outwith the United Kingdom, but the prohibitions bite only on those in the United Kingdom or when United Kingdom nationals are elsewhere. An example is the prescription regime under the Terrorism Act 2000 and this legislation. There is a list of prescribed groups, almost all of which operate outside the United Kingdom, but the effect of proscription is to prohibit persons in the United Kingdom from membership of such groups or from providing material support to such groups. As with our Bill and sanctions legislation generally, the target is outwith the United Kingdom but the prohibitions apply solely in relation to persons in the United Kingdom or UK citizens operating abroad. That accords with the fundamental jurisdictional principle that the country should normally legislate to criminalise only acts committed within its territory or by its citizens abroad. Here the acts that are being criminalised are the provision of finance for the purposes of terrorism.
I understand the noble and learned Lord to be concerned about interfering with the sovereignty of other states. I hope that he can see from an indication of how we might act in the event of getting intelligence or representations from France that this measure would not offend another state but would promote co-operation. At the risk of repeating myself, the effect of a designation is to freeze only those assets of a designated foreign national that are within the United Kingdom, and we believe that that is the sensible way in which to proceed.
Clause 1(b) refers to persons listed in Council Regulation 2580/2001. This regulation is the means by which the European Union implements Resolution 1373; it does so by requiring member states to identify persons against whom the state has taken action, for example by way of a domestic asset freeze. Persons put forward and included on the list are then subject to financial sanctions throughout the EU. The reference to “persons” here cannot be confined to those within the UK and the same term cannot have different meanings in the same clause. The EU regime emphasises, I think, the essential territoriality of an individual member state’s actions, and the need for each member state to take action against assets in their country and to prevent those in the country from providing material support to terrorists.
The noble and learned Lord referred to Clause 33, which provides for cases in which UK nationals and UK incorporated bodies commit an offence outside the UK. This is not an unusual extension of the application of a statute, and I do not think—nor did he suggest—that it is in any way controversial. The purpose is straightforward—to prohibit UK nationals and companies from committing acts abroad that would be offences under the Bill if committed here.
The noble Lord, Lord Pannick, asked whether we should be able to designate overseas persons only if they hold assets in the United Kingdom. I have answered that. The asset-freezing regime not only freezes assets but prevents persons in the United Kingdom making payments to a designated person. That is why we need to be able to designate overseas persons, even if they do not hold funds in the UK, so that we can prevent people in the United Kingdom or UK persons overseas providing designated persons with funds.
In summary, we believe that Clause 2 does not limit the Treasury to designating only persons who are in the UK, and nor should it. While we have listened carefully to the noble Lord’s arguments today, on Report and in the exchanges that he has had with my noble friend, we are satisfied that the wording of Clause 2 as it stands is sufficiently clear in this regard. It does not make the provision extra-territorial. Clause 2 merely identifies those persons involved in terrorism whose assets persons in the UK cannot deal with and whom persons in the UK cannot assist by providing funds or economic resources.
For this reason, the Government cannot support the amendment, and I urge the noble and learned Lord to withdraw it.
My Lords, I am extremely grateful for that full response. The problem remains, I fear, the meaning of the word “person” in Clause 2. Somehow underlying the Minister’s reply is the idea that a Treasury Minister has a power to designate assets, but of course the power can designate only persons. The Minister dealt with that clearly in relation to the example of us suspecting a French terrorist; indeed, he gave the same answer as I did. The way that it is meant to work is as follows: if we suspect someone in France of being a terrorist, we approach the French authorities and ask them in the spirit of co-operation—as the Minister rightly says, that underlies all this—to look at this, and the French will agree. If they come back and say, “Yes, we think you’re right”, they will designate the terrorist in France. There is nothing wrong with that. That is what Regulation 1373 envisages. What it does not envisage is us, without consulting the French, simply designating a Frenchman resident in France. All the cases show that a general word such as “person” in this clause, whatever may have been the Government’s intention, does not mean—I respectfully suggest—what they think that it means.
I will look closely at what the Minister has said and, more important, I hope that others will look closely at what the Minister has said and what I have said. I hope that in due course they will reach what I believe to be the correct result, which would require only a small amendment to Clause 2. That having been said, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Clause 23 : General power to disclose information
2: Clause 23, page 11, line 28, leave out “or Guernsey“ and insert “, Guernsey or the Isle of Man”
My Lords, I hope that this will be a little briefer. In Committee, I tabled, and this House accepted, a minor amendment to remove any doubt that disclosure of information obtained under Part 1 of the Bill to the law officers of Jersey or Guernsey is permitted. I said at the time that the ability to share this information is essential to the maintenance of an effective asset-freezing regime. The Government have tabled a further amendment to Clause 23 to make it clear that the disclosure of information obtained under Part 1 of the Bill can also be to the law officer of the Isle of Man. This is a minor amendment, which is intended to ensure that Clause 23 achieves its original intention. I hope that your Lordships will support me in making this technical amendment to the Bill.
Amendment 2 agreed.
A privilege amendment was made.
Bill passed and sent to the Commons.