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Andrey Lugovoy and Dmitri Kovtun Freezing Order 2020

Volume 801: debated on Tuesday 11 February 2020

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Andrey Lugovoy and Dmitri Kovtun Freezing Order 2020.

Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee

My Lords, first, I would like to draw noble Lords’ attention to the fact that the Secondary Legislation Scrutiny Committee described this order as an “instrument of interest” in its third report of 30 January. The order was laid before the House on 17 January under the “made affirmative” procedure and came into force on 19 January. It maintains a freeze of any funds or assets that the two individuals hold in the United Kingdom or with any United Kingdom-incorporated entities, denying them access to the UK financial system and prohibiting UK persons from making funds available to them.

The order was made because in 2016 an independent inquiry, chaired by Sir Robert Owen, concluded that Mr Alexander Litvinenko was deliberately poisoned in 2006 by Lugovoy and Kovtun through the use of polonium-210. The inquiry also concluded that there was a “strong probability” that Mr Litvinenko, an ex-KGB and ex-FSB officer and critic of the Russian Government, was murdered on the order of the FSB—the Russian domestic secret service—and furthermore that the killing was “probably approved” by then head of the FSB, Nikolai Patrushev, and by the Russian President, Vladimir Putin.

As part of its response to the gravity of these findings, the Treasury imposed an asset freeze in January 2016 on Lugovoy and Kovtun by making a freezing order under the Anti-terrorism, Crime and Security Act 2001. A second order was imposed in January 2018 which expired at the end of 18 January this year. The order that I am commending to the House was therefore put in place to ensure there was no gap in the freezing measures that have been enforced against Andrey Lugovoy and Dmitri Kovtun since 2016.

Under Section 8 of the Act, the duration of a freezing order is limited to two years. Since 2018, as required by Section 7 of the Act, the Treasury has kept the order under review. In May 2019 the Treasury reviewed the facts of the case against the relevant statutory criteria and concluded that the criteria continued to be met in respect of both individuals.

Prior to the expiry of the 2018 order, the Treasury again reviewed the facts of the case and decided to make a new order to maintain the asset freeze against these two individuals. The Treasury believes that making a new order is an appropriate and proportionate measure to take. The relevant conditions required to be met, as set out at Section 4 of the Act, are still being met. In this case, these are that

“the Treasury reasonably believe that … action constituting a threat to the life or property of one or more nationals of the United Kingdom or residents of the United Kingdom has been or is likely to be taken”

by a person or persons resident in a country or territory outside the UK.

The freezing order is one of a limited number of measures available to the UK authorities to act directly against Lugovoy and Kovtun. We continue to believe that it acts as a deterrent and a signal that the Government will not tolerate hostile acts on British soil and will take firm steps to defend our national security and rule of law. The new order maintains a robust approach on Russia, in line with our Russia strategy, and maintains unity of approach with the United States, which also sanctions these two individuals. Continued close co-ordination is a vital part of our joint effort in countering the Russian threat.

Were we not to maintain asset freezes against Lugovoy and Kovtun we would risk sending a damaging signal that the consequences of murder in the United Kingdom are limited and timebound if you choose to evade the UK justice system by remaining overseas. Not maintaining asset freezes against these individuals would be likely to be perceived as the UK softening its stance towards Russia. Furthermore, it would risk signalling to the Russian state that the UK is looking to normalise relations. This would be contrary to and directly undermining of Her Majesty’s Government’s consistent message that there can be no change in UK-Russia relations until Russia desists from attacks that undermine international treaties and security.

The current bilateral relationship is not the one we want. We continue to remain open to a different and co-operative relationship, but this depends on Russia stopping its destabilising activity, which threatens the UK and its allies. We engage with Russia on a guarded basis, defending UK national security where necessary while ensuring we address the global security issues of the day.

In summary, the Government believe that maintaining asset freezes against Lugovoy and Kovtun is an appropriate and proportionate measure to take and that not to do so would run counter to the national interest. I hope noble Lords will join me in supporting the order. I beg to move.

My Lords, I hear the noble Earl, but I hope he will understand that I am not wholly convinced by the case he has deployed for continuing the order in respect of the two Russians. Indeed, I question whether it serves any useful purpose. We are dealing with a freezing order in respect of those two people, prohibiting persons from making funds available for their benefit. In my judgment, it is unlikely that the pair are dreading the result of this debate.

I ask three key questions. My first question is: why now? The short answer is of course that this is the second order made against the two men following the Owen report in January 2016. The order has expired and must now be renewed. The question must arise: at what point will this two-year cycle end? What criteria did the Treasury use in looking at the case for its continuation? Are we to anticipate that this two-year continuation will go on ad infinitum?

The Government have clearly put much effort into the order’s renewal, as shown by the timetable I just mentioned and some of the many committees that have looked into it. The instrument was made on 17 January. It was laid before both Houses. A Motion to approve has been made. It has been before several similar committees. There are also the English votes for English laws certification, the Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments, the Delegated Legislation Committee and so forth. It is a pretty formidable series of consideration. I wonder whether it smacks a little of a job creation exercise and whether the Treasury is doing its job properly in asking whether there is value for money in what we are doing. For example, before or after the order made on 19 January, was any effort made—if we consider this so important—to persuade other countries to follow suit in respect of these two Russian gentlemen?

The second question I pose is this: why are we here at all? Has anyone in the Treasury, for example, asked the basic question on behalf of law and on taxpayers’ behalf: is this expenditure worth while? Is it worth the effort of time and finance? I put this question to the noble Earl: is there a scintilla of evidence that the two men have any assets in the UK on to which the Treasury might latch? Is there any possible way in which any financial institution within this country’s jurisdiction is likely to offer any loans or any form of financial help to these two men, who are GRU operatives? Are they likely either to seek or be given any such help, given their lack of creditworthiness? Otherwise, surely this is a pointless exercise. As we know, Russia will not extradite any of its nationals, let alone those like these two gentlemen—that is, operatives of the Russian secret state engaged in a clandestine mission.

The only explanation offered in the Explanatory Memorandum is in paragraphs 6.2 and 7.3. Paragraph 6.2 states:

“The Treasury believe that this Order will be an effective deterrent to prevent similar activities being undertaken again.”

Paragraph 7.3 states that

“Parliament will not tolerate activities of this sort, and constitutes a deterrent to these persons and others from undertaking similar activities in the future.”

Do the Government seriously suggest that the GRU or the other elements of the Russian secret service will be deterred by an order of this sort? The facts clearly suggest otherwise.

I cite the Salisbury outrage, when the GRU sent two men in the hope of murdering Mr Skripal. In effect, they murdered an ordinary British citizen through their negligence in discarding that vial. Remember, those GRU agents purported to have an interest in medieval ecclesiastical architecture. They said that they thought that Salisbury cathedral was an appropriate place for them to visit in this country, so they visited it to continue their interest in such architecture. It was absolute nonsense. They came here with a firm purpose. There was clearly no deterrent in that case. It was Mr Putin who, in his press conferences and elsewhere, tried to laugh off—almost—the evidence, saying in effect that all traitors may well suffer the same fate. We also know that a number of Chechen opposition people have been killed in France in the same way. Where is this deterrent effect that the Treasury found so convincing? To be fair, in paragraph 12.1, the Treasury concedes that:

“The continued listing of these two names is likely to have negligible impact.”

The use of “negligible impact” probably overstates the effect.

So, why are we here? Could not someone in the Treasury have looked at the facts of the case and what happened afterwards and have said, “Look, stop. This order is no longer justified”? Are we going to consider the charade of extending these two years indefinitely?

Finally, I want to ask about the Magnitsky clauses in the 2018 Act. Why are they not now put into effect? The clauses relate to asset freezes and visa bans. Had they been in effect, they could have been used in this case. I accept that the Government say that an SI will be put down to bring forward the Magnitsky clauses. They argue that they were restrained by EU membership. That is nonsense on stilts. There is no such restraint by EU membership. If there were, why have the Baltic countries—also EU members—had Magnitsky clauses of this sort, on the same lines as legislation in Canada and the USA and that being considered in Australia? The EU did not in any way restrain this. The Government’s argument is wholly without merit. I pay tribute to all those who, on a cross-party basis, led by Andrew Mitchell MP, persuaded the Government, rather against their will, to put forward those Magnitsky clauses. The Government’s best argument is that they are doing this because they are doing it. I only wish that someone had the nous and courage to say, “Enough is enough. We should stop at this point”.

My Lords, I believe that on balance it is necessary to renew the order, simply because not to renew it would send the wrong message, but I agree with many of the comments made by the noble Lord, Lord Anderson. I spoke on this issue back in 2018—I will not repeat the whole of that speech, as that would be to test the patience of the Committee. I used that opportunity to pay tribute to Marina Litvinenko, who fought so hard against the Home Secretary of the day for the public inquiry that should have come almost automatically but did not. The reality is that, because of the many delays, Andrey Lugovoy and Dmitri Kovtun had years in which to move out any assets that they had in the UK or within the scope of the UK. From the moment that the order was established, it was unlikely that it would have any personal impact on them, but at least it sent some sort of message.

At the time, I asked the Minister of the day to be sure that all assets were encompassed by the various definitions, including crypto-assets, and I received an assurance that they were. Is there an ongoing mechanism to make sure that, as new financial mechanisms develop, they are covered and automatically caught by the order? That would be a useful discipline to have in these instances.

I was also concerned to know to what extent these two individuals would be able to make use of Crown dependencies and overseas territories, many of which do not have a public register that would enable any civil society person to identify whether they were making use of financial services capabilities in those locations. Without that, the UK or the enforcement arm, presumably the Metropolitan Police, would need to initiate an investigation into assets in the names of the two individuals and into any shell companies that they might be involved in or any other kind of entities that were making use of those Crown dependencies and overseas territories. I am not sure how active that process is and whether we are serious about making sure that these two individuals are at least excluded from UK-related financial capacity.

I also asked about property ownership. As the Minister will be aware, we have public registers of beneficial owners, but not yet in the case of property, although I believe that that process is in train. I very much hope that he can assure me that the necessary monitoring is in place to ensure that neither of those individuals, or the shell companies that they use, has managed to get around the system by using the loophole of the absence of beneficial ownership.

Surely the argument put forward by the noble Baroness would have some merit if one had any suspicion that those two individuals had any form of asset—be it property or finance—or any possibility of obtaining a loan, given their lack of creditworthiness.

I think it is understood that those two individuals at some point had assets in the UK. Hence my frustration that the long delay and the public inquiry meant that they had every opportunity to remove those assets. We cannot guarantee that they used them, but they certainly had the opportunity. I fear that, with the way that various shell companies work, it is not as simple as looking at one individual’s creditworthiness: there are many other ways. I assume that these two people, within their own context, are considered to be very successful individuals who are not short of the ready, and therefore have the opportunity through various mechanisms to exploit financial services. If the order is to mean anything, there must be some enforcement capability to it, and I am inquiring whether there is.

I noticed that the debate that we had in 2018 was in February, towards the end of the month. To reinforce the point of the noble Lord, Lord Anderson, that this is not really a deterrent of any sort, the attack on the Skripals happened on 4 March that year, days later. That says everything about the weakness of the deterrent effect. It would be incumbent on the Treasury to rewrite its note in the light of the Salisbury poisonings. We need to pay great respect in understanding the suffering not only of the Skripals but of Dawn Sturgess, who died as a consequence.

I also wondered—I ought to know the answer to this but do not, so I am simply inquiring—whether the same orders now apply to the two individuals identified as being involved in the Skripal poisonings, Colonel Anatoliy Chepiga and Dr Alexander Mishkin, both of the GRU. If this is a principle, it ought at least to be more broadly applied. I very much agree with the noble Lord, Lord Anderson, that we need to implement the legislation passed in both Houses.

A more robust response to the poisoning of Litvinenko and the attempted poisoning of Skripal is fundamentally necessary. Will we wait for a third or fourth poisoning before we start looking at more senior figures within the Russian establishment? Clearly, all the people we have mentioned who face freezing orders were under orders from far more senior people. It is a great weakness in our position not to have recognised that much more clearly and to have considered whether, if we believe that constraining people from using UK financial services has an impact on their behaviour, making that work up the chain will be a lot more useful than simply applying it to the individuals who we have been able to identify but who are, frankly, in every case, pretty small fry.

My Lords, it is not the intention of the Labour Front Bench to oppose this order nor to rehearse the merits of the case. However, as a matter of principle, I would like the Minister to explain why he had to use the “made affirmative” procedure. When a two-year order is about to expire, the one thing you know is that you would have had two years’ notice of that. It is not clear why a perfectly normal order could not have been made. This procedure should be used only in emergency circumstances.

I thank all noble Lords for their contribution to this short debate. I will do my best to cover all the points raised but should I miss any out, I will write to noble Lords. The noble Baroness, Lady Kramer, asked how the asset freeze affects real property—land, buildings et cetera. She also mentioned cryptocurrencies, which she had referred to in the previous debate, two years ago. Under an asset freeze, all funds and economic resources must be frozen. No funds or economic resources can be made available, directly or indirectly, to a designated person or for their benefit. To do so may be a criminal offence. Funds generally mean financial assets and benefits of every kind. Economic resources—this relates to the noble Baroness’s point about property—generally refers to assets of every kind, tangible or intangible, moveable or immoveable, which are not funds but which may be used to obtain funds, goods or services. This includes, but is not limited to, property. As confirmed in the previous debates, crypto-assets are also covered by this.

I do not want to create a problem for the noble Earl, because this may be outside his general scope, but where there is no public register of beneficial interests, the problem is that civil society groups—which do a lot of the monitoring on behalf of us all—cannot see through to identify whether there is abuse. In those particular circumstances, the only way to find out whether somebody has acquired property in the UK, which will be under various other names, shell companies, and whatever else, is by active intervention by UK enforcement authorities. Until we get the public register, that is limited. That was the question I was trying to focus on.

The noble Baroness’s point is basically about transparency. I do not have any information on that issue to hand, but I will write to the noble Baroness.

The next point was about a link between the 2018 order and the Salisbury event. As noble Lords are aware, the murder of Alexander Litvinenko and the attack on Salisbury are part of a pattern of Russian aggression over the past decade, which includes its actions in Georgia, Crimea and Ukraine, and campaigns of reckless and irresponsible cyberattacks. We took a range of measures following the attacks in Salisbury, including co-ordinating the expulsion of 153 Russian intelligence officers, the largest mass expulsion in history. We continue to believe that, in conjunction with the other measures which the Government have taken in response to the murder of Alexander Litvinenko, this freezing order sends a message to others who might consider committing similar acts in future that the UK Government will not tolerate such action. After the Salisbury attack, four Russian individuals were sanctioned under the Chemical Weapons (Asset-Freezing) and Miscellaneous Amendments Regulations 2018 for their roles in transporting and using a toxic nerve agent—Novichok—in Salisbury in March 2018.

The noble Lord, Lord Anderson, raised a number of issues relating to his thoughts on whether it was worth while going through this exercise. Obviously, Her Majesty’s Government feel that it is, but he also mentioned the Magnitsky sanctions and asked why we were not introducing the asset freeze under them. The Government have announced their intention to establish UK-autonomous global human rights Magnitsky-style sanctions, as he said. These will be coming forward shortly, once we have left the European Union—which I imagine we have.

How shortly is shortly? Since the 2018 Act, the Government have had two years in which to implement this. They are not in fact constrained by the European Union. I pose the same question again: do the Government have any suspicion at all that these two individuals mentioned have any assets, or any other form of property or whatever, in the UK? If not, this is surely a totally pointless exercise.

As the noble Lord is well aware, “shortly” is a term often used in this position from the Dispatch Box. I cannot give him any more details on that at the moment. He also raised another point which he had already raised in his earlier speech; I will come to that.

Another point raised by noble Lords was on the GRU in the UK and what we have done about that. As I mentioned, there was asset freezing following the Salisbury event, but we have exposed the role of the GRU in the despicable attack on Salisbury. We have exposed its operatives and the methods it used. The actions of the GRU are a threat to all our allies and we have shared the information with them. We have stepped up our collective efforts to disrupt and dismantle the GRU networks in this country, with the expulsion of these Russian members.

The noble Lord also asked whether there was any evidence of these individuals actually owning assets in the United Kingdom. Her Majesty’s Treasury has received no information about frozen funds in respect of designations in place against Kovtun and Lugovoy. However, the asset freeze continues to deny those individuals access to the UK financial sector. Beyond the financial impact, this order is part of a package of measures which send a clear message that such illegal acts will not be tolerated.

In the absence of bringing the killers of Litvinenko to trial in the UK, the Government believe that it is important and appropriate to maintain these measures against the two individuals—including the asset freeze, the European arrest warrants and the Interpol red notices—as a deterrent against others conducting such unacceptable actions in future. We continue to believe that this freezing order sends a message to others, who might consider committing similar acts in future, that the United Kingdom will not tolerate such action. Despite the poisoning of Sergei Skripal in Salisbury in March 2018, we cannot discount the possibility that the 2016 and 2018 orders have had a deterrent effect on the Russian state, or indeed on other states.

The noble Lord, Lord Anderson, asked at the beginning of his speech at which point these orders will end. Under Section 7 of the Anti-terrorism, Crime and Security Act 2001, the Treasury is required to keep a freezing order under review. In accordance with this obligation under Section 7, in May 2019 Her Majesty’s Treasury conducted a review of the facts of the case against these individuals. The Home Office and the Foreign and Commonwealth Office were consulted as part of that review, which established that the then-existing freezing order was an appropriate measure to maintain. The new freezing order will lapse two years after it is made, as set out in Section 8 of the 2001 Act. Her Majesty’s Treasury will continue to monitor the evidence and review the facts of the case against these two individuals while the order is in force.

The noble Lord, Lord Tunnicliffe, asked about the “made affirmative” procedure. Section 10 of the Anti-terrorism, Crime and Security Act 2001 requires that freezing orders under it are made using this procedure. The procedure allows for immediate action followed by debate in the next 28 days. If Parliament does not agree the order, the asset freeze falls away. Freezing orders under the Act are designed for situations in which events require an urgent response and/or in which there is a risk of asset flight. The original 2016 order against Lugovoy and Kovtun was made one day after Sir Robert Owen’s inquiry reported, concluding that the two individuals had deliberately poisoned Litvinenko. The Treasury continues to believe that the conditions for making the order set out in this Act remain satisfied.

Motion agreed.