How Britain can speed up sanctions against the oligarchs

7 March 2022

7:53 PM

7 March 2022

7:53 PM

In contrast to its leadership in relation to economic sanctions against the Russian state, the UK has been much too slow in imposing sanctions on named Russian oligarchs and officials. The problem is not a lack of political will. Ministers have found it very difficult to swiftly impose sanctions on Russian nationals because of the terms of the Sanctions and Anti-Money Laundering Act 2018 and the legal risks to which they give rise. Time then to change the law.

The government is moving to address the problem. The Economic Crime (Transparency and Enforcement) Bill has been brought forward and is set today to have its second reading and to complete all remaining stages in the House of Commons. The government has tabled nine amendments designed to streamline the process of imposing sanctions. The amendments will help, but not enough, and another – more direct and focused – option should be explored.

The first amendment will remove section 2 from the 2018 Act, a section which was added in the course of the Bill’s passage through the House of Lords. The point of the section is to force ministers to think long and hard about whether there is a problem to which sanctions might be an answer and about whether imposing sanctions is in fact a reasonable response to the problem. I doubt this section is a main cause of our present difficulties. The amendment might streamline the process in future – which may or may not be a good thing, for not every international crisis is as serious as this one is – but it is unlikely to speed up the process of sanctioning Russian nationals.

Much more important are the amendments to sections 11 and 12, which (a) remove the requirement that ministers consider the likely significant effects of imposing sanctions on individuals and (b) create an urgent process for imposing sanctions on named individuals.

If ministers do not have to consider the effect of imposing sanctions on individuals, this frees them to move more quickly. There will be bipartisan support for this change; Sir Keir Starmer and other Labour frontbenchers have tabled an amendment to similar effect. The point, it seems, is to enable ministers to impose sanctions without having to undergo a proportionality exercise of the kind that the House of Lords, led by Lord Pannick, insisted on back in 2018. In the context of the present crisis, this is a change to welcome. However, parliamentarians should note that these changes will be of general application – they are not limited to Russian oligarchs or officials – and in other cases a failure to consider the impact on individuals of freezing their assets might well be unjust. In addition, it is not entirely clear that this change, sensible though it is, will succeed in stripping out the idea of proportionality from the sanctions process. The Human Rights Act 1998 will continue to apply and there must be a real risk that the 2018 Act will continue to be read in a way that limits government freedom to impose sanctions and maintains significant legal risk.

The new urgent process for imposing sanctions is effectively a ministerial power to impose sanctions on a named individual if that person is the subject of sanctions imposed by the United States, the EU, Australia, Canada or any other country specified by a minister. This last qualification goes too far. Importantly, sanctions imposed by way of this process last no more than 56-days, a period which may be renewed once, during which time the government may pursue the standard process.

Another amendment addresses the risk that damages may be awarded against the government in relation to the decision to impose sanctions. The 2018 Act limits damages to cases of negligence or bad faith; the amendment would limit damages to bad faith only, which sharply limits the risk of having to pay compensation. That said, the amendment may not succeed in removing the risk of damages arising in consequence of ordinary judicial review proceedings, as opposed to litigation applying the terms of the 2018 Act itself. The amendment also provides that ministers may make regulations specifying the maximum sums that may be recovered in compensation. This is a very bad idea, not only because it is unjust for the government effectively to be judge in its own cause in this way, but also, more pressingly, because the House of Lords will inevitably cry foul, which may delay the enactment of the legislation, defeating the point of the exercise.

Beyond the government amendments, two backbench amendments attempt to address the problem of capital flight in advance of a decision to sanction. The first would enable emergency asset-freezing orders in relation to a person whom the Secretary of State considers likely to meet the criteria for sanctioning under the 2018 Act. The second would empower the Secretary of State to freeze the assets of a person who is being considered as a subject for sanctions. One can see the sense of both amendments, but each would need to be recast in order to be more clearly effective and to be in a fit state to form part of the law without giving rise to unintended injustice.

The problem with all these measures is that they attempt to make general reforms to the 2018 Act in order to address the particular problem of sanctioning Russian oligarchs and officials. The present crisis has of course revealed some general problems with the 2018 Act, but these might well be better addressed at a later point in time, in a way that minimises the risks of mistake. MPs and peers may well end up opposing (or delaying) reforms intended to enable swift action against Russia because they fear that the changes will have lasting and damaging consequences.

It thus makes sense for government and Parliament to consider the narrower, more direct proposal, which Sir Stephen Laws (former First Parliamentary Counsel) and I outlined for Policy Exchange on Saturday. That is, Parliament should enact emergency legislation – a Bill introduced and passed by both Houses on one day – that imposes sanctions on individual Russian nationals, listed in a schedule to the Act, which would provide an unquestionable legal basis for freezing their assets.

The Act of Parliament in question would list the oligarchs and officials who are to be the subject of sanctions, ruling out any risk of litigation challenging the sanctions or seeking compensation. The Act should empower ministers to add to the schedule, especially in order to keep track with decision-making on the part of our allies, and also to remove names from the schedule if need be. The individuals in question should retain their rights under the 2018 Act to ask ministers, and in due course a court, to reconsider whether they should be subject to sanctions and to gain access to funds needed for reasonable expenses. The legislation could expire after six months. Its significance is that it would cut through the immediate problem, which is the time it takes for the government to work up a detailed case against so many individual Russian oligarchs and officials.

Without legislative change, the government will not be able swiftly to impose sanctions, which will undermine their effectiveness as a means of foreign policy. Amending the 2018 Act is one option and may do some good. But it is not a direct response and may not come in time – it is unclear when exactly the Economic Crime Bill will receive royal assent and even when it comes into force it will still take time for ministers to make a case against individual Russian nationals. Parliament should instead move swiftly and directly legislate to impose sanctions on the individuals in question.

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Richard Ekins is Head of Policy Exchange’s Judicial Power Project and Professor of Law and Constitutional Government, University of Oxford

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