Terrorist Asset-Freezing (Temporary Provisions) Bill
Second Reading
3.09 pm
Moved By Lord Myners
That the Bill be read a second time.
The Financial Services Secretary to the Treasury (Lord Myners):My Lords, the Terrorist Asset-Freezing (Temporary Provisions) Bill makes provision for the temporary validity of Orders in Council that impose financial restrictions on, and in relation to, persons suspected of involvement in terrorist activity, and for connected purposes.
The whole House will, I know, understand that terrorism continues to pose a threat to the UK. The Home Secretary recently raised the UK terrorist threat level to “severe”, meaning that an attack on the UK is highly likely at any time. As noble Lords know, terrorist organisations including al-Qaeda have executed or planned a succession of attacks with the aim of causing mass casualties. Measures to prevent terrorist finance are at the heart of the international effort against terrorism. Without resources, terror networks are unable to plan, to organise or to execute attacks. For this reason, the United Nations requires that all states freeze, without delay, the assets and resources of people who commit, attempt to commit, participate in or facilitate the commission of terrorist acts. Our tools to combat terrorist finance therefore, have become an important part of the UK’s counterterrorist strategy. Our measures must be proportionate but they must also be robust and effective. Terrorist attacks are not expensive, and even small amounts of money in the wrong hands can cause devastation. The attacks in London on 7 July 2005 cost the perpetrators just £8,000.
While financial sanctions have a long history, their use against terrorists is only around a decade old. The UN Security Council established an asset-freezing regime against the Taliban in 1999. It was quickly extended to include Osama bin Laden and persons associated with al-Qaeda. In the weeks after 9 September 2001, the UN created a separate requirement on member states to freeze the assets of those involved in terrorism more generally, where those individuals were identified by member states. The UK acted quickly; using secondary legislation under the United Nations Act, we were able to ensure that our freezing regime was in place by 10 October 2001, only 12 days after the UN Security Council passed the resolution.
Some people have asked why we used secondary legislation under the UN Act in the first place rather than putting our regime into primary legislation. The answer is that in good faith we believed that the United Nations Act was the right legal base. Section 1 of the United Nations Act has been used since 1946 as an established basis for successive Governments to implement our UN obligations on matters concerning threats to international peace and security. Section 1 of the UN Act says:
“If, under Article forty-one of the Charter of the United Nations, the Security Council of the United Nations call upon His Majesty’s Government in the United Kingdom to apply any measures to give effect to any decision of that Council, His Majesty may by Order in Council make such provision as appears to Him necessary or expedient for enabling those measures to be effectively applied”.
Given that there are clear UN Security Council obligations to freeze the assets of terrorists, the Government believed that the UN Act gave them legitimate authority to make secondary legislation to freeze terrorist assets. The Court of Appeal upheld the Government’s position. The Supreme Court decided on 27 January 2010 that the United Nations Act does not go so far as to give us that authority and that the Orders in Council we have used were therefore not validly made.
However, I hope noble Lords will appreciate that until the Supreme Court made its judgment, the correct interpretation of the United Nations Act was unclear. The Government acted in good faith when using it as the basis for implementing UN asset-freezing obligations.
The Supreme Court ruled that the Terrorism (United Nations Measures) Order 2006 and the Al-Qaida and Taliban (United Nations Measures) Order 2006 were beyond the scope of the power provided by Section 1 of the United Nations Act 1946, and quashed both orders. On 4 February, it ruled not to grant the Government any stay or pause before its judgment took effect.
Assets frozen under the UN regime on al-Qaeda and the Taliban remain frozen under the effectively parallel EC regulation. However, the Supreme Court’s judgment has the effect of removing the sanctions for breach of its provisions, so we will attach sanctions to the EC regulation through secondary legislation. This will be debated in the House in due course through an affirmative procedure.
The court then also struck down the terrorism order 2006, and in so doing rendered vulnerable the terrorism orders of 2001 and 2009. There is no back-up EC regulation for the UK’s designations under the terrorism orders. Primary legislation is therefore needed to ensure that we can continue to freeze terrorist assets.
Currently, more than £150,000 is frozen in the UK under the terrorism orders. We need to act quickly to ensure that this money remains frozen and that suspected terrorists are not allowed to use the financial system to raise and move funds. That is why this Bill is being fast-tracked, with all stages being considered in this House in one day. I appreciate that one day is inadequate to consider legislation of this significance, but I hope noble Lords will understand why we need to act quickly.
The Bill seeks to provide a temporary legal base for the Orders in Council, aimed at freezing assets of those we reasonably suspect are involved in terrorism where it is necessary to protect the people of this country. This Bill will, if passed, restore the UK’s terrorist asset-freezing regime in primary legislation as a stop-gap, before a full Bill can be considered and, I hope, passed into law. This course of action allows the House to scrutinise our proposals, while eliminating any risk of a gap in our asset-freezing regime. Through this action we are able to provide legal protection for the banks, to ensure that terrorist assets remain frozen, even though the Supreme Court judgment was not stayed. We have already published the full Bill to which today’s legislation is merely a bridge. I hope the House will agree that the fuller Bill deserves a great deal of scrutiny.
Lord King of Bridgwater: When that fuller Bill is considered in the House, will it take account of the fact that, while this freezes some terrorist assets at present, many terrorists are closely involved in serious organised crime? The figures the Minister has given for what is actually going to be frozen under this are minute compared to the resources available to some of these organisations. One of the tragedies of recent years and successive Administrations around the world is the total failure to deal effectively with money-laundering by terrorists and serious organised crime.
Lord Myners: I note the observation from the noble Lord, Lord King. Matters relating to serious organised crime are already dealt with by other agencies and legislation. This legislation focuses on the use of finances that are specifically related to the risk of terrorism activity which threatens the United Kingdom. No doubt the authorities will at all times be vigilant in recognising the area where organised crime may well abut terrorist activity, and will be alert to ensure that we are vigilant in addressing that risk.
I should make it clear at the outset that today’s Bill, and the fuller Bill, seek only to restore the asset-freezing regime that is implemented through the terrorism orders— that is, the regime mandated by UN Security Council Resolution 1373, where listings are made at the national level. The Bill does not seek to restore the UN al-Qaeda and Taliban asset-freezing regime. That is the regime mandated by UN Security Council Resolution 1267, where listings are made at the UN. As I mentioned earlier, the al-Qaeda regime remains in effect through a directly applicable EC regulation. Noble Lords will be aware that the Supreme Court had specific concerns about the UN al-Qaeda regime—in particular, the lack of direct access to a court for people who are listed at the UN. Those specific concerns do not arise on this Bill, because it seeks only to restore the terrorism order regime, where decisions are made nationally and individuals have access to UK courts.
With the House’s permission, I shall briefly outline the Bill’s effects. It seeks to maintain the Treasury’s power under the Orders in Council to designate persons if they meet both the required conditions of a legal test: reasonable suspicion that the person is involved in terrorist activity, and that the designation is necessary for public protection. The effect of a designation is to forbid dealing with a designated person’s funds and economic resources; to forbid making funds or economic resources available to such persons, and to forbid funds or economic resources being made available to a person when the designated person will obtain significant financial benefit. The orders will continue to provide for licences to permit access to funds and to ameliorate the effect of the sanctions. The Treasury will remain open to legal challenge to its asset-freezing decisions, including the procedures approved by Parliament in the Counter-Terrorism Act 2008.
Perhaps I might turn briefly to retrospection. The Bill makes retrospective provision in one respect only. It gives retrospective legal authority for banks and any other institutions to maintain existing freezes between the dates of the Supreme Court judgment—4 February—and Royal Assent. I know that retrospective legislation is a very serious business and should be contemplated only where absolutely necessary. I assure your Lordships that this provision is necessary; without legal cover, banks would not have been able to maintain existing asset freezes for the past five days, and asset flight might already have happened at a cost and risk to our national security.
The Bill is time-limited to expire on 31 December 2010. We believe that the end of the year is the right timetable, as it will allow time for more permanent asset-freezing legislation to be given full consideration both in Parliament and in pre-legislative scrutiny. I could not be confident that, given elections and recesses, this job of scrutiny could be safely dispatched and a full Bill could then be taken through both Houses before 31 July 2010. Today’s Bill is unavoidably urgent, but we do not believe that we should be fast-tracking two asset-freezing Bills through Parliament in close succession.
I want to respond to a number of points concerning human rights safeguards that were raised yesterday in debating the Bill in the other place, and which I expect noble Lords will also want to discuss today, both at Second Reading and in Committee. There are fundamental issues that are important to all Members of this House. Our intention is that all those issues be fully considered and debated when this House considers permanent asset-freezing legislation in the coming months. However, I understand that noble Lords will want some discussion of these issues today to be satisfied that the regime they are voting to extend in this Bill today until the end of the year is proportionate and fair.
Before coming to some specific issues, I want to explain that our asset-freezing regime is tried, tested and fit for purpose. It was subject to rigorous analysis by the Financial Action Task Force in 2007 and was judged to be, in its words, “fully compliant” with international best practice—we are the first country, incidentally, to get this top mark—and we have improved it through experience. For example, as the Supreme Court itself pointed out, the Terrorism Order 2009 is an improvement on the 2006 order, with more safeguards and greater proportionality.
One question that was raised yesterday in the other place, and which I see is also raised in an amendment we will discuss later, is whether “reasonable suspicion” is the right legal test. We believe strongly that it is. If we want the regime to be preventive rather than punitive, which we all do, freezing people’s assets only when they are convicted is not the right approach. Such an approach is not very preventive as it may mean that freezes cannot be imposed for more than a year after someone has been detained, while they are still awaiting trial. Indeed, waiting to freeze assets until someone is convicted may simply appear punitive; an additional form of punishment on top of a prison sentence. The Financial Action Task Force is clear that reasonable suspicion is a proper legal basis for meeting UN asset-freezing obligations. As I mentioned earlier, we do not simply rely on the reasonable suspicion test. Designations must also be necessary for public protection, which acts as a safeguard against any arbitrary use of the power to make designations.