Irish Border and Brexit: Contributions to debate on European Union (Withdrawal) Bill, House of Lords, 14th March 2018

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My Lords, I am very grateful to my noble friend Lady Kennedy of The Shaws for enabling me to speak to this amendment on the common travel area and to Amendment 198 in my name and those of the noble Baronesses, Lady Altmann and Lady Suttie, and the noble Lord, Lord Kerslake. It seeks to deliver into statute what the Government agreed with the EU on 8 December:

“The Good Friday or Belfast Agreement reached on 10th April, 1998 by the United Kingdom Government, the Irish Government and the other participants in the multi-party negotiations (the ‘1998 Agreement’) must be protected in all its parts, and that this extends to the practical application of the 1998 Agreement on the island of Ireland and to the totality of the relationships set out in the Agreement.”

My noble friend Lord Browne of Ladyton will also address this specifically on Amendment 215, an important amendment that he has tabled with the support of other noble Lords—and noble Baronesses.

We scarcely need to remind ourselves that the Good Friday agreement, which my noble friend Lord Murphy of Torfaen negotiated, was a triumph of politics over violence in post-conflict Northern Ireland. When I spoke in this place over a year ago, I said that a hard Brexit and the hard border that would inevitably follow it would test the delicate balance of the three strands of the Good Friday agreement—relationships within Northern Ireland, between Belfast and Dublin and between London and Dublin—on which the peace settlement is based. That, sadly, is coming to pass.

The Good Friday agreement was a good-faith effort to take the toxin out of identity politics in Northern Ireland, where those who identified themselves as Irish could live with those who identified themselves as British and with those who see themselves as Northern Irish. There is no doubt that since Brexit, which the majority of people in Northern Ireland voted against, the divisive politics of identity is coming increasingly to the fore again. That is profoundly disturbing. Meanwhile, there has not been a local Administration for over a year—an equally profound government failure. Relations north and south are also deteriorating, to the extent that a senior member of the party propping up the Government can publicly call the Taoiseach a “nutcase”, and “not Indian” but a cowboy. To get the full flavour of that particular witticism, noble Lords need to know that Leo Varadkar’s father was born in Mumbai.

The tensions between the UK leaving the EU and Ireland remaining in it are clear. Following the phase 1 joint report on Article 50 on 8 December, the EU produced a 120-page document setting out the legal framework for fallback positions in the absence of agreement between the UK and the EU on the way forward. There were howls of protest and the Prime Minister rejected it out of hand, but where is the Government’s legal framework setting out what they think they signed up to on 8 December? Presumably, it sits alongside the Brexit Secretary’s impact assessments.

We are still desperately unprepared for Brexit and this is no more evident than on Northern Ireland. The UK Government, having agreed with the EU three months ago in the phase 1 agreement to maintain a frictionless border to preserve the Good Friday agreement, continue to fail completely to demonstrate how they can combine an open Irish border with the UK remaining outside both the single market and the customs union with the European Union. There is a simple reason for that—they cannot. Yet in her desperate attempt to keep her Cabinet—never mind her party—together, the Prime Minister continues to spin platitudes and delusion. Just last week, she was still maintaining that the United States/Canada border could be a model for an open border in Ireland. This is just nonsense. There are armed guards patrolling that border; there are flags on it; there is infrastructure on it—all the things that were specifically promised would not be on the border between Northern Ireland and the Irish Republic. If they were, they would be recruiting sergeants for mayhem, civil disobedience and attack.

Ministers still maintain the fiction that technology is the answer. All technological solutions require resources, infrastructure and preparation to implement. They do not substitute for the need for checks and inspections but merely aid the efficiency in crossing the border legitimately and identifying potential breaches of compliance or false declarations. As the former Permanent Secretary at the Department for International Trade, Martin Donnelly, has made clear, on the Northern Ireland border there is absolutely no evidence, and no serious expert in the customs field, who thinks that there can be an invisible technological border. He said that it does not exist anywhere in the world.

    • I am most interested but I wonder whether the noble Lord has looked at the evidence given to the Select Committee on Exiting the European Union in the House of Commons by the head of Customs and Excise, who said that whatever the outcome of the talks, there would be no need for infrastructure on the Irish border.

    • I know that evidence has been given but I simply stick to what I have argued, supported by the former Permanent Secretary at the Department for International Trade, who is an authority on these matters.

      I remind your Lordships of the report of the Public Accounts Committee in the other place, published last December. It said:

      “Government departments’ poor track record of delivering critical border programmes, such as e-borders, leaves us sceptical that they are up to the challenges of planning for the border post-Brexit”.

      The Foreign Secretary compares it all to the congestion charge between council areas in London. Sadly, he knows little about the issues and cares even less.

      The single market and customs union are not political deals but rules-based legal entities. As an EU member state, the UK has rightly insisted on the strict and consistent enforcement of these rules. Brexiteers, no doubt including the noble Lord, Lord Lamont, pretend that the EU can pick and choose to satisfy the UK that we can have all the benefits of being in the customs union and single market with none of the obligations, and that we can have an open Irish border while rejecting all the rules for keeping it open. That is like saying, “I want my country to play in the World Cup but I won’t recognise the offside rule”.

      The success of the Good Friday agreement was that it made the border between the two parts of Ireland virtually uncontentious, both to nationalists, because it had to be completely open, and to unionists, because any constitutional change in Northern Ireland’s status could occur only with a referendum. The threat to it which Brexit poses was eminently foreseeable. It is important also to note that the 1998 agreement is not a domestic contract or statement of intent; it is an international treaty between two states. The British and Irish Governments are bound in international law to implement the terms of this agreement. Its legal precedent is the 1985 Anglo-Irish Agreement, signed by Margaret Thatcher, which gave the Irish Government a right of consultation in the affairs of Northern Ireland. The 1998 agreement makes formal recognition of the Irish Government’s,

      “special interest in Northern Ireland and … the extent to which issues of mutual concern arise in relation to Northern Ireland”.

      The agreement expressed the British Government’s wish to “develop still further” close co-operation with Ireland.

      Strands 2 and 3 of the 1998 agreement, the cross-border and British-Irish strands, are international by nature and their future cannot be determined solely by the will of this Parliament. The British Government are legally bound, in partnership with the Irish Government, to ensure that the functions and objectives of this co-operation are unimpeded by withdrawal from the European Union.

    • My Lords, on the question of the Good Friday agreement, did my noble friend notice the significant exchange that took place in the House on Monday between my noble friend Lord Judd and the Minister, the noble Lord, Lord Bourne of Aberystwyth? When my noble friend Lord Judd said,

      “could the noble Lord confirm that the amendments to be brought forward by the Government will make absolutely sacrosanct the principle of the preservation of the Good Friday agreement?”,

      the noble Lord, Lord Bourne, replied,

      “My Lords, I certainly can confirm that”.—[Official Report, 12/3/18; col. 1397.]

      So the Government appear to have committed themselves to bringing forward amendments, I assume on Report, to enshrine their obligation to observe the Good Friday agreement.

    • If that is the case, as my noble friend has reminded us, then the Government should be supporting this amendment and putting it into statute.

      During the referendum campaign in 2016 two former Prime Ministers, Sir John Major and Tony Blair, both of whom made significant contributions to the peace process, gave speeches in Derry/Londonderry, in which they stressed that imposing a hard border between the north and the south of the island of Ireland would threaten the very basis of the peace process and the stability that the island of Ireland has enjoyed. Both have cogently reinforced their case in recent weeks and are as alarmed as any of us privileged to have served as Ministers in Northern Ireland.

      There are more crossing points along this 310-mile border than there are along the whole of the EU’s eastern frontier: 257 compared with 137. The border crosses family farms and separates towns and villages from their natural hinterlands. It is both invisible and ever present, both unremarkable and deeply contested. Even the younger generation on both sides of the border associates the very idea of border controls with conflict and collective trauma. As well as the formal movement of goods, there are many services from cross-border medical and pharmaceutical transactions to people and data movements between supply chains north and south and the infrastructure issues: energy, telecoms, air and rail travel, environmental standards and so on. If, as the Prime Minister insists, Brexit means the UK leaving the customs union and the single market—a rules-based legal entity, not just a political agreement—then Brexit would unavoidably mean the introduction of a hard Irish border.

    • Is my noble friend aware that the European Parliament has today voted by 554 votes to 110 for a framework agreement that supports seeking UK associate status but that the necessary frictionless trade can be guaranteed only by membership of both the customs union and the single market? That underlines the point he is making.

    • I understood that this was a proposal being put by, I think, the leader of the European Parliament, Guy Verhofstadt. I am grateful that my noble friend has brought it to the attention of the Committee.

      A hard border is one that consists of layers of barriers to movement—that is, tariffs, quotas, bans and regulations—and requires strict conditions and evidence of compliance to cross: declarations, inspections, authorisations, visas and permits. However, while harder borders require greater means of control and management by states, it is not the visibility of a border that determines how hard it is. The experience of a harder border is felt away from the border line in the obstacles faced by an individual or business when seeking to cross it legally to work, trade or operate on the other side. Hard border arrangements therefore threaten the evolution of a successful all-island economy, which is essential to the economic development and long-term prosperity of Northern Ireland.

      A combination of the conditions of EU membership and the operation of the 1998 agreement has enabled cross-border economies of scale, supply chains, public service delivery and practical co-operation to flourish. These are particularly essential in areas, such as those in the central border region, which have suffered the consequences of multiple deprivation and conflict.

      It is estimated that 30,000 people commute across the border every day. Around 1 million HGVs, more than 1 million vans and 12 million cars move between Northern Ireland and the Republic every year. Northern Ireland is also a vital route to market for goods from the Republic, with the UK acting as a land bridge to markets in the EU 27—some of the goods going through Wales, I might add. Approximately 40% of container movements to or from the island of Ireland go through Northern Ireland.

      Also threatened are 142 areas of north-south co-operation that have developed as a result of the implementation of the 1998 agreement. These range from an all-island regime for animal health and welfare to shared infrastructure and emergency healthcare planning and provision. They bring direct benefits to people on both sides of the border, and much of this co-operation relies on regulatory alignment across it. For example, Dublin Airport is the main entry and exit point for air travel for Northern Ireland, around half of whose residents use it for holiday travel. Brexit will also require a new aviation agreement between the UK and EU member states if there is not to be disruption to flights to and from Ireland to the UK.

One of the most tangible successes in economic co-operation post the Good Friday agreement is the single wholesale electricity market, known as the SEM. A report by the House of Lords European Union Sub-Committee on Energy and Environment, published on 29 January 2018, stated:

“The Single Electricity Market (SEM) on the island of Ireland has been a key dividend of the peace process, reducing energy prices in both Northern Ireland and the Republic of Ireland, and helping to achieve decarbonisation targets. It is therefore vital that the SEM is able to continue post-Brexit. Given that its functioning requires the implementation of EU energy laws in Northern Ireland, the mechanics of maintaining the SEM will require careful consideration and new arrangements, particularly if the UK were to leave the Internal Energy Market”.

Food and agribusiness, worth more than £4.5 billion, form the largest cross-border trading sector, relying hugely on EU membership for everything from farmer payments to tariff-free exports. The sector operates on a de facto all-island basis. Examples include the 594 million litres of milk that are imported from Northern Ireland for processing in Ireland. If import tariffs or even non-tariff barriers were put in place, that could decimate the Irish milk-processing sector. Nearly all the wheat grown in Ireland is sent north for milling and then re-imported back to Ireland. Nearly 40% of Northern Irish lamb is processed in the Republic, while a significant volume of pigs and cattle from the south are processed in Northern Ireland. The Bushmills distillery, the oldest working brewery in Northern Ireland, which claims to have invented single malt before the Scots and is located on the beautiful coast of County Antrim, has trucks making 13,000 border crossings each year.

The 1998 agreement was drawn up in the context of shared UK and Irish membership of the EU, and its practical implementation centres on continued regulatory alignment. UK withdrawal from the EU means that the trajectories of the UK and Ireland will now diverge. The divergence will be wide-ranging and will happen in law, trade, security, rights, policies and politics. Brexit therefore risks deep fissures between the UK and Ireland and thus puts the Good Friday agreement at risk. Brexit, with its re-emergence of exclusivist definitions of sovereignty, nationalism and state borders, threatens to destabilise the fragile equilibrium in Northern Ireland. There are those in the Cabinet and in the ranks of the ideological hard right who see the Good Friday agreement as a tedious encumbrance to their form of Brexit, rather than as the cornerstone of a hard-won peace process that is not yet complete. They cannot be allowed to put that at risk. That is why this amendment is necessary and why I hope it will be voted on on Report

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  • I welcome the noble Lord, Lord Duncan, to his post as a Minister and commend the empathy he has shown in responding to the debate, which I think the whole House welcomes.

    I will not respond to the whole debate—the hour is too late—except to commend the marvellous, passionate eloquence of the noble and right reverend Lord, Lord Eames. He would be able to get me to follow him on any theological journey, which is asking a lot of me. However, I regret that the Minister has not really responded to the questions put to him. For example, the Brexit Secretary said recently that there would be no problem monitoring imports and exports between Northern Ireland and Ireland after Brexit and there would be no need for a hard border because we already do this for VAT purposes. But we can do it for VAT purposes now only because we are in the European Union’s VAT Information Exchange System—VIES. Outside the EU, we are out of that tracking system. Then, on Sunday, the Chancellor admitted that there was not an example in the world of the kind of technological open border alluded to by the Minister. Who believes for a minute that it can be done, apart from the Foreign Secretary—who thinks that South Armagh and Louth are the same as Camden and Westminster, except with more Guinness?

    The Prime Minister insists that Brexit means the UK leaving the single market and the customs union, which I do not accept for a moment. We can Brexit and stay in the single market and the customs union; other countries are outside the European Union but are in either the customs union or the single market. But if she were right, the UK Government in turn would be obliged by WTO rules to enforce hard border arrangements on the island of Ireland because of the change in their relationship with the EU. Therefore, to keep the border open as it is today, there is no alternative to Northern Ireland—and, by implication, the UK—remaining in both the single market and the customs union. I regret that the Minister, despite his empathy, has not really answered that point. I will not press my amendment.

 

Contribution to European Union (Withdrawal) Bill, House of Lords, 21 February 2018

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My Lords, having added my name to the amendments in the name of my noble friend Lord Adonis, I want to explain that they are designed to give back to Parliament control of when the European Communities Act 1972 is repealed and to strengthen the effect of the amended Clause 9(1), which was designed to give Parliament a meaningful vote on the final terms of withdrawal and which required that a new statute be put in place before any regulations are made to implement the withdrawal agreement.

I do not need to remind your Lordships’ House that what is at stake is more than a matter of process or procedure. It is ultimately about whether either Parliament or a group of hard Brexiteers who are trying to manipulate the Government will decide the future of the people of this country. What is at stake is people’s jobs and standards of living, which depend on our trading relationships; the protection of labour rights and environmental standards; the alliances on which Britain’s future security depends; and the future of the Good Friday agreement, which has brought peace and stability to the island of Ireland for generations to come but is itself now under attack from assorted Brextremists—including, astonishingly and recklessly, a former Secretary of State, Owen Paterson, who should know a great deal better. It is reckless and downright dangerous to put Brexit dogma before peace and stability on the island of Ireland.

As noble Lords will be aware, the notification of the UK’s intention to withdraw from the European Union under Article 50(2) of the Treaty on European Union was served by the Prime Minister on 29 March 2017. Article 50(3) provides:

“The Treaties shall cease to apply to the State in question”—

in this case, us—

“from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period”.

Therefore, Article 50 in its entirety means something quite contrary to the widespread impression, often reinforced by Ministers, that there can be no flexibility about exit day. As the noble Lord, Lord Kerr, the author of Article 50, has made it clear, the article contains provision for a possible extension of the period if that is needed to come to an agreement.

The main purpose of our amendments is therefore to give Parliament rather than Ministers the power to control the UK’s position on the date of exit day. By specifying that the European Communities Act 1972 can be repealed only on a date to be determined either by a further Act of Parliament or in the Act of Parliament enacted for the purposes of Clause 9(1), Amendments 2 and 3 support the amended Clause 9(1) by ensuring that Parliament stays in control of the timing of exit day under Article 50, and is thereby in a position to influence the withdrawal agreement and its provisions for the framework of the future relationship between the UK and the EU.

Our amendments are of particular importance in view of the earlier government amendments to Clause 14, moved on the final day in Committee in the other place, which gave Ministers power to fix the date of exit day. In their initial draft of the Bill, the Government were apparently satisfied that, for the purposes of the Bill, the date of exit day could be left to Parliament. Then, for what appear to be purely internal party factional reasons, the Government introduced an amendment to fix exit day in the Bill for 29 March 2019 at 11 pm for all purposes. The Government also supported amendments by Oliver Letwin which allowed the date to be changed by Ministers if the withdrawal agreement provides that the UK will leave on a date different from that set out in Clause 14.

I trust that your Lordships’ House will agree that Parliament rather than Ministers should be in control of the process. However, the government-supported amendments in the other place allow the date to be changed only by Ministers, not by Parliament, even if Parliament has a different view to that of the Executive. In addition, this could happen only if an alternative date on which the treaties ceased to apply to the UK was included in the withdrawal agreement—that is, only if Ministers agreed an alternative date with the EU.

Under the Bill, Ministers would in these circumstances therefore be able to use secondary legislation to change the date in UK legislation as well, thereby bypassing Parliament. Surely, that is completely unacceptable on a matter of such crucial historical importance. Therefore, there are a number of important and worrying implications of the government and government-supported amendments approved in the other place, which can be overcome by the amendments that my noble friend Lord Adonis has tabled, giving Parliament control over the date when the European Communities Act 1972 can be repealed, thus forcing the Government, if necessary, to go back into the negotiations with the EU under Article 50(2).

One example, as the former Attorney-General, Dominic Grieve, made clear in the other place, is that it was always the intention behind his amendment to Clause 9, which the other place voted for, that the powers in the Bill for implementing the withdrawal agreement, including fixing the withdrawal date, should not be used until after the final statute had been approved by Parliament. However, because of the government-sponsored amendments referred to earlier, those powers for Parliament in relation to the date of exit day are effectively removed from the scope of Clause 9, the other place having voted for that amended Clause 9. This could conceivably mean, for instance, that, given the first-phase agreement of December 2017 stating that,

“nothing is agreed until everything is agreed”,

if negotiations were deemed to have failed, the date of exit could be made earlier than 29 March 2019, thereby pre-empting Parliament’s consideration and implementation of a statute approving exit. As things stand, if there is no withdrawal deal, Parliament will be bypassed without any right to a vote. The Government’s amendments relating to the date of exit day have therefore been seen by some as potentially paving the way for a pre-emptive no deal—a so-called “hard Brexit”—by hard-line Brexiteers.

Another potential outcome of leaving the power to change the date of exit day in the hands of Ministers only is that this could be used by them to fail to pursue issues where Parliament wishes to see progress in the negotiations, on the grounds that they do not need Parliament’s support for Brexit in order for them to proceed on the pre-determined date. By the time any such vote comes on the withdrawal agreement, perhaps as soon as the end of this year, it could be difficult, if not impossible, to make substantive changes to the outcome. Neither the EU Commission, nor the member states, will be keen to renegotiate it. The European Parliament has its own agenda, and it seems highly likely that the choice facing the UK Parliament, as a result of Theresa May’s premature triggering of Article 50, would in these circumstances be to either accept the terms or reject them, with no leverage to force the Government back into renegotiations, so risking precipitating the UK crashing out of the EU with no deal. Surely, it is incumbent upon both Houses of Parliament to prevent this scenario by ensuring that Ministers are obliged to refer back to Parliament during the negotiations to ensure they win the ensuing vote.

Another danger is that the transition period, which the Prime Minister has inappropriately referred to as the implementation period, and which Labour, with the support of the CBI and the TUC, has advocated, could be at risk in the negotiations if Ministers alone control of the date of exit day. This transition period is necessary to prevent a so-called “cliff edge”, involving a legal and regulatory void, with chaos resulting for our businesses and services and gridlock at our borders after exit day. A transition period covering as many years as necessary would also ensure that exporters would not have to adapt to two new customs and regulatory arrangements in succession by first dropping out of the EU framework and falling back on the totally inadequate WTO rules and then later, possibly much later, becoming part of arrangements negotiated as part of a comprehensive trade deal with the 27 countries of the EU, which currently take almost half of our exports.

In addition, even if a transition period is agreed, the UK will drop out of the over 60 trade deals with “third countries” which we have access to through our membership of the EU. However, it appears that the Government’s concept of “on current terms” in the transition period excludes the European Court of Justice from its role in arbitrating commercial and other disputes. This is one effect of those government amendments relating to exit day, which would potentially end the jurisdiction of the ECJ on 29 March 2019, thereby preventing agreement on a transitional period “on current terms”. The UK also apparently wants to object to the application of new EU laws and to treat European citizens who come to this country differently during the transition period. All this makes it less likely that a transition period will be agreed in detail at the next EU summit, just weeks away on 22 March, in which case discussions will not move on to a framework for the future relationship. There are, therefore, now fears that the talks on the next phase, the post-transition end state, including the outline of a future trade deal, will have to be delayed, casting the whole timetable into doubt. The more things are delayed, the greater the danger that the EU will simply impose a very narrowly drawn trade deal on the UK or, worse still, the UK might crash out without a deal, to the evident glee of Brextremists such as Jacob Rees-Mogg.

Many people have imagined that the text of Article 50(2) of the Treaty on European Union—and I speak with some trepidation, given that its author, the noble Lord, Lord Kerr, sits opposite me—implies that any withdrawal agreement will constitute a new trade deal with the EU. It does not. However, anyone familiar with major trade deals knows that they reflect the judgment by states of what will be in their own interests and the relative economic power and weight of the parties involved, and that they take years to negotiate. That is presumably why the noble Lord, Lord Bridges of Headley, a former and very recent Minister for Exiting the European Union, said that he did not believe that it would be possible to sort out the divorce bill, the implementation period and the final deal on our withdrawal within the timeframe envisaged. It is therefore completely unrealistic to imagine that the detail of a new trade agreement with the EU will be finalised before the specified exit day or even before the end of the transition period, assuming one is agreed, which, for reasons relating to its budget period, is currently being set by the EU for the end of 2020.

The Dominic Grieve amendment to this Bill, carried in the other place, makes implementation of the withdrawal agreement subject to parliamentary approval. But all that is likely to be agreed by October this year, the deadline for giving time for consideration and ratification by the European Parliament and the other 27 member states of the EU, is just what the treaty states; that is, a,

“framework for its future relationship”,

with little flesh on the bones, which may therefore fall very short of the guarantees which I believe that a majority both Houses of Parliament wish to see: namely, access in the future to EU markets equivalent to what the UK has now to prevent a “cliff edge” for businesses and services and to protect the hard-won benefits of the Good Friday agreement and a completely open border on the island of Ireland.

The Irish question is a crucial reason for Parliament being in charge of the exit date. The serious near-breakdown in the December negotiations between the UK and the EU was eventually resolved only through both sides pledging no regulatory divergence between the Irish Republic and the UK. However, although this cleared the way for the next phase of the Brexit talks, the task of giving it legal effect in the withdrawal agreement remains. Brussels has asked for “precise, clear and unambiguous” proposals to avoid reimposing a hard border between the Republic and Northern Ireland, linking this to progress on transition. Brussels and most dogma-free analysts interpret this December agreement to require the whole of the UK to remain in the single market and customs union, or its exact arrangements, if there is not to be “regulatory divergence” between the Irish Republic and the rest of the UK. Yet the Prime Minister has dogmatically excluded that. It is in everyone’s interest, surely, including the DUP’s, that the exit date is not set in concrete, as it is in this Bill, giving sufficient time both to find a solution on the Irish border and, as the CBI and the TUC have argued, the economy.

Parliament should not be asked passively to sanction a transition to an unknown destination by Ministers—what could be a suicidal leap into a chasm of chaos and uncertainty. We surely have a duty to ensure that, if no deal is struck, or the terms of such a deal are deemed inadequate by Parliament, the provisions of the European Communities Act 1972 continue in force and the timing of exit day will be delayed in order that these critical issues for the nation’s future are properly addressed. The purpose of Amendments 2 and 3 is that, on the precise date of Brexit, Parliament—not Ministers—should have the final say on our country’s destiny and on whether any deal either preserves or threatens peace and stability on the island of Ireland.

Contribution to Sanctions and Money Laundering Bill, House of Lords, 15th January 2018

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My Lords, I shall speak to these amendments, on which the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover, made some persuasive and consensual points about how we uphold our international obligations. I will focus on sanctions in the related context affecting UK-based companies. I would be very grateful for some leeway from your Lordships in this so that we can make progress on the whole Bill, especially on Wednesday, when time will be short.

It should be a matter of shame that companies headquartered here in the UK have so far evaded sanctions for aiding and abetting money laundering, corruption and state capture in South Africa, including Bell Pottinger, KPMG, McKinsey, SAP and banks such as HSBC, Standard Chartered and Baroda, in total betrayal of Nelson Mandela’s legacy. I have just referred Hogan Lovells, the international law firm headquartered here in London, to the Solicitors Regulation Authority—the SRA—for enabling a corrupt money launderer to be returned to his post as second-in-command of the critically important South African Revenue Service, SARS. I have asked the SRA to withdraw Hogan Lovells’ authorisation as a recognised body and to examine what other disciplinary action can be taken against its leading partners, including withdrawing their permission to practise as solicitors.

Hogan Lovells spared two of the most notorious perpetrators of state capture in South Africa, Tom Moyane, head of SARS, and his deputy, Jonas Makwakwa, from accountability for their complicity in and cover up of serious financial crimes. In so doing, Hogan Lovells are complicit in undermining South Africa’s once revered tax-collection agency and thereby effectively underpinning President Jacob Zuma and his business associates, the Gupta brothers and others, in perverting South Africa’s democracy, damaging its economy and robbing its taxpayers. When Hogan Lovells was engaged by the corrupt Moyane in September 2016, it was well known that he and Makwakwa were synonymous with President Jacob Zuma’s capture of the state. Hogan Lovells could therefore not plead ignorance as they walked right into that web of corruption and cronyism for a fat fee.

To help protect himself from 783 counts of corruption, fraud, racketeering and money-laundering levelled against him when he came to power in 2009, President Zuma systematically dismembered and manipulated the once highly functional South African Revenue Service and the National Prosecuting Authority. Zuma’s key man in this process was his long-time comrade, Tom Moyane, whom he appointed as head of SARS, as commissioner, in 2014 and who, from day one, loyally set about obliterating all its investigative capacity, with the assistance of his deputy, Jonas Makwakwa. These two turned the institution, which under the leadership of the highly respected Pravin Gordhan had consistently overdelivered on revenue collection, into one now facing a 51 billion rand, or £3 billion, revenue shortfall.

Makwakwa’s unethical behaviour was quickly exposed in May 2016 when South Africa’s financial crime regulator, the Financial Intelligence Centre, ordered SARS to establish whether several “suspicious and unusual cash deposits and payments” into the accounts of Makwakwa and his lover, a low-level SARS employee, Kelly-Ann Elskie, were “the proceeds of crime and/or money laundering”. About 1.7 million rand—about £100,000, a lot in South African purchasing power—had been paid into their bank accounts over a six-year period. The FIC noted that the amounts flowing out of Makwakwa’s account,

“are of concern as they originate from unknown sources and undetermined legal purpose”.

However, when the FIC reported these suspicious transactions to Moyane, he tried to ignore the request by keeping it a secret. At the same time, the FIC reported the suspicious transactions to the police, known as the Hawks, to investigate the alleged criminality associated with the transactional flows and they opened a case.

Four months later, in September 2016, news of the FIC’s report to Moyane was exposed by investigative journalists and he begrudgingly suspended Makwakwa and later Elskie. This is when Hogan Lovells entered the picture. Moyane appointed the law firm to conduct “an independent investigation” into the Financial Intelligence Centre’s allegations to ensure “transparency, independence and integrity”, and then to recommend and independently facilitate necessary action, including disciplinary action. Hogan Lovells was therefore appointed to investigate the allegations contained in the FIC report and to conduct disciplinary proceedings against Makwakwa on behalf of SARS. To that effect, Hogan Lovells drafted the terms of reference for the engagement, a seven-page roadmap signed and adopted by SARS. However, Hogan Lovells failed to investigate the very reason the firm was appointed; the allegations contained in the FIC report. Hogan Lovells deviated so materially from its own terms of reference, allowing itself to be blindly led by Moyane, who redefined the terms of reference as and when it suited him, that a respected investigative journalist described the outcome as being,

“so tailored that it borders on the realm of being cooked”.

What an indictment of a leading international firm, Hogan Lovells, and its role.

The allegations against Makwakwa involved layers of possible transgressions; these being, first, tax law breaches, linked to whether he declared the transactions; secondly, criminal breaches, linked to whether the suspicious transactions were predicated on corruption or money laundering; and thirdly, whether internal SARS policy breaches had occurred. Moyane also mandated PricewaterhouseCoopers to analyse Makwakwa’s tax compliance, with regards to the “suspicious and unusual” money flows through his accounts. The Hawks were simultaneously investigating the criminality. Hogan Lovells’s mandate was, according to its terms of reference, to institute an independent investigation, partly using the findings of these other processes, to assess the veracity of the FIC allegations against labour and administrative law, and institute a disciplinary process.

But then two things happened. First, SARS declined to provide Hogan Lovells with the PricewaterhouseCoopers investigative report into Makwakwa, citing taxpayer confidentiality—an inaccurate interpretation of the law, which Hogan Lovells accepted without question. Secondly, Hogan Lovells never made contact with the Hawks to assess the status of their investigation—information which would logically be crucial to its assessment of Makwakwa’s fitness as a senior SARS employee. Equally puzzling is that around that time, South Africa’s Parliament got interested in Moyane’s puppet mastery of Hogan Lovells, prompting a parliamentary question about the nature of the engagement between the two organisations.

In Moyane’s reply, which is a matter of public record, he said that Hogan Lovells had been mandated to investigate contraventions of tax laws and money laundering allegations, and that it would assist the criminal authorities, where necessary, in investigating these transgressions. It would also deal with the SARS disciplinary process. In a press statement released weeks later, Hogan Lovells toned down this interpretation, saying that the scope of the investigation conducted by the firm was,

“limited to identifying whether any misconduct had been committed by Makwakwa and Elskie as employees of SARS. It did not seek to directly investigate the financial transactions identified by the FIC”.

If noble Lords are confused, it is because they should be. This obfuscation is precisely what Moyane set out to achieve, and to which purpose Hogan Lovells was either a willingly gullible or malevolent accomplice.

The end result is that the firm issued an incomplete, fatally flawed whitewash of a report, which ultimately cleared Makwakwa, despite reams of evidence to the contrary. Most damning of all, Hogan Lovells failed to include crucial evidence from the PwC report and the status of the Hawks investigation in its own report. That meant that Makwakwa has answered to only a fraction of the allegations levelled against him—a serious deviation from Hogan Lovells’ mandate. It is beneath contempt that Hogan Lovells subsequently tried to justify its work by hiding behind various complex legal provisions, sections and subsections—explanations which have been described by legal experts as “utter nonsense”. Hogan Lovells’ cover-up led directly to the corrupt Moyane exonerating his corrupt deputy Makwakwa and welcoming him back on 30 October 2017—to continue their looting and dirty work of robbing South African taxpayers.

Hogan Lovells must stand indicted by the Solicitors Regulation Authority, which should seek and publish answers to the following questions. Why did Hogan Lovells accept this mandate while knowing about Tom Moyane’s corrupt Zuma/Gupta agenda? Why did Hogan Lovells allow itself to be controlled by Moyane, including allowing him glibly to alter the terms of reference to suit his agenda at various points in this sorry saga? Why has Hogan Lovells failed to release its documents—including the original terms of reference, its final report and any other relevant documentation which would help clear its name—to the South African Parliament? What has it got to hide? How much money did Hogan Lovells get from SARS for this investigation? Will Hogan Lovells pay back that fee, if not to SARs then at least to South African charities combating the poverty it has helped deepen? What is the relationship between the South African chair of Hogan Lovells, Lavery Modise, and the commissioner of SARS, Tom Moyane? Why has Hogan Lovells allowed itself to be used to undermine South Africa’s revenue collection agency? Some of the suspicious transactions received by Makwakwa were in US dollars. What onus does this place on regulatory authorities in the US—and, indeed, Hogan Lovells, as a firm that is also based in the US—to report and investigate?

Hogan Lovells has ducked and dived over its responsibility for and complicity in propping up state capture, corruption, cronyism and money laundering in South Africa. I trust that the SRA will sanction it, and that the British Government will issue an edict that no British-based firms should do any business whatever with any member of President Zuma’s family, or with any member of the Gupta family, and that any work for any state agency or state-owned enterprise in South Africa must be undertaken only with total integrity, not connivance in criminality such as Hogan Lovells has been guilty of. I thank noble Lords for their indulgence.

Contribution to Lords’ debate on Sanctions and Anti-Money Laundering Bill – Wednesday 6 December 2017

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My Lords, it is a pleasure to follow such an expert and impressive speech from the noble Baroness, Lady Bowles, in moving Amendment 69B. The amendment is supported by my noble friend Lord Collins, and I have put my name to it. It introduces a failure to prevent offence.

In June 2011, the then Financial Services Authority found shocking inadequacies in UK banks’ anti-money laundering controls, with one-third of banks accepting,

“very high levels of money-laundering risk”,

and three-quarters of banks failing to take adequate measures to establish the legitimacy of the wealth they were handling. The then acting head of financial crime at the FSA, Tracey McDermott, said publicly:

“The banks are just not taking the rules seriously enough”.

Yet, after all these strong words, what happened? Instead of the FSA—now the FCA—getting tough with the banks, since 2010 there have been only 10 convictions under the money laundering regulations, not one of them of a bank. It is therefore hardly surprising that there have been repeated money laundering scandals involving UK banks. There is simply no adequate deterrent or serious regulatory risk to make UK banks turn away profitable business that they are offered, and there will not be until the FCA starts prosecuting people and banks for failing to apply the regulations.

By chance, I met a business analyst this morning. Although I did not know it beforehand, he happened to be an expert in this area, and he described London as the money laundering capital of the world. If he is right, that is shameful. The UK is woefully behind where it should be on holding banks and financial institutions to account for money laundering. HSBC was fined $1.2 billion in the US in a criminal settlement for money laundering, and just a few weeks ago it was fined $352 million in France to settle criminal charges for money laundering. Despite being a UK-headquartered bank, and despite being under investigation since last December by the FCA, HSBC has not yet faced regulatory sanction in this country, even though it has been named repeatedly in corruption cases, for example in Nigeria in 2012 and during the 2000s. No UK action was taken against HSBC in any of those cases. Earlier this year, HSBC was again implicated, with other British banks, in laundering ill-gotten money out of Russia.

A failure to prevent offence for money laundering, as provided for in Amendment 69B, would make it significantly easier to hold large global banks such as HSBC to account for poor procedures and for turning a blind eye to handling corrupt wealth. Without this reform, as Jonathan Fisher QC, a money laundering expert, has explained, it would be difficult and clumsy for the FCA or any other agency to prosecute a bank such as HSBC because it would have to show that a director or some other controlling mind in the parent company in London knew about the alleged misconduct. Indeed, it would have to show that that director intended the misconduct to happen. This is an exceptionally high bar which makes it virtually impossible to hold large global financial actors such as HSBC to account in the UK.

In my speech at Second Reading on 1 November 2017, I described a vivid context for this Bill: the massive money laundering organised from the very top of government in South Africa—the presidency itself—and the systematic transnational financial crime network facilitated by an Indian/South African family, the Guptas, and the presidential family, the Zumas. British-based financial institutions such as HSBC, Standard Chartered, the Bank of Baroda and other international institutions have been conduits for laundering hundreds of millions of pounds or billions of rands, mostly through Dubai and Hong Kong.

The South African Parliament itself is in the process of holding a public inquiry into large-scale state capture involving even larger-scale corruption and looting of state-owned enterprises. On 21 November 2017, Mr Zola Andile Tsotsi, erstwhile chair of the state-owned electricity generator, Eskom, gave evidence under oath. What resulted is the first smoking gun implicating the President of South Africa, Jacob Zuma, who exerted shadow control over state-owned enterprises which have been exploited through large-scale looting and money laundering, from which his family and friends have benefited. He did this by deploying one of his nominees, Ms Dudu Myeni, a person near and dear to him—he fathered a child by her. Educated as a primary school teacher, in 2012 she was appointed chair of Africa’s largest state-owned airline, South African Airways. In early December 2015, the then Minister of Finance, Nhlanhla Nene, rejected her request to renegotiate a fleet renewal deal for SAA, because it smacked of corruption. Within days, the President sacked Minister Nene.

Evidence before the South African parliamentary public inquiry showed that, as chair of the state-owned airline, Ms Myeni not only facilitated looting by the Zuma and Gupta families, but also sought to control, instruct and manipulate the running of another state-owned power utility, Eskom, from which the Gupta family, through an intricate network of companies, have siphoned off billions of rands, via various banks, including London-based banks which I am asking the British authorities to investigate. I am grateful to the FCA for the contact it has had with me to pursue this.

First, Eskom chair Mr Tsotsi was ordered by the government Minister for Public Enterprises in February 2015 to refrain from “interfering” with the management of Eskom. He only chaired the Eskom board, after all—why on earth should he bother himself with holding to account the executives underneath him? This ministerial instruction, to put it simply, was aimed at stopping him scrutinising the decisions and behaviour of Eskom and instead ensuring he turned a blind eye to the corrupt award of multibillion-rand contracts to the benefit of the Gupta and Zuma families.

According to the evidence at the parliamentary inquiry that same day in February 2015, Mr Tony Gupta phoned Mr Tsotsi, accusing him of not “helping us with anything”, adding: “We are the ones that put you in the position you are in. We are the ones who can take you out!”. A few days later, on the eve of the newly appointed Eskom board’s first meeting, President Zuma called Mr Tsotsi, instructing him that the board meeting be postponed, without even giving reasons. Less than a week later, Mr Tsotsi was instructed by South African Airways chair Ms Dudu Myeni to attend the presidential residence on 7 March 2015, where she unlawfully ordered the suspension of three of Eskom’s key executive members. President Zuma arrived late to the meeting and ordered that Mr Tsotsi go along with the plan, resulting in one of the most notorious examples of looting in South Africa’s recent history. This Zuma-Gupta conspiracy then left the door wide open for the appointment of Gupta stooges, who in less than 18 months had bled the power utility dry. It now faces bankruptcy and has been downgraded by international financial institutions due to governance failures. I am explaining the background before coming to the point about money laundering and the responsibility of UK authorities.

Eskom has more than 471 billion rands in outstanding debt, the majority of which is guaranteed by the South African Government and owed mainly to funders outside the country. In October 2017, Eskom revealed to its largest shareholder, the South African Government, that the power utility only had 1.2 billion rands left in its cash reserves until the end of November 2017, when it should have had 20 billion rands. It is estimated that by the end of January 2018, Eskom will be running a deficit of 5 billion rands. Eskom’s virtually giving billions to the Gupta-Zuma syndicate through nonsensical consulting contracts, tenders for fictitious goods and services, and advances to allow them to buy the coal mines from which they then sold back overpriced, poor-quality coal is the underlying cause of what went wrong.

Similarly, in September 2017, South African Airways was given emergency Treasury funds to help it repay loans of 3 billion rand to Citibank, again diverting precious money from taxpayers into the pockets of the Zumas and Guptas. The bill is being picked up by taxpayers when there is a shortage of the decent schools, hospitals, housing and job opportunities those billions should be spent on.

Each South African state-owned enterprise has been looted using the same modus operandi by the same elite individuals at the very top of the chain—namely President Zuma and his family, and the now infamous Gupta family. They have placed cronies such as Ms Myeni in key decision-making positions in these public enterprises to ensure that all valuable tenders are siphoned off to the Guptas, and in return a cut is then given to the Zuma family. Hundreds of millions of pounds have been siphoned off these important public companies in a process that has been described by the South African media as “state capture”. What is more, well-placed South African whistleblowers inform me that UK financial and banking institutions have been used for the systemic transnational financial crime network run by Gupta and Zuma families.

Then there is the shadowy figure of Mr Nick Linnell, a “Mr Fixit” who, in the late 1970s, operated in the illegal racist white minority regime of Ian Smith in then Rhodesia. He was unlawfully hired by Eskom, on Ms Myeni’s instructions, to assist in unlawfully getting rid of certain executives, thereby clearing the way for the corrupt capture of Eskom. It has now emerged that South African Airways, through dubious unauthorised payments to Mr Linnell, and working hand-in-glove with the remnants of South Africa’s notorious apartheid police, has deliberately targeted well-known anti-corruption activists. This has resulted in unlawful arrests, detention and torture, as part of a desperate attempt to silence these courageous men and women, to stop them exposing systemic state-sponsored corruption. By the way, last weekend it was announced that Dudu Myeni had been appointed as the special adviser to the Transport Minister and that she came “highly recommended”.

I therefore hope not only that this amendment will be supported by the Government but that there will be an immediate investigation by the City of London Police, the Metropolitan Police and the financial regulatory authorities into all bank accounts held in London by any South African state-owned company. Can the Minister, in replying to the amendment, please give me an assurance that this investigation will proceed? Because of the South African Airways chair’s patently unlawful involvement with the Zuma and Gupta families, the authorities should start their investigations with the airline, which is known to bank here in London, to ensure that its UK accounts have not been used for the illegal laundering of moneys from the proceeds of financial crime in South Africa, and that payments from it into UK banks have not been used to pay off stooges who have unlawfully targeted corruption whistleblowers.

The British Government must not permit any UK-based financial institution to be complicit in the plundering of state-owned companies in foreign lands, especially when that plunder affects the poorest of the poor. South Africa suffered enough repression over the apartheid years, and we cannot stand idly by while economic repression replaces racial oppression, serving the greed of corrupt leaders, when we have the ability to help stop it.

The exposure of HSBC, Standard Chartered and the Bank of Baroda to the parasitic Gupta financial crime network is currently the subject of international law enforcement investigations from the FBI to our own FCA. Inevitably, when dirty money from a global criminal network infects one financial institution, it will sequentially infect a number of others. This is the result of what is known as “correspondent banking”—a term that I have just been educated in—which by its complex nature is often misunderstood. Correspondent banks are international banks that clear smaller, generally domestic banks’ foreign currency transactions through large financial centres. In practice, this means that one transaction can move through a chain of financial institutions from the point of payment before it reaches its intended beneficiary. This creates significant money laundering and terrorist financing risks because each bank in the chain has to rely on the other to correctly identify the customer, determine the real owner and monitor the transaction. In essence, the correspondent bank is only as strong as the weakest link in the chain.

Umpteen domestic and regional banks will inevitably have been part of the money laundering chain of Gupta money. These include, in South Africa, Nedbank and Standard Bank; in the UAE, Habib Bank; in China, Citibank China and Bank of China; and almost certainly every well-known bank in continental Europe.

In the UK, Barclays Bank, which has a significant presence in South Africa and Africa, together with Santander, which also has a global footprint, should be given a red flag warning to check their exposure to Gupta money laundering—both direct and indirect. It is essential that all UK banks refuse to have anything to do with the Guptas or Zumas. I hope that the Minister will confirm that that will happen and that the same warning is given to RBS, Lloyds and any other UK banks—indeed, any bank that has had any contact with the Guptas or Zumas, inadvertently or knowingly. I, for example, passed sheets of evidence from HSBC accounts to the FCA only recently. In those accounts are clear debits—hard payments—to members of the Gupta family here in Britain. So this is infecting the whole of our banking and the whole of our country.

It is not good enough for those banks to argue that they reported suspicious transactions to their relevant domestic regulatory authorities. For over 10 years the Guptas have washed their money, aided by a labyrinth of correspondent banks—names that we would all recognise and probably bank with. Had these banks closed the Gupta accounts of their own volition, even five years ago, and not simply in reaction to recent political and investigatory journalist pressures, South Africa might not be on her economic knees today.

In the same way as other companies such as Bell Pottinger, KPMG, SAP and McKinsey have been exposed and called to account for complicity in corruption for doing business with the Guptas, so too must these banks of ours. It is not good enough just to haul HSBC, Standard Chartered and Baroda over the coals, because the nature of dirty money is that it passes through a chain of banks from originator to beneficiary. The banks in between are also guilty, and if they do not act, they risk exposure and reputational damage of the kind suffered by HSBC. Look at what happened to Bell Pottinger: as a result, it went bankrupt.

The message from our Parliament should be loud and clear: no UK commercial entity should have anything to do with the Guptas or Zumas. By accepting this amendment, the Government would at last demonstrate that the UK is serious about ensuring that its financial institutions must stop being used to pilfer public money from countries around the world and ensure that banks do not put profit before ethics when handling risky money