My Lords, I will also speak to Amendments 46 and 78.
There is a lack of specific instruction that the Government can dissolve or close down companies in cases of violations or sanctions regulations made under the Bill. The amendments would rectify that omission. It must be made clear that the Government have the power to prevent trading or any other business activity by company structures. That is key to ensuring, for example, that action against shell companies brokering arms is captured in the Bill.
Consider a recent case: S-Profit Ltd v South Sudan. The UK-registered shell company, set up by a Ukrainian, was used to broker arms, in violation of sanctions, in a deal worth $44 million. A company can be set up in the UK in a matter of hours for just £12. HMRC has acknowledged—there are numerous other examples—that
it cannot prosecute such brass-plate and shell companies under existing law where the burden of proof is criminal standards of evidence. That is impossible to get because such companies have a limited physical presence in the UK and little hard evidence can be gathered.
That case, highlighted by Amnesty International, starkly illustrates the current loophole and legal vacuum that allows companies posing as reputable UK corporate entities to supply arms to some of the most dangerous places and actors in the world. The lower burden of proof suggested in the Bill before us—a reasonable knowledge test—would give the means to use sanction powers to take action against such shell companies and crack down on illicit arms brokering. The amendments would give enforcers powers to wind up such companies and disqualify their directors.
Furthermore, reasonable knowledge is the threshold used in existing sanctions regimes in both the EU and UN. That is why it has been replicated in the UK, so that we can have legal powers to mirror and enforce our international obligations in this area. However, there must be at least a due process mechanism to allow a right of reply, or an appeal process to challenge decisions and overturn them. This amendment would add additional tools to improve controls over the arms trade and arms-brokering activities, which would be welcome.
I will speak briefly to Amendment 78. Currently, companies can be wound up by the Insolvency Service relatively easily for corporate abuses such as non-reporting, but they can also be wound up on the ground of public interest under Section 124A of the Insolvency Act 1986. However, the sanctions regime and these powers are not used together. It would make sense for brass-plate companies known to the Government to be in breach of sanctions to be wound up using these powers. Now that BEIS’s criminal enforcement team has been transferred into the Insolvency Service it also has the ability to prosecute. It would therefore make sense for the two to be linked for enforcement purposes. This amendment would have that effect.
6.30 pm