Background
3.The purpose of Part 1 of the Act is to give effect in the United Kingdom to resolution 1373 (2001) adopted by the Security Council of the United Nations on 28th September 2001 (“resolution 1373”) relating to terrorism and resolution 1452 (2002) adopted on 20th December 2002 (“resolution 1452”) relating to humanitarian exemptions. It also provides for enforcement of Regulation (EC) 2580/2001 on specific measures directed at certain persons and entities with a view to combating terrorism (“the EC Regulation”).
4.Resolution 1373 includes a requirement that Member States of the United Nations must (a) prevent the financing of terrorist acts, including the freezing of funds and economic resources of persons who commit or attempt to commit terrorist acts or participate in or facilitate such acts, and (b) prohibit their nationals and those within their territories from making funds, financial services or economic resources available to such persons.
5.Resolution 1452 introduces exemptions to prohibitions on making funds, financial assets or economic resources available to permit payments necessary to meet basic humanitarian needs (such as payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, public utility charges and legal fees and expenses) and payments necessary to meet extraordinary expenses.
6.Obligations under resolution 1373 had been implemented by the Treasury by a number of Orders in Council made under section 1 of the United Nations Act 1946 (the “UN Act”). Under section 1 of the UN Act, there is a power to make an Order in Council to give effect to any decision of the UN Security Council where such provision appears “necessary or expedient for enabling those measures to be effectively applied”.
7.The Orders made under section 1 of the UN Act to give effect to obligations under resolution 1373 were the Terrorism (United Nations Measures) Order 2001 (the “2001 Order”), the Terrorism (United Nations Measures) Order 2006 (the “2006 Order”) and the Terrorism (United Nations Measures) Order 2009 (the “2009 Order”). In these Notes, those Orders are referred to collectively as the “UN Terrorism Orders”. The 2006 Order replaced and revoked the 2001 Order save that directions designating persons under article 4 of the 2001 Order which remained in force on the date the 2006 Order came into force continued to apply and the provisions of the 2001 Order continued to apply to such directions. Similarly, the 2009 Order replaced and revoked the 2006 Order save that directions under article 4 of the 2006 Order, which remained in force on the date the 2009 Order came into force, continued to apply and the provisions of the previous Orders continued to apply to such directions.
8.On 27 January 2010 the Supreme Court decided in the case Ahmed & Ors v HM Treasury(1) that the 2006 Order was ultra vires the UN Act and on 4 February 2010 made an order quashing the 2006 Order. The Supreme Court did not rule upon the lawfulness of the 2001 Order or the 2009 Order but both Orders were liable to be quashed on the same grounds as the 2006 Order. The Terrorist Asset-Freezing (Temporary Provisions) Act 2010 (the “Temporary Provisions Act”) provided that the UN Terrorism Orders were deemed to have been validly made under the UN Act and for directions made imposing asset freezes to have effect, for the period from Royal Assent (10 February 2010) until 31 December 2010. The Act therefore maintained terrorist asset-freezing restrictions which had been quashed by the Supreme Court ruling or which were vulnerable to being quashed as a consequence of that ruling.
9.On 18 March 2010 the Government published a public consultation with regard to the content of Part 1 of the Act. A draft Bill and draft Explanatory Notes were annexed to the consultation. This consultation closed on 18 June 2010 and the Government’s(2) response to the consultation replies was published on 15th July 2010. Part 1 of this Act is broadly based on the consultation draft.
10.The purpose of Part 2 of the Act is to make amendments to Schedule 7 to the Counter-Terrorism Act 2008. Schedule 7 provides the Treasury with powers by directions to impose financial restrictions in relation to persons connected with a country (a “country of concern”) in response to money laundering, terrorist financing or the development or production of nuclear, radiological, biological or chemical weapons that poses a risk to the national interests of the United Kingdom, or where the Financial Action Task Force has advised that measures should be taken in relation to the country because of the risk of terrorist financing or money laundering activities.
11.Part 2 of the Act makes amendments to the Schedule 7 powers to clarify the persons to whom a direction may be given, to broaden the definition of persons in relation to whom restrictions may be applied, and to introduce a prohibition on circumventing the requirements of a direction. There are also amendments to Schedule 7 to remove some enforcement functions of the Department of Enterprise, Trade and Investment in Northern Ireland (“DETINI”).