Russia Sanctions Bill

  • enacted

Russia Sanctions Bill

Government Bill

111—1

Explanatory note

General policy statement

The Russia Sanctions Bill establishes a framework for implementing sanctions by New Zealand in response to the aggressive acts and other breaches of international law by the Russian Federation (Russia), in particular, its illegal invasion of Ukraine, and violations of Ukraine’s sovereignty and territorial integrity.

The Bill allows for sanctions to be imposed and enforced on individuals or entities that are responsible for, associated with, or involved in actions that undermine the sovereignty or territorial integrity of Ukraine or that are of economic or strategic relevance to Russia.

It will prevent individuals or entities from moving assets to New Zealand or using New Zealand’s financial system to circumvent sanctions that may be imposed by other countries in the future. It will also enable New Zealand to freeze assets already located here.

The Bill also allows sanctions to be imposed and enforced on designated assets or services (such as trade and financial services). Sanctions could also restrict access to New Zealand territory.

The New Zealand Government continues to register its condemnation, in the strongest possible terms, of Russia’s invasion of Ukraine. Russia has shown a flagrant disregard for, and breached, international law’s most fundamental norms, abdicated its responsibility to uphold global peace and security, and ignored the international community’s outrage at its behaviour. In this context, New Zealand has been consistent in supporting Ukraine’s sovereignty and territorial integrity.

As a small country that depends on the international rules-based system for security and prosperity, New Zealand supports the sovereign right of states to determine their own future, including their security relationships. New Zealand upholds international law, and supports respect for it. Regrettably, Russia has used its veto, as a permanent member of the United Nations Security Council (the Security Council), to prevent any action, including sanctions, at the multilateral level.

In an emergency session of the United Nations General Assembly on 2 March 2022, New Zealand, along with 140 other United Nations member states, voted for the resolution “Aggression Against Ukraine”. Only 5 states voted against the resolution. This is the first time in 40 years that the United Nations Security Council has referred such a crisis to the United Nations General Assembly and only the 11th time an emergency session of the General Assembly has been called since 1950. This referral, known as a Uniting for Peace resolution, can only occur in circumstances where the United Nations Security Council fails to exercise its primary responsibility to act as required to maintain international peace and security (because, as in this case, Russia has abused its veto power).

In further condemnation of Russia’s actions, on 2 March 2022, New Zealand joined a group of 39 States Parties to the Rome Statute formally referring the situation in Ukraine to the Prosecutor of the International Criminal Court. The prosecutor will now investigate the situation and identify whether any acts of war crimes, crimes against humanity, or genocide appear to have occurred on the territory of Ukraine by any person.

The Bill ensures that, despite the members of the United Nations Security Council being unwilling to act, New Zealand’s condemnation of Russia’s illegal actions will be expressed through practical legislative changes. The changes will prohibit or restrict activity inside and outside New Zealand by individuals or entities responsible for, associated with, or involved in this invasion. Given the fluid situation in Ukraine, and the international community’s rapidly evolving response, the Bill will ensure that New Zealand has the legislative tools to take further measures to respond to Russia’s illegal aggression. Having the ability to implement additional response measures will ensure that New Zealand can contribute to the collective actions of the international community to respond to Russia’s actions.

The Bill responds to illegal Russian aggression against the sovereignty and territorial integrity of Ukraine. All States have obligations at international law not to render aid or assistance to those committing illegal acts. Where there is evidence that another State is providing such illegal aid or assistance to Russian aggression—for example, the actions of Belarus in allowing its territory to be used by Russian forces—the Bill allows relevant individuals and entities from that State to be subject to sanctions. Correspondingly, the Bill also provides the ability to apply further sanctions against Russia if it threatens the sovereignty or territorial integrity of other neighbouring States.

As an act of aggression is considered to be a fundamental breach of international law, all States are legally required to co-operate to bring the aggression to an end, using any lawful measures available.

Sanctions enabled by the Bill reinforce those imposed by the international community and would provide the ability to respond, as appropriate, to threats to the sovereignty and territorial integrity of Ukraine or another country.

The framework that the Bill establishes will allow sanctions to be made by regulations in clearly defined circumstances. The Minister of Foreign Affairs must be satisfied, before recommending the making of regulations to impose sanctions, that the regulations are appropriate to respond to threats to the sovereignty or territorial integrity of Ukraine.

Regulations will set out the specific prohibitions and restrictions that apply to the classes of persons, assets, or services concerned. The Bill authorises the Secretary of Foreign Affairs and Trade to issue designation notices that give further details of the particular persons, assets, or services subject to the sanctions. A public sanctions register will be established to list all individuals, entities, assets, or services sanctioned under the Bill.

The framework is designed to provide the flexibility to tailor sanctions to the rapidly changing situation in Ukraine and to enable the Government to take action in a timely way. The Bill incorporates provisions to ensure that sanctions are transparent, able to be reviewed and revoked, are temporary rather than permanent, and are subject to exemptions where appropriate (for example, to meet humanitarian needs).

While existing processes and mechanisms are in place for the monitoring and enforcement of immigration restrictions and import and export restrictions, the Bill contains a requirement for all reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 to report to the Commissioner of Police when they suspect they possess assets or are dealing with services that are subject to sanctions. This will facilitate the monitoring and enforcement of any restrictions imposed under the sanctions regulations. At the same time, the Bill confers immunity from legal proceedings on any person who takes action in good faith in order to comply with the Bill or regulations made under the Bill.

The Bill enables government agencies to share information with the Secretary of Foreign Affairs and Trade to support the making, and enforcement, of the sanctions.

Enforcement action can be taken against individuals or entities who fail to comply with sanctions, in the form of civil penalties, criminal fines, or imprisonment.

Where designated individuals (other than New Zealand citizens or permanent residents) are already in New Zealand at the time of designation, the Bill allows the sanctions regulations to prohibit or restrict them from remaining in New Zealand, and links to the deportation provisions of the Immigration Act 2009.

Departmental disclosure statement

The Ministry of Foreign Affairs and Trade is required to prepare a disclosure statement to assist with the scrutiny of this Bill. It provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill. A copy of the statement can be found at http://legislation.govt.nz/disclosure.aspx?type=bill&subtype=government&year=2022&no=111

Regulatory impact statement

Because this Bill is urgently required, a regulatory impact statement has not been completed.

The Treasury and the Ministry of Foreign Affairs and Trade have agreed that a post-implementation review will be completed after the passage of this Bill.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 states when the Bill is to come into force, which is on the day after it receives the Royal assent.

Part 1Preliminary provisions

Clause 3 sets out the purpose of the Bill. The purpose is to enable the New Zealand Government to impose and enforce sanctions in response to military actions by Russia (and by countries or persons who may be assisting Russia).

Sanctions may relate to military actions in Ukraine or in any other country.

Sanction is defined in clause 6. The term denotes a prohibition or restriction imposed by regulations made under the Bill. Sanctions can be prohibitions or restrictions on—

  • persons travelling to, entering, or remaining in New Zealand; or

  • dealing with assets; or

  • dealing with services.

Clause 4 provides for the application of the Bill. The Bill empowers regulations that may apply in certain circumstances to action outside New Zealand by New Zealand citizens and companies, people who are ordinarily resident in New Zealand, and dealings on New Zealand ships or aircraft. Clause 4 provides a signpost to where the Bill’s extraterritorial application is covered further (clause 26).

Clause 5 contains definitions of terms used in the Bill. The key terms are asset, service, dealing with assets, and dealing with services.

Asset and service are defined widely. Some explicit inclusions are spelt out, which do not limit the 2 basic definitions. The essence of the definition of asset is that it is everything that is capable of being owned. Service means a service of any kind. It includes services that facilitate, or are provided in relation to, any activity.

For example, regulations made under the Bill could sanction military activities, but build in exceptions to allow for military activities in and around Ukraine that are by peacekeeping or other security or police personnel acting on behalf of the New Zealand Government or a partner Government or organisation.

An example of an asset might be computer code or other data. A related example of a service might be coding. Examples of services provided in the Bill’s definition include—

  • advice, assistance, or training:

  • electronic services (for example, relating to information technology):

  • communications services:

  • bunkering services:

  • carriage services:

  • financial, accounting, and insurance services (including for example, a service relating to cryptocurrency):

  • military activities.

Dealing with assets and dealing with services are also defined widely. Dealing with assets means using, receiving, providing, or otherwise exchanging, trading, or controlling assets in any way and by any means (whether commercially or not). Dealing with services means using, receiving, providing, or otherwise exchanging, trading, or controlling services in any way and by any means (whether commercially or not). Both definitions indicate inclusions that do not limit the basic definition.

The breadth of the definitions allows sanctions restricting or prohibiting certain aircraft or ships (assets) from entering New Zealand waters.

The definition of entity is wide enough to cover persons or bodies performing a public function, duty, or power for Russia or an assisting country. Examples might include State military institutions or hacking organisations working on behalf of, or supporting, Russia. The definition of entity also includes an organisation or association set up for a political purpose. Examples might be bodies known as the Donbass People’s Militia, the Donestsk People’s Republic, the Oplot Battalion, the Federal State of Novorossiya, and Peace to the Luhansk Region.

Clause 7 provides that the Bill is to bind the Crown.

Part 2Sanctions

Clause 8 sets out the threshold for when the Minister may make a recommendation for regulations to be made under the Bill. The Minister may do so only if the Minister is satisfied that the regulations are necessary to respond to threats to the sovereignty or territorial integrity of Ukraine or another country.

A response is appropriate if the Minister considers it demonstrates New Zealand’s condemnation of the threat, including—

  • if it is designed to exert pressure on Russia (or an assisting country); or

  • because it complements or reinforces sanctions by other countries.

The pressure could be exerted by interrupting economic relations, which is something referred to in Article 41 of the United Nations Charter. Article 41 allows for sanctions imposed by the United Nations to cause the—

...complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations.”

Additionally, the Minister must be satisfied that the United Nations Security Council is unlikely to act or has acted (or is likely to act) insufficiently.

Clause 9 is the key regulation empowering provision. Regulations that prescribe a sanction must include—

  • a statement of the purpose of the regulations:

  • a description of the persons or class of persons, assets or class of assets, or services or class of services affected:

  • a description of the relevant prohibitions or restrictions:

  • a description of any duties or requirements in relation to compliance with the sanction.

Other limits on the power to make regulations that prescribe a sanction are provided in clauses 10 and 11. For example,—

  • regulations prohibiting or restricting a designated person from travelling to or entering New Zealand do not affect New Zealand citizens and residents. The result is that New Zealand citizens and residents cannot be banned from coming into New Zealand. In relation to citizens, this is consistent with the protection in section 18 of the New Zealand Bill of Rights Act 1990. Clause 10(2) sets out the relationship of such a regulation with the Immigration Act 2009:

  • regulations prohibiting a designated person from remaining in New Zealand do not affect New Zealand citizens and residents. New Zealand citizens and residents are not able to be removed from New Zealand (which is consistent with the protection in section 18 of the New Zealand Bill of Rights Act 1990). Designated persons who are not New Zealand citizens or residents may be liable for deportation under section 157 of the Immigration Act 2009 because the designation is sufficient reason for deportation.

Clause 10 sets out other aspects about the scope and effect of sanctions regulations. Clause 10(1) allows the regulations to be of general application or to relate only to specified countries. Clause 10(2) provides that regulations in relation to a designated person may cover their associates (including their relatives). Clause 10(5) provides for the regulations to set out how assets may be preserved or managed during the time they are prohibited or restricted. The regulations may also provide that the owner can be charged for that preservation or management. Clause 10(6) allows sanctions relating to dealing with assets or dealing with services to modify (with or without conditions), extend, disapply, exempt, or suspend any specified rule in any other legislation.

Clause 11 enables the Secretary to further identify persons, assets, or services described in sanctions regulations. This may be done by a designation notice. Designation notices must identify the persons, assets, or services consistently with the descriptions in the regulations, and must be required for the purpose of the regulations.

Clause 12 provides for regulations and designation notices to have a fixed term (unless extended under that clause).

Clause 13 provides for the ability to challenge or alleviate the effects of a sanction. Those affected are able to apply and ask the Minister to change the sanction.

Clause 13 also allows those affected to seek an exemption for a particular specified situation, in relation to particular persons, assets, or services and for particular events or dealings. An application may be made because of humanitarian need or for any other reason.

Clause 14 requires the Secretary of Foreign Affairs and Trade to maintain an online register listing all current sanctions and exemptions from sanctions.

Clause 15 requires duty holders (such as registered banks and certain others) in possession or in immediate control of assets that they suspect are designated assets or assets owned or controlled (directly or indirectly) by a designated person to report that suspicion to the Commissioner of Police. The same obligation to report suspicions falls on those that are to deal with or that are dealing with services that they suspect are designated services.

Regulations made under clause 32 may extend this obligation onto other duty holders for the purposes of the Bill.

Clause 16 protects the identity of people making reports under clause 15.

Clause 17 provides an immunity for people with obligations imposed by or under the Bill from liability in criminal and civil proceedings for any act or omission to comply with the obligations if the act or omission was reasonable and done in good faith.

Part 3Enforcement

Clause 18 prohibits contracting out of the Bill.

Clause 19 provides that no person is entitled to compensation or other remedy for good faith and reasonable actions or omissions by those acting under the Bill.

Civil enforcement

Clauses 20 to 23 create a civil liability regime for people who breach a sanction (without lawful justification or reasonable excuse). The regime also applies if there are reasonable grounds to believe that a person is likely to breach a sanction.

The Attorney-General may issue a formal warning to a person to whom the regime applies or accept an enforceable undertaking from the person and then seek an order of the court if the undertaking is breached. Alternatively, the Attorney-General may seek an injunction restraining a person from breaching a sanction.

Criminal enforcement

Clause 24 sets out offences under the Bill.

It is an offence to knowingly or recklessly breach a sanction (without lawful justification or reasonable excuse) (see clause 24(1)).

It is also an offence to knowingly provide false information, or make material omissions, in connection with an application for the amendment or revocation of, or for an exemption from, a sanction (see clause 24(3)).

The offences under clause 24(1) and (3) are punishable, for individuals, by imprisonment for a term not exceeding 7 years or a fine not exceeding $100,000 (or both) and, for entities, by a fine not exceeding $1 million.

Knowingly failing to provide a report required under clause 15 is an offence, as is knowingly providing false information or making material omissions in a report (see clause 24(5)). The punishment for individuals is a term of imprisonment not exceeding 1 year or a fine not exceeding $20,000 (or both). The punishment for entities is a fine not exceeding $200,000.

A person who knowingly breaches clause 16(4) commits an offence and is liable to a fine not exceeding $10,000 (see clause 24(7)). Clause 16(4) prohibits a person from disclosing, in any judicial proceeding, information protected under clause 16 unless the decision-maker at the proceeding is satisfied that the disclosure is necessary in the interests of justice.

Clause 24(8) provides that if it is necessary to establish the state of mind of an entity in proceedings for an offence, it is sufficient to show that 1 individual working for the entity, acting within the scope of the person’s actual or apparent authority, had that state of mind.

Clause 25 provides for an additional penalty if offending involved commercial gain. A court may order a convicted person to pay up to 3 times the value of any gain.

Extraterritorial application

Clause 26 sets out the extraterritorial jurisdiction for offences under the Bill. This is modelled on the precedent section of 7A of the Crimes Act 1961.

Attorney-General’s consent

Clause 27 provides that the Attorney-General must consent to any prosecution under the Bill. This is the usual position for foreign affairs legislation.

Application of Customs and Excise Act 2018

Clause 28 provides that the provisions of the Customs and Excise Act 2018 that apply to prohibited imports or prohibited exports apply (with any necessary modifications) with respect to assets that are subject to, or that otherwise relate to, a sanction. The provisions apply as if the importation or exportation of the assets were prohibited under that Act.

Part 4Review of Act and miscellaneous provisions

Review of Act

Clause 29 requires a review about the operation and effectiveness of the Act after 2 years. The Minister must present a report of the review to the House of Representatives.

Information gathering and sharing powers

Clause 30 provides powers for the Commissioner of Police to order documents to be produced. Clause 30 is similar to the Commissioner of Police’s powers in the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

Clause 31 provides that a government agency may disclose to the Secretary certain information if the agency considers that the disclosure is necessary or desirable for specified purposes relating to sanctions.

Other regulation-making powers

Clause 32 provides for other regulation-making powers.

Consequential amendments

Clause 33 consequentially amends the Companies Act 1993. This amendment has the effect that if the Registrar of Companies exercises the Registrar’s powers to find out the beneficial owner of a company (which may be a foreign company), the Registrar can share that information with the Ministry of Foreign Affairs and Trade.

Clause 33 also makes other consequential amendments.