The Treasury is reviewing its procedures after the Russian founder of a mercenary army was allowed to break sanctions to try to silence a British journalist.

Treasury minister James Cartledge said changes could be made after an outcry about the case, which the shadow foreign secretary, David Lammy, called an “insensitive” decision to make it easier for Yevgeny Prigogine to make baseless claims.

Cartledge said individuals under the ban also had the right to legal representation and could be granted licenses to cover their own legal fees.

“However, I can confirm that in the light of recent cases, and related to this question, the Treasury is now considering whether this approach is correct and whether changes can be made without the Treasury accepting unacceptable legal risk, ensuring that the rule of law is followed, ” he told the Commons.

The revelations, published by Open Democracy, concern a defamation suit brought by Prigogine, a key aide to Vladimir Putin, against Eliot Higgins, founder of the investigative group BellingCat.

Documents and leaked emails show how Prigogine’s lawyers were given permission Financial Sanctions Enforcement Office (OFSI), a department within the Treasury, to represent him despite the fact that he is under sanctions.

For years Prigogine denied all links to the mercenary Wagner group, and he brought a lawsuit against Higgins, but admitted last year that he founded Wagner in 2014.

Discrete Law, a London firm led by Roger Gherson, has received government approval to engage Prigogine, Open Democracy reported. McFadden said Jeremy Hunt, the chancellor, must explain how this was allowed to happen. No 10 said all decisions were taken by officials without the involvement of ministers.

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During an urgent question on the revelations, Lammy accused Cartledge of “distraction”, adding: “The government appears to have given a militant a reprieve which enabled him to launch legal attacks on British journalists. If the current Prime Minister’s Treasury had any hand in easing the pressure on Prigogine, I’m sure I am sure that every member of this House will agree that it would be totally unfair.”

In a letter to Hunt seen by the Guardian, Pat McFadden, shadow chief secretary to the Treasury, said why No 11 allowed it and whether similar allowances were made for other oligarchs was subject to restrictions. Use defamation lawsuits.

McFadden said: “It is completely unacceptable that one of Putin’s allies was able to use funds to circumvent sanctions and silence a critical journalist. The chancellor must immediately explain how this was allowed to happen, and that wealthy oligarchs cannot use the Treasury or any government department as a weapon in this way. What steps will be taken in the future to ensure that.”

A statement at No. 10 said that there was a process whereby a person under the ban could apply for a license to pay legal costs for their property.

“Obviously, having a fully functioning legal system that enables people to defend themselves is part of a working democracy, and so, in limited circumstances, OFSI is likely to be given access to funding to use the legal system as it is designed,” the spokesperson said. .

McFadden said in his letter that Wagner had “conducted a murderous campaign against the people of Ukraine” and that Prigogine’s aim was to “silence Mr Higgins and his organization Bellingcat”.

He wrote: “The key question is how the Treasury could facilitate legal action against a British journalist by the founder of the Kremlin-linked Wagner Group, and do so when that person is a sanctioned individual?

“What questions have you asked OFSI since this story came to light? What actions has the Fund taken to ensure it is not used as a weapon in a SLAPP?” [strategic lawsuits against public participation] Actions by wealthy oligarchs facilitated by law firms here in the UK?

“Are there any other examples of OFSI granting such permits to oligarchs or other Kremlin-linked individuals seeking to silence British journalists? What steps will the Treasury take to ensure this does not happen again?”

Discrete lawyers stopped representing Prigogine in March 2022, a month after Russia launched a full-scale invasion of Ukraine. Higgins said he was left with estimated costs of £70,000.

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