Dalston Projects Limited & Ors v Secretary of State for Transport

The First Appellant is a company registered in St Kitts and Nevis and is the legal owner of the Vessel. The Third Appellant, a Maltese company, would, but for the detention of the Vessel, have become its legal owner. The Second Appellant (Sergei Naumenko) is the beneficial owner of the Vessel. He is a Russian citizen and is ordinarily resident in Russia.

Although Mr Naumenko did not file a witness statement in these proceedings, there is indirect evidence that he accumulated his wealth by (i) being one of the original owners of a privatised construction and development company (SMU-3 JSC) involved in major projects in the Ural region, (ii) selling his stake in an investment company established in 1991 (Troika Dialog) to the state-owned (and currently sanctioned) Sberbank Group in 2012, and (iii) as a regional manager and minority shareholder in an asset management company established in 1991 (ATON). The evidence before the Court includes a declaration as to the source of wealth of Mr Naumenko dated 31 March 2022, which was annexed to a letter from his representatives (Ward & McKenzie) dated 26 May 2022. There is also a letter from Mr Naumenko dated 23 May 2022, in which he denied that he had ever met President Putin or had participated in any political or near-political organisations, or had held any positions in the state or municipal authorities of the Russian Federation.

The Foreign, Commonwealth and Development Office (“FCDO”) has not found sufficient evidence to “designate” Mr Naumenko as being “involved” in activities adverse to Ukraine or “obtaining a benefit” from supporting the Government of Russia.

In early March 2022, following the escalation of the Russian invasion of Ukraine on 24 February 2022, the 2019 Regulations were amended to enhance the Respondent’s maritime sanctions powers: see in particular Part 6 of the 2019 Regulations, which is concerned with ships. I will refer to the relevant legislation as it was in force at the material time.

Regulation 57D empowers the Respondent to give a “detention direction” to harbour authorities in respect of a ship owned, controlled, chartered or operated by a “designated person” (regulation 57D(3)(a)), but also in respect of a ship owned, controlled, chartered or operated by a much wider category of “persons connected with Russia” (regulation 57D(3)(b)), meaning those either ordinarily resident or located in Russia (regulation 57I(5)(a) and (b)). Regulation 57C empowers the Respondent to give a “movement direction” in similar circumstances: see in particular regulation 57C(1)(b), which refers to a ship owned, controlled, chartered or operated by “persons connected with Russia”.

On 11 March 2022 the National Crime Agency (“NCA”) shared initial information about the Vessel with the Department for Transport (“DfT”), and over the next two weeks the DfT worked with investigatory authorities to confirm that the vessel was purchased for €44 million and owned by Mr Naumenko.

The First Decision: On 28 March 2022 the DfT presented an urgent Ministerial Submission to the Respondent in light of the Vessel’s impending departure.

On behalf of the Appellants Mr Bethell emphasises that the Ministerial Submission, dated 28 March 2022, did not contain any recommendation but simply advised that the Respondent had the statutory power to detain the Vessel. He also emphasises that the decision to detain the Vessel was taken personally by the Secretary of State (at that time Grant Shapps MP).

The Respondent decided to issue the Phi (Russia (Sanctions) (EU Exit) Regulations 2019) Direction 2022 (“the Direction”) and commented in the Ministerial Readout that: “it is most certainly both in the public interest to detain this ship and to publicise the fact of its detention”. The Direction contained both a Detention direction, at para 3, and a Movement direction, at para 4. The Movement direction required the Vessel to remain in South Dock, West India and Millwall Docks. In the present proceedings both the Detention direction and the Movement direction are challenged but no separate legal issues arise in connection with the Movement direction.

On 29 March 2022 the Direction was served on the Vessel. DfT officials prepared a communication plan for the Secretary of State. Mr Shapps departed from the communication plan and made widely reported remarks in a TikTok video that the Vessel is “a yacht which belongs to a Russian oligarch, friends of Putin”.

The Second Decision: On 8 April 2022 a Ministerial Submission sought a decision regarding the continuing detention of the Vessel. The rationale was set out in Annex D, which noted that the detention of the Vessel sat alongside a larger package of sanctions and would contribute to “wider social and cultural change”, in particular by sending “… a clear message of intent to Russian oligarchs … with the aim of damaging support for Putin and limiting resources available to the Russian state”.

On 11 April 2022 Mr Shapps decided to implement the recommended ‘Option A – Maintain detention direction whilst seeking further evidence’. The Parliamentary Under-Secretary, Robert Courts MP, had commented that he agreed to “… maintain [detention] for now whilst we obtain further evidence – but we do need to consider this fully in the round once that is obtained and come to a properly evidenced decision.”

The Third Decision: In response to the Appellants’ letter dated 1 December 2022 requesting the Direction to be withdrawn, a further Ministerial Submission was prepared dated 13 December 2022, advising that the Vessel’s continued detention was lawful under the 2019 Regulations, proportionate with Mr Naumenko’s A1P1 rights, and in the public interest. Annex C set out the rationale for the Vessel’s continuing detention, stating that the “… signalling provided by detaining luxury assets should be considered a useful tool alongside other trade, financial and transport sanctions”, and that it was “intended to put pressure on oligarchs by disrupting their luxurious lifestyle (denying them the use of the asset, denying them income from chartering etc.) which would in turn place pressure on the regime”.

On 3 January 2023 the Secretary of State, by now Mark Harper MP, confirmed that he agreed with the Ministerial Submission, and a letter was sent to the Appellants refusing their request that the Direction should be withdrawn.

Following pre-action correspondence, a claim for the Direction to be set aside under section 38(2) of SAMLA was commenced in the High Court on 27 March 2023.

In the Statement of Facts and Grounds, at para 54, the original grounds of challenge were set out under four headings:

It appears that, at the hearing before the Judge, the focus of the Appellants’ submissions was on the first two of those grounds. The third ground (Article 14 of the ECHR) was barely mentioned in the Appellants’ skeleton argument in the High Court and does not seem to have been pursued at the hearing before the Judge. The fourth ground seems to have been pursued only half-heartedly, certainly so far as the Judge was concerned. The Judge rejected all of the grounds.

First, the Judge held that the detention decisions were taken for a proper purpose, in accordance with Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 (“Padfield”).

Secondly, the Judge rejected the Appellants’ A1P1 challenge. He rejected the Appellants’ challenge under limbs two (rational connection) and four (fair balance) of the proportionality test, as set out in Bank Mellat.

In relation to what the Judge clearly regarded as at best tangential points in view of the way in which the submissions were presented before him, he said that:

There are six grounds of appeal. I will address them in the order in which they were presented to us by Mr Bethell: Grounds 2, 4, 3, 5 (which are all based on conventional public law grounds); Ground 1 (proportionality under A1P1); and Ground 6 (conversion).

Under Ground 2 the Appellants contend that the Judge was wrong to hold in effect (at paras 67-68 of his judgment) that it is sufficient, in order for the vessel-detention powers to be exercised for a proper purpose, merely that its owner is a person connected with Russia, and that the Respondent’s aim was to apply pressure to Russia.

Specific complaints are made, at paras 5.1-5.2 of the Grounds of Appeal as follows:

“5.1

The Judge ought to have held, consistently with the parliamentary material before the Court, that sanctions were only properly to be imposed upon persons not personally involved in the activities being targeted where that was a necessary consequence of the adoption of ‘broad sectoral measures’, and that the relevant sectoral purpose of the shipping measures in Part 6 of the Sanctions Regulations was to attack Russian economic interests in the context (as stated in the accompanying statutory report) that ‘the vast majority of global trade in goods is carried on board ships’.

5.2

The Judge ought accordingly, and in the light of the specific designation and asset freezing provisions in the Sanctions Regulations, to have held that the proper use of the detention power such as regulation 57D needed either to rest upon the function or activity of the vessel itself; or alternatively that if based simply upon the ownership of that vessel, that the use of the power was consistent with the other asset-freezing provisions of the Regulations, and specifically with the manner in which the designation provisions had identified persons who were to be regarded as personally involved in the activities being targeted, so that subject to appropriate exemptions and procedural protections, their assets were properly to be frozen.”

The Appellants’ Ground 2 corresponds to what was Ground 1 in the claim for review before the High Court, namely that the power of detention was exercised in this case for an improper purpose in breach of the principle in Padfield. The Judge addressed this ground at paras 57-69 of his judgment, and rejected it, particularly at paras 62-68.

In Padfield, at page 1030, Lord Reid famously said that there is no such thing as an unfettered discretion in administrative law. Parliament always confers a discretionary power with the intention that it should be used to promote the policy and objects of the Act concerned; and the policy and objects must be determined by construing the Act as a whole. If a Minister uses his discretion to thwart or run counter to the policy and objects of the Act, then the decision will be reviewable by the court on judicial review.

On behalf of the Appellants it is submitted that the “key point” is that the reason for the detention decisions related exclusively to Mr Naumenko and his status as “a wealthy Russian resident” but had nothing to do with the Vessel itself, or with anything which Mr Naumenko or anyone else had done or proposed to do with it. It is submitted that this was tantamount to “freezing” an asset belonging to an individual because he is wealthy and resident in Russia. It is submitted that that purpose is inconsistent with the overall scheme of the 2019 Regulations in circumstances in which those regulations contain explicit provision for the freezing of the assets of individuals (see in particular regulation 11) but only where those individuals have been designated. It is also submitted that it is significant that the FCDO had decided that designation would not be appropriate in Mr Naumenko’s case.

The fundamental difficulty with this argument is, as the Judge held, that the terms of the relevant legislation are clear. The power which was exercised in the present case does not depend upon an individual being designated. It is sufficient that he is “connected with” Russia and there is no dispute that Mr Naumenko is connected with Russia because he is ordinarily resident there. This does not mean that the discretionary power to detain a Vessel must be used: every case must be considered on its particular facts. But it does mean that the discretionary power in this case was not used for an improper purpose.

The second main argument which is made under Ground 2 on behalf of the Appellants is that the essential purpose of the relevant regulations is “to disrupt Russian shipping and thereby to inhibit Russian trade in, or transport of, goods or personnel.” It is submitted that this is the correct construction of the structure of the regulations. It is further submitted that this is supported by what was said to Parliament when the Regulations were amended. It is also submitted that this is consistent with the essentially secondary role played by detention in the scheme of Part 6 of the 2019 Regulations because the first relevant power is to exclude Russian ships from UK ports: see regulation 57A. It is only because, fortuitously, this Vessel happened to be in a UK port at the relevant time that it could be detained. It is submitted that the purpose of Part 6 would have been better served by permitting the Vessel to leave the UK, as she had always intended to do in March 2022.

Like the Judge, I cannot see any hierarchy in the relevant legislation. In my judgment, the discretionary power to detain is broadly expressed and can be used for the purpose for which it was used in the present case. There is no need to read that power of detention as being a secondary power, incidental to the primary power to exclude Russian ships from the UK.

Furthermore, like the Judge, I do not consider that the general underlying policy which lay behind the introduction of the amending regulations, which was no doubt to disrupt Russian shipping and trade generally, is inconsistent with the detention of this particular Vessel. As a matter of ordinary language, to detain one Vessel is indeed to disrupt Russian shipping. The fortuitous fact that there was only one relevant ship in UK waters at the time does not mean that the power of detention was exercised for an improper purpose which was inconsistent with the purpose of the relevant legislation.

In this context Mr Bethell drew our attention to a letter dated 9 November 2017, which was sent by Lord Ahmad of Wimbledon, the Minister of State for the Commonwealth and the UN, to Lord Pannick KC (a crossbench peer) during the passage of the Bill which became SAMLA. Mr Bethell submits that the purpose of the legislation was to ensure that “broad sectoral measures” could be imposed across the board so that they can have maximum impact.

I do not agree that the statutory purpose of the relevant legislation was so limited. As Lord Ahmad’s letter made clear, at page 2, the Government were aware that these were broad restrictions and had the potential for persons to be caught by them in circumstances that are “less than ideal.” Nevertheless, as the Minister went on to say, this type of sanction was intended “to have a broad and deep impact (in order to bring about a change in the behaviour that the sanctions are targeted against) …”. I can see nothing in the policy which lay behind either SAMLA or the 2019 Regulations, as amended, which is inconsistent with the way in which the discretionary power of detention was exercised in the present case.

Mr Bethell also referred us to the report made by the Government under section 18 of SAMLA when the 2022 (No 4) Amendment Regulations were put before Parliament. At para 11, it was said:

“The ability to enforce transport sanctions through these offences is an important deterrent. The vast majority of global trade in goods is carried on board ships. Maritime sanctions are therefore crucial in achieving the objectives of the Russian sanctions regime and they are designed to cause significant short term disruption to Russian shipping, thereby restricting their economic interests and further holding the Russian government to account.”

Like the Judge, I do not read that passage as limiting the discretionary power of detention of a ship in circumstances such as those in the present case.

Finally in this context, Mr Bethell submitted that, while there is a suite of safeguards for the freezing of bank assets, even as little as £100, there are no such safeguards for the detention of an expensive yacht as in the present case. He submitted that it cannot have been the intention of Parliament that there should be no such safeguards and therefore the detention power is incapable of being used in circumstances like the present.

In my judgment, that is to give insufficient effect to the clear and express legislation enacted in this context. While the safeguards may not be the same as for freezing of assets where a person is designated, it would be wrong in law to say that there are no procedural safeguards in the present context. That said, no specific argument has been made in these proceedings that there was procedural unfairness and so it is unnecessary to say more about that point.

For those reasons I have reached the clear conclusion that the Judge was correct that there was no breach of the Padfield principle in this case and Ground 2 on this appeal must be rejected.

Ground 4 is formulated as follows, at paras 8-9 of the Grounds of Appeal:

“8.

The Judge was not entitled to hold (judgment paragraphs 69 and 90) that the Secretary of State’s own statements, made a few hours after the decision to detain, had been personally taken by him, to the effect that detention had occurred because the vessel was owned by a person ‘with close connections to Putin’ or had ‘made their money through their association with President Putin’, were mere ‘excusable political hyperbole’ which ‘did not feature as a consideration in the Secretary of State’s own decision-making’. There was no evidence upon which such a finding could be made.

9.

Since there was no such suggestion that these statements were true in Mr Naumenko’s case, or that there had been any basis at the time for the Respondent to think that they were true, if the Judge had concluded that the Secretary of State’s public statements meant what they said, he would have been bound also to conclude that the March 2022 decision was based upon legally irrelevant considerations.”

At the hearing before us the following points were emphasised by Mr Bethell.

First, the undisputed facts are that, although Mr Naumenko is resident in Russia and is wealthy, he does not have any connections to President Putin. Nor is there any evidence to contradict the Appellants’ evidence, that the ownership of the Phi was not deliberately concealed.

Furthermore, Mr Bethell emphasises that the decision in March 2022 was taken personally by the Secretary of State, at that time Mr Shapps. The submission which was presented to the Secretary of State before that decision simply advised him that he had the power to detain but did not recommend any particular course of action. Importantly, Mr Bethell emphasises the statements which were then made by Mr Shapps at the dock where the Vessel was located. We have seen transcripts of those statements. It was said, by way of example, that “we cannot have any benefit to these oligarchs with close connections to Putin …”.

Mr Bethell submits that, if these erroneous matters were taken into account by Mr Shapps, they are clearly irrelevant considerations and the decision to detain was vitiated by a public law error.

Furthermore, Mr Bethell emphasises that the Respondent has not adduced any evidence from Mr Shapps directly or from anyone who had spoken to him about the matter. Accordingly, there was no evidence, he submits, upon which the Judge could conclude that Mr Shapps did not mean what he had said about why he had taken the decision to detain in March 2022. He submits that the Judge was wrong to dismiss these comments as mere “excusable political hyperbole”, as he did at para 69 of his judgment, or “political messaging”, as he did at para 90. Accordingly, Mr Bethell submits, the Judge was wrong to say, at para 90, that:

“It did not feature as a consideration in the Secretary of State’s own decision-making.”

In my judgment, the crucial answer to this Ground is what then immediately followed at para 90 of the judgment:

“In any event it made no difference to the outcome.”

I am troubled by the Judge’s reference to what was said by the Secretary of State at the time as “excusable hyperbole”. It was not hyperbole; it was incorrect. There is hyperbole where a statement which is true is exaggerated, but the statement that was made about Mr Naumenko’s connections with President Putin was not true. It ought not to have been said and it certainly should not have been taken into account when exercising a discretionary power.

Nevertheless, I have come to the clear conclusion that the Judge was right in his ultimate dismissal of this ground for judicial review because what the Secretary of State said did not make any difference to the outcome. It is clear on the evidence before the Court (for example para 91 in the First Witness Statement of James Driver) that the March 2022 decision (and the second decision in April 2022) would have been exactly the same for the reasons set out in writing in the Ministerial submission of 8 April 2022. Accordingly, two things are clear. First, events have superseded the original decision of March 2022 and there would be no practical purpose served by quashing that decision and remitting it for reconsideration. Secondly, and related to that point, if the Court were now to quash the March 2022 decision, it is perfectly clear what the outcome would be because the Court knows what the subsequent two decisions were and they were to the same effect.

Mr Bethell submitted that there would be some practical purpose to be served by quashing the March 2022 decision even if the later decisions were not quashed, because this would give rise to the possibility of a claim for damages for unlawful detention of the Vessel in the period from 28 March to 11 April 2022. I think this puts the cart before the horse. The remedies for a breach of public law do not normally include damages, although they may do so where, for example, a tort has been committed and the elements of that tort depend on there being a material error of public law. Since there is no such thing as a technical breach of public law, and it is perfectly obvious what the decision in March 2022 would have been even if the extraneous factors mentioned by the Secretary of State had not been mentioned, I have reached the conclusion that there is nothing of substance in this complaint. Since there is no public law error which vitiates the decision, no question of a claim for damages can arise.

For those reasons I would reject Ground 4 on this appeal.

Ground 3 of the Grounds of Appeal is formulated as follows:

“The Judge erred in holding (judgment paragraph 56) that the requirement in regulation 57D(5)(c) to state the grounds on which a vessel is detained did not amount to a requirement to give reasons for the exercise of the power of detention (as opposed to the basis upon which the power was believed to exist). The Judge ought to have held, consistently with the authority cited to him, that such a statutory requirement, whilst not calling for the giving of detailed reasons, did require the Respondent to ‘explain broadly the basis of the decision.’”

Under this ground Mr Bethell submits that there was a failure to comply with the express requirements of regulation 57D(5)(c) and (d), which, so far as material, provide:

“A detention direction given in relation to a ship–

…

(c)

must state the grounds on which the ship is detained, and

(d)

must state that–

(i)

it is given under this regulation …”

Mr Bethell submits that it is clear both (i) that the detention direction itself must state the grounds on which the ship is detained; and (ii) this cannot be done simply by stating the regulation under which the direction is given, since that is a separate requirement of regulation (5)(d)(i). Mr Bethell accepts that the grounds need not constitute full reasons for the decision but submits that something of substance nevertheless needs to be said beyond simply rehearsing the statutory power under which the detention direction is made.

This ground has assumed a greater prominence before this Court than it had before the High Court.

It was not clearly raised as a distinct ground of challenge in the Statement of Facts and Grounds, for example where the four grounds of challenge were summarised at para 54, or at para 89, which had the heading ‘The grounds stated in the Direction’. In any event, the point seems not to have been at the forefront of the submissions at the hearing before the Judge. This is why he said at para 56 of his judgment:

“If it had been necessary to address the claimant’s challenge on a further ground, that there was a failure of the detention direction to state the grounds relied upon, I would have dismissed it. Regulation 57D(5)(c) requires the direction to state the grounds on which the ship is detained, whereas regulation 8(4) requires a statement of reasons for designation under Part 2. The contrast in the language of the two provisions means that the detention direction does not require grounds to be equivalent to a statement of reasons.” (Emphasis added)

Greater reliance has been placed before this Court on the decision of the High Court in R v South Gloucestershire Appeals Committee, ex parte C [2000] ELR 220 (Dyson J). Particular emphasis is placed by Mr Bethell on what Dyson J said at page 225:

“I do not believe that the decision in R v Birmingham City Council Education Appeals Committee ex parte B lays down any general principle save perhaps to say that a minimum requirement of the grounds of a decision in that they explain broadly the basis of the decision. I respectfully agree with what Macpherson J said in R v Lancashire County Council ex parte M [1995] ELR 136; the statute requires broad grounds rather than detailed reasons. What is required will depend on the issues that have been raised on the appeal. In a complex case the grounds may well have to be more elaborate than in a simple one. Where however there is no dispute as to the primary facts, I do not consider that the grounds are required to make findings about those facts.”

The first point to note about that passage is that, on its own terms, it is tentative. What Dyson J said was that he did not believe that the decision in the earlier case of Ex parte B laid down any general principle. At its highest it appeared to say that a minimum requirement of the grounds of the decision is that they explain broadly the basis of the decision.

Secondly, the decision in Ex parte C needs to be seen in its own context. In particular, as is clear from page 222 of the judgment, that case concerned an appeal which could be, and was, made by the applicant’s father to the County Council. Although that would not have been a judicial decision, it was an appeal: in that context it is readily understandable that the court would expect more by way of reasoning than would be the case with most administrative decisions (in the absence of an express statutory duty to give reasons).

Thirdly, the fundamental point, as the Judge pointed out at para 56 of his judgment in the present case, is that the statutory scheme here does not require the giving of reasons.

Fourthly, I do not accept the submission that the grounds for the decision in the present case simply set out the statutory power under which it was taken. Para 5 of the Direction, dated 28 March 2022, stated that:

“The Phi is being detained on the grounds that it is owned, controlled or operated by Sergei Georgievich Naumenko, a person connected with Russia.”

In other words, it asserted certain facts, in particular as to the ownership of the ship and that Mr Naumenko is a person connected with Russia. These are facts which, as it happens, are true but, if they had not been or if they had been disputed by the Appellants, the stated grounds would have enabled them to challenge the decision. The purpose of requiring a statement of the grounds for detention was therefore achieved by what was said in the Direction in this case. No more was required than that.

For those reasons I would reject Ground 3 on this appeal.

Ground 5 of the Grounds of Appeal is formulated as follows:

“10.

The Judge was not entitled to hold (judgment paragraphs 82, 89) that the April 2022 decision was not taken ‘as a holding measure while further evidence was collected’. The specific decision taken was to adopt what the relevant ministerial submission described as Option A, namely ‘Maintain detention direction whilst seeking further evidence’.

11.

If the Judge had concluded accordingly, he would have been bound also to conclude that it was disproportionate and/or a breach of the Tameside duty to maintain the detention for a period of some 8 months thereafter without the Respondent either seeking further evidence, or reconsidering its decision in the light of factual material provided by the Appellants.”

Ground 5 has also assumed a greater importance before this Court than it appears to have had before the High Court. In the original proceedings it was not a distinct ground of challenge but appears to have been raised in the context of an argument about proportionality under A1P1. Be that as it may, complaint is now made on behalf of the Appellants about what the Judge said at para 82 of his judgment:

“Mr Giffin [who led Mr Bethell in the High Court] did raise an issue about the legitimacy of the April 2022 decision. The argument was that it could not be legitimate to detain the vessel as a holding measure while further evidence was collected, and then not to undertake further inquiries. In my view, this places too much weight on the comment of Mr Robert Courts MP, the Parliamentary Under-Secretary of State, and on the summary in the cover sheet to the ministerial submission. The Secretary of State did not expressly share Mr Courts’ view, and the rationale of the decision in Annex D to the submission does not give any support to maintaining detention as a holding exercise. That Ward & McKenzie were invited to make further submissions does not detract from this point.”

On behalf of the Appellants Mr Bethell submits that the Judge was wrong to characterise the April 2022 decision as not being “a holding measure while further evidence was collected”.

When the submission was sent to the Minister’s office on 8 April 2022, the covering message said that:

“The owner of the Phi yacht, which SoS detained last month, has had his legal advisors get in touch.”

The submission sought agreement for officials to respond as per Annex C and give a steer on what to do with the Phi, either “maintain detention” or “revoke detention”. The Minister, Robert Courts MP, said that he was content and his decision was “maintain for now whilst we obtain further evidence”. This reflected what had been put to the Minister as Option A:

“Maintain detention direction whilst seeking further evidence (Recommended).”

The email conveying the Minister’s response to the submission, dated 11 April 2022, said:

“Minister Courts added that he is content to maintain detention whilst we obtain further evidence before considering fully in the round once that is obtained to come to a properly evidenced decision.”

The email which was then sent on behalf of the Secretary of State on 11 April 2022 to the Appellants’ representatives finished with this:

“Accordingly, the Secretary of State remains content that the continued detention of the Vessel is appropriate and in accordance with the Regulations; however, the Secretary of State would be happy to consider any evidence Mr Naumenko may wish to present in writing in relation to the continued detention of the Vessel.”

Like the Judge, I have reached the conclusion that this ground of appeal places undue emphasis on the words of Mr Courts taken out of context. The Secretary of State, who made the decision, was not of the view that this was simply a holding decision and that further evidence needed to be obtained. Rather the position was that he was content to maintain the continued detention of the Vessel but would be willing to consider any further evidence that might be presented on behalf of Mr Naumenko and was affording him the opportunity to do so. That is indeed what the Appellants’ representatives then did, by letter dated 26 May 2022.

For those reasons I would reject Ground 5 on this appeal.

At para 3 of the Grounds of Appeal, it was said that the Judge held that the detention of the Vessel was proportionate even though Mr Naumenko himself “had no proximate responsibility for events around Ukraine, and could not be said to have assisted the Russian regime” (para 84 of the judgment), and it was “unclear what contribution [detention] will make in influencing the situation for which he is not directly responsible and over which he has no control” (para 85 of the judgment).

At para 4 of the Grounds it was observed that the burden of justifying the interference with rights in A1P1 rests upon the Respondent. So much is common ground. Paras 4.2 to 4.4.2 of the Grounds were formulated as follows:

“4.2

It was necessary for the Respondent to explain in concrete terms how the measure was expected to serve the aim identified, whether that was because the detention was intended directly to influence the Russian authorities in a particular way, or because it was intended to cause Mr Naumenko to behave in a particular way which would in turn influence the Russian authorities. Without an explanation of that nature, the measure could not be rationally connected with the legitimate aim relied upon, and unless the explanation showed that the positive impact of the measure was commensurate with the interference with individual rights, it would also fail to strike the fair balance required by A1P1.

4.3

No such explanation was contained in the contemporaneous decision-making documents, and no such explanation was provided by the Respondent’s evidence in answer to the claim.

4.4

It was not a sufficient answer (contrary to the Judge’s ultimate conclusion on the issue as set out at paragraph 86 of the judgment) to say:

4.4.1

That the Respondent ‘need not demonstrate the efficacy of each individual detention . . . in order to maintain a sanctions measure.’ Whilst that might be true in a situation in which a significant number of individual detentions resulted from a general rule or policy, so that it was the overall effect of the rule or policy which mattered, detention decisions under regulation 57D are individual and, on the Respondent’s own case, specific to the particular facts; they are also, both in fact and by the very nature of Part 6 of the Sanctions Regulations, very few in number. Further, whilst it is legitimate to approach individual sanctions measures on the basis that it is their cumulative effect which is intended ultimately to influence the Russian government, it is nonetheless necessary to show that the individual measure can at least be expected to make some contribution to that effect.

4.4.2

That the Respondent had a broad margin of discretion, so that beyond a rational connection between the sanctions measure and the aim, it was ‘not an issue for the court’. Proportionality is a matter for the court, which must scrutinise rigorously whether the sanctions measure makes logical sense, even though it will normally defer to any specific judgment made by the decision-maker at the time of the decision in relation to questions of foreign policy or similar issues. The evidence in this case disclosed no such concrete consideration of the measure’s anticipated effect.”

There can be no realistic suggestion that the Judge misdirected himself as to the correct legal approach which he had to take to the assessment of proportionality. At para 78, he correctly directed himself as to the four limbs of the Bank Mellat test. At para 79, he correctly directed himself that a proportionality challenge is ultimately a matter for the court to determine with reference to all the evidence before it and that this involves considering the substance of the Secretary of State’s decision, not the process of its making. Thirdly, at para 80, he correctly directed himself that, although the court itself determines proportionality objectively on the basis of its own assessment, a margin of discretion will be afforded to the decision-maker, to the extent that it has itself considered the relevant issues at the time of the challenged decision. Further, in matters relating to foreign policy or the conduct of foreign relations, the court accords to the executive an especially broad margin of discretion. All of this was supported by the Judge’s correct citation of relevant authority, both from this Court and from the Supreme Court.

The issue on this appeal therefore for this Court is whether we consider, in accordance with the principles which I have outlined above, that the assessment by the Judge of proportionality was “wrong”. I therefore turn to each of the four criteria which are relevant to the assessment of proportionality.

First, it is common ground that the decision under challenge had a legitimate aim. It was part of a package of measures taken by the United Kingdom in response to the gross violation of fundamental norms of international law by Russia when it invaded Ukraine. On behalf of the Appellants, Mr Bethell also accepts that targeting Russian businesses could in principle contribute to changing Russian behaviour. There was also no serious suggestion made before this Court that, if the other criteria in Bank Mellat are met, there would be any less intrusive means (limb 3). The critical issues therefore relate to limbs 2 and 4, in other words whether the means adopted had a rational connection to the end being pursued, and whether the impact on the Appellants’ rights under A1P1 was outweighed by the benefit to the general interests of the community.

I consider first the issue of rational connection. Mr Bethell accepts that a broad sectoral measure could be a rational measure in this context but submits that this was not such a case, because there is no general policy that all Russian ships should be detained. There is a discretion to do so and it is exercised in respect of each individual ship. He reminds us of the test as put by Lord Reed in Bank Mellat, at para 74: the extent to which the decision will make a contribution to the overall objective needs to be balanced against the benefit to the general interests of the community.

Mr Bethell submits that there is a close analogy with the facts of Bank Mellat because here there is only one ship affected, just as in that case there was only one bank affected. Further, Mr Bethell submits that it is necessary to show that the decision would have efficacy in making a material contribution to its objective in practice. He submits that the Judge was wrong to say, at para 86, that this is not an issue for the court.

In my view, this is to take one sentence in para 86 out of context. The Judge was well aware that the assessment was one for the court, as he had said earlier in his judgment. The point that he was making in para 86 was that all that is needed is a rational connection between the sanctions measure and the aim. He was also making the common sense point that it would be difficult to demonstrate that any one decision would have the desired foreign policy outcome.

Driven to its logical conclusion, the Appellants’ submission would mean that, if 100 ships are detained, each owner of one ship could say that detaining his ship is not going to be particularly effective or make a material contribution to the overall aim and so it is disproportionate to detain it. That argument would obviously be absurd. It is the overall effect of detaining all 100 ships which is important and the detention of each one of them obviously has a rational connection to the overall aim in view.

The fact is that, in view of the circumstances in March 2022, most Russian ships had already been prohibited from entering UK ports. If, however, there had been other such ships such as the Phi, they would have been detained consistently with the objective of the detention of the Phi. This is also one important reason why the facts of this case are distinguishable from those of Bank Mellat. What troubled the majority of the Supreme Court in that case was that there were other Iranian banks which were not affected by the measure: see e.g. Lord Sumption’s judgment at para 22. This is what the Judge said at para 85 of the judgment in the present case, and I agree with him.

Finally in the context of rational connection, Mr Bethell submits that detaining the ship of one Russian wealthy person who has no association with politics in Russia has no rational connection to the legitimate aim. The Judge addressed this argument at para 84 of his judgment and again I agree with him. Given the likely direct and indirect links between Mr Naumenko’s wealth, economic activities, and the Russian state, it is rational to consider that he is the sort of individual on whom sanctions could effect the “broad and deep impact” which Parliament intended via the “connected with Russia” powers in, at least, weakening their tacit support for the regime.

Moreover, I would be prepared to go further than the Judge and accept the additional point raised in the Respondent’s Notice:

“The patronage system that exists in Russia, and the loyalty that is required from wealthy Russians, provides a further basis on which it is rational to conclude that a person resident in Russia who retains significant wealth is likely, directly or indirectly, to have benefitted from the Russian regime. Mr Driver's evidence in his first witness statement (especially §§50-54 and §§136-139) and in his second witness statement (especially §§12-17) explains the nature of Russia's political economic context, and whilst the Judge did not consider it necessary to rely upon this evidence, it is respectfully submitted that, if necessary, it provides an additional reason to uphold the Judge's conclusion that detaining a superyacht such as the Phi is rationally connected to the legitimate aim of encouraging Russia to cease its actions in Ukraine by way of targeted sanctions measures.”

In my view, the evidence before the Court, in particular from Mr Driver, which I summarise below, supports the proposition that (i) the patronage system in Russia and (ii) the need for loyalty to President Putin of wealthy Russians are such that it would not otherwise have been possible for an individual like Mr Naumenko to accumulate the significant wealth which he has. In this context it is appropriate to give weight to the judgment of the executive, since this is a matter which it is better equipped to assess than the courts can be.

In his first witness statement, at para 50, Mr Driver says that in Russia “wealth and power are highly centralised.” He continues that:

“The nature of the Russian political economy is essentially one of patronage. By this, I mean a system in which opportunities and material benefits, government contracts, and senior positions in the government and government-affiliated entities, are provided by the state to a small circle of insiders, in return for their loyalty and support.”

At the risk of stating the obvious, one of the ways in which economic sanctions can be effective is, as Mr Driver says at para 49, by increasing the disadvantages felt by citizens. In this sense, the aim and the purpose of sanctions are not restricted to state institutions, or those who exercise political power and influence. In this way sanctions may provide a peaceful way to impose pressure on a hostile state.

At para 8 of his second witness statement, Mr Driver made it clear that there is no evidence to suggest that Mr Naumenko was part of President Putin’s circle of insiders in the sense of holding a senior Government position or having contracts to provide the Government with services. Nevertheless, as he continues at para 9, Mr Naumenko was someone who had acquired a level of wealth that went significantly beyond that acquired in the ordinary course of business. That conclusion was based upon the fact that he owned the Phi, a custom-built superyacht valued at £38 million. In addition he owned her sister vessel, as well as another superyacht, the Aurelia. Further, as he states at para 11, the information before the DfT was that Mr Naumenko’s economic activities had links to the activities of the Russian state, such that he was likely to fall within the business elite who benefitted from, and provided benefits to, the Russian regime. Mr Driver continues, at paras 12-16 of his second witness statement, to make the point that the system of patronage in Russia is not purely “political” in nature. Mr Naumenko will have had to accept the regime and show no sign of disloyalty. In this regard it is notable that he has never publicly criticised President Putin or his actions in Ukraine. Further, he has necessarily benefitted from the economic conditions which have subsisted under President Putin’s regime and will, in turn, have benefitted the regime through, not least, payment of taxes from his successful economic activities. Finally in this context, Mr Driver says that retaining the loyalty of high net-worth individuals is important for ensuring the stability of the Russian regime in both political and economic terms and is particularly important at the present time in order to continue to resource Russia’s war against Ukraine.

In my judgment, all that evidence sensibly leads to the conclusion that there was a rational connection between the decision under challenge and the legitimate aim.

I turn to the fourth limb of the Bank Mellat test, that is the fair balance between the general interests of the community and the individual rights of the Appellants, noting that the individual rights in question here are most easily conceptualised as those of Mr Naumenko, the second Appellant.. Like the Judge, I conclude that this is straightforward. There can be no doubt that the interference with the Appellants’ property rights is significant. Even if this is not strictly a deprivation of property case, the Appellants are deprived of the use of the Vessel for a significant and indefinite time. There are, however, as the Judge observed at para 87-88 of his judgment, weighty public interest factors on the other side of the balance, in particular the need to bring to an end the illegal use of force by Russia and the violation of the territorial integrity of Ukraine. Further, as the Judge noted, the individual burden on the Appellants is not as great as it would have been if, for example, they suffered particular hardship. The fact that this is the detention of a luxury superyacht is of relevance in that context.

Before this Court Mr Bethell emphasised that the disproportionality of the detention decision has become more pronounced over time and reminds this Court of the witness evidence filed on the Appellants’ behalf, in particular by Mr Booth, paras 23-24 and Mr Booth’s second witness statement, at paras 10-13. In outline, the Appellants are being put to expense because they have to maintain the Vessel and keep it safe from intruders and fire risks, its chartering value is being reduced and they have not been able to get indemnity insurance.

I acknowledge these impacts on the Appellants but cannot conclude that this leads to an unfair balance having been struck between the rights of the individual and the general interests of the community.

Mr Bethell submits that ultimately the Government’s case comes down to the proposition that anyone with substantial wealth in Russia who does not leave or criticise the regime is a legitimate target for what is in effect the freezing of his assets. That puts it far too broadly. The fact is that Mr Naumenko is not a designated person and so his assets generally have not been affected by the sanctions regime. The decision under challenge is no doubt unwelcome to him but, as the Judge noted, concerns a luxury superyacht and does not cause him individual hardship in his normal daily life.

It is also relevant in this context to remind oneself of what is said in the evidence of Mr Driver. Mr Naumenko will necessarily have benefitted from the economic conditions which have subsisted under the present Russian regime. He has also benefitted that regime, for example through the payment of taxes. It is important in this context to note that Mr Naumenko has chosen not to file any witness evidence in these proceedings as to how he has accumulated his economic wealth.

For the above reasons I have come to a conclusion that the Judge’s assessment of proportionality was not wrong. To the contrary I would reach the conclusion that he was right.

Under Ground 6 it is contended that:

“The Judge ought to have held that the unlawful detention of an asset in such a way as to entail, for a prolonged and indefinite period, the owner being unable to use that asset for its intended purpose in accordance with normal rights of ownership amounts to the exercise of a right of dominion over that asset sufficient to constitute the former tort of conversion as now subsumed into the statutory tort of interference with goods.”

It is common ground that Ground 6, which relates to the tort of conversion, would only arise if the appeal otherwise succeeded. Since I would dismiss the earlier grounds of appeal, I do not think it is either necessary or appropriate to say anything on this issue.

For the above reasons, I would dismiss the appeal in the Dalston Projects case.

This appeal relates to the lawfulness of the designation of Eugene Shvidler under the 2019 Regulations. It is an appeal against the decision of Garnham J dated 18 August 2023. Permission to appeal was granted by Lewis LJ on Ground 1 (proportionality under A1P1 and Article 8 of the ECHR) but refused on Ground 2 (Article 14 of the ECHR). Permission was granted on the basis that there was a compelling reason why the appeal should be heard in view of the importance of the issues and the fact that this Court had not previously considered this legal regime.

Background

Mr Shvidler left the former Union of Soviet Socialist Republics (“the USSR” or “the Soviet Union”) in 1989 and moved to the United States, obtaining refugee status. At the hearing we were informed that he had to renounce his citizenship of the USSR in order to leave that country. He has never been a citizen of the Russian Federation, which became the successor state to the USSR on the latter’s dissolution in 1991.

In 2004, Mr Shvidler was granted a British visa under the Highly Skilled Migrants Programme, and was subsequently naturalised as a British citizen in 2010. Mr Shvidler has five children, all of whom are British citizens (the elder three are naturalised, the younger two by birth).

Mr Shvidler was educated in the Soviet Union, graduating from the Moscow Institute of Oil and Gas in 1986. Before leaving for the United States, Mr Shvidler worked at the Oil Research Institute in Moscow. Once in the United States, Mr Shvidler obtained a Master of Science degree in International Taxation, and subsequently commenced work at Deloitte & Touche in New York.

Executive work and relationship with Roman Abramovich

Mr Shvidler commenced a friendship with Roman Abramovich (“Mr Abramovich”) in 1986, the pair remaining in contact during Mr Shvidler’s time in the United States. In 1994, Mr Shvidler visited Moscow (travelling on a United States refugee travel document with a Russian visa), and soon thereafter entered into business with friends and contacts in Moscow, led by Mr Abramovich.

From 1996, Mr Shvidler was Vice-President for Finance of Sibneft, an oil production company belonging to Mr Abramovich. Mr Shvidler became President of Sibneft in 1998, continuing in that role until 2005, when Sibneft was sold to a Russian company (Gazprom). Whilst President, Mr Shvidler, alongside all other Sibneft employees, was given a nominal shareholding in Sibneft: these shares did not form part of the sale to Gazprom.

In 2011, Mr Shvidler was appointed to the board of Evraz plc (“Evraz”), a UK listed company with subsidiaries in Russia, the United States, Ukraine, Canada, and the Czech Republic. By 2018, Mr Shvidler occupied that role as the nominee of Greenleas International Holdings Limited, a BVI entity controlled by Mr Abramovich. When Mr Abramovich’s 28.64% shareholding was transferred into his personal control on 16 February 2022, Mr Shvidler again continued in his role on the Board.

Evidence before the Secretary of State further highlighted Mr Shvidler’s relationship with Mr Abramovich, he being described as Mr Abramovich’s “best friend”, “right-hand man”, and as being “joined at the hip”. It also said that, along with Evraz, Mr Shvidler was Chairman of Millhouse LLC (“Millhouse”), the Moscow-based arm of the UK holding company that manages Mr Abramovich’s assets (along with managing the assets of Mr Shvidler himself). Mr Shvidler reportedly stepped down from his role at Millhouse in March 2021.

Mr Shvidler resigned from his position as a non-executive director of Evraz on 10 March 2022, the day that Mr Abramovich was designated under the 2019 Regulations by the Secretary of State (as discussed below). Evraz’ shares were suspended from trading on the London Stock Exchange on the same day.

This appeal relates to sanctions imposed by the Secretary of State under regulation 5 of the 2019 regulations. Designations are made pursuant to the criteria laid out in regulation 6, which provides, so far as material:

“(1)

The Secretary of State may not designate a person under regulation 5 (power to designate persons) unless the Secretary of State—

(a)

has reasonable grounds to suspect that that person is an involved person, and

(b)

considers that the designation of that person is appropriate, having regard to—

(i)

the purposes stated in regulation 4 (purposes), and

(ii)

the likely significant effects of the designation on that person (as they appear to the Secretary of State to be on the basis of the information that the Secretary of State has).

(2)

In this regulation, an ‘involved person’ means a person who—

(a)

is or has been involved in—

(i)

destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine, or

(ii)

obtaining a benefit from or supporting the Government of Russia,

(b)

is owned or controlled directly or indirectly (within the meaning of regulation 7) by a person who is or has been so involved,

(c)

is acting on behalf of or at the direction of a person who is or has been so involved, or

(d)

is a member of, or associated with, a person who is or has been so involved.

(3)

For the purposes of this regulation, a person is ‘involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine’ if—

(a)

the person is responsible for, engages in, provides support for, or promotes any policy or action which destabilises Ukraine or undermines or threatens the territorial integrity, sovereignty or independence of Ukraine;

(b)

the person provides financial services, or makes available funds, economic resources, goods or technology, that could contribute to destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine;

(c)

the person provides financial services, or makes available funds, economic resources, goods or technology, to—

(i)

a person who is responsible for a policy or action which falls within sub-paragraph (a), or

(ii)

a person who provides financial services, or makes available funds, economic resources, goods or technology, as mentioned in sub-paragraph (b);

(d)

the person obstructs the work of international organisations in Ukraine;

(e)

the person conducts business with a separatist group in the Donbas region;

(f)

the person is a relevant person trading or operating in non-government controlled Ukrainian territory;

(g)

the person assists the contravention or circumvention of a relevant provision.

(4)

For the purposes of this regulation, being ‘involved in obtaining a benefit from or supporting the Government of Russia’ means—

(a)

carrying on business as a Government of Russia-affiliated entity;

(b)

carrying on business of economic significance to the Government of Russia;

(c)

carrying on business in a sector of strategic significance to the Government of Russia;

(d)

owning or controlling directly or indirectly (within the meaning of regulation 7), or working as a director (whether executive or non-executive), trustee, or other manager or equivalent, of—

(i)

a Government of Russia-affiliated entity;

(ii)

a person, other than an individual, which falls within sub-paragraph (b) or (c);

(e)

holding the right, directly or indirectly, to nominate at least one director (whether executive or non-executive), trustee or equivalent of—

(i)

a Government of Russia-affiliated entity, or

(ii)

a person, other than an individual, which falls within sub-paragraph (b) or (c).

…

(6)

In paragraph (2)(d), being ‘associated with’ a person includes—

(a)

obtaining a financial benefit or other material benefit from that person;

(b)

being an immediate family member of that person.

(7)

In this regulation—

…

‘immediate family member’ means—

(a)

a wife or husband;

(b)

a civil partner;

(c)

a parent or step-parent;

(d)

a child or step-child;

(e)

a sibling or step-sibling;

(f)

a niece or nephew;

(g)

an aunt or uncle;

(h)

a grandparent;

(i)

a grandchild.”

On 10 March 2022, Mr Abramovich was designated by the Secretary of State. On 23 August 2022, Mr Abramovich’s designation was varied. The variation removed the reference to Mr Abramovich “being involved in destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine”. However, the grounds of Mr Abramovich’s designation continued to refer to his association with President Putin.

On 5 May 2022, Evraz was designated. Trading in Evraz’ shares had been suspended by the London Stock Exchange since 10 March 2022, when Mr Abramovich was designated.

On 2 November 2022, Alexander Frolov and Alexander Abramov, both former non-executive directors of Evraz, were also designated.

On 24 March 2022, Mr Shvidler was designated by the Secretary of State. On 31 March 2022, Mr Shvidler’s solicitors, Peters & Peters, wrote to the FCDO requesting the written reasons for the designation. Further, Mr Shvidler wrote personally to Elizabeth Truss MP, then the Secretary of State, requesting a reconsideration of the decision to designate him.

Peters & Peters received the Sanctions Designation Form, as well as a Sanctions Designation Form Evidence pack, substantiating the designation, on 16 June 2022. The designation was made on two grounds:

On 28 March 2022, Mr Shvidler was informed by Harrow School that his son’s place would be withdrawn with immediate effect. Similarly, over Easter 2022 Mr Shvidler was informed by Marlborough College that his daughter would not be permitted to return to school for the remainder of the school year. Subsequently, Mr Shvidler’s children had to continue their school education in the United States, where he now lives.

On 14 July 2022, Peters & Peters submitted a request for a ministerial review of Mr Shvidler’s designation, pursuant to section 23 of SAMLA. On 5 August, 9 September, and 28 September 2022, Peters & Peters wrote to the Secretary of State, requesting a response to the request for a ministerial review.

As set out above, Mr Abramovich’s designation was varied on 23 August 2022.

On 14 October 2022, Peters & Peters again wrote to the Secretary of State requesting a response to the request for a ministerial review, and notifying the FCDO of Mr Shvidler’s intention to seek judicial review of the Secretary of State’s failure or refusal to conduct the administrative review (should no response be received). On 28 October 2022 Peters & Peters sent a pre-action protocol letter to the FCDO seeking a response to the request for a ministerial review.

On 11 November 2022, the Secretary of State completed the ministerial review, and amended the designation. An amended Sanctions Designation Form and Sanctions Designation Form Evidence pack were sent to Mr Shvidler. The amended bases for designation are as follows:

A claim for statutory review brought under section 38(2) of SAMLA was issued in the Administrative Court on 24 February 2023.

By the proceedings, Mr Shvidler challenged the designation on two grounds. First, Mr Shvidler contended that the designation constituted a disproportionate interference with his rights under Article 8 of the ECHR and A1P1. Secondly, Mr Shvidler contended that the Secretary of State had exercised his discretion in a discriminatory manner in breach of article 14 (read with Article 8 and A1P1) of the ECHR.

On 18 August 2023 Garnham J (“the Judge”) dismissed Mr Shvidler’s claim.

Although permission to appeal was granted only on Ground 1, that ground is divided into five sub-grounds.

The fundamental point (Ground 1A) which is made on behalf of the Appellant is that the Judge fell into error because he considered that the court’s task was limited to assessing whether the Secretary of State’s ultimate conclusion under each of the four limbs of Bank Mellat was properly open to the executive rather than conducting the exercise for himself.

The other sub-grounds under Ground 1 are as follows:

At para 80 of his judgment, the Judge recorded that it was agreed before him that the test for proportionality is that set out by the Supreme Court in Bank Mellat and quoted the relevant passage in Lord Sumption’s judgment, at para 20, which sets out the four limbs of that test. The Judge noted that the first issue was not disputed: there was a legitimate aim which was “of the greatest importance and in principle justifies the limitation on the fundamental rights of those affected”: see para 81. At para 85, the Judge set out the relevant issues which arose for decision by him.

I am very conscious that the judgment must be read fairly and as a whole. It would not be right to take one or two phrases or sentences out of context. Nevertheless, I have respectfully come to the conclusion that the Judge fell into error in relation to the proper role of the court in assessing proportionality: I have set out the correct approach above. I will give some examples of why I have reached that conclusion.

At para 79, the Judge said:

“The Secretary of State has a discretion under the 2019 Regulations whether or not to impose sanctions on an individual and, where Convention rights are engaged as they are here, it is necessary in the exercise of that discretion for the Secretary of State properly to consider the proportionality of the measure proposed.” (Emphasis added)

At para 91, the Judge said:

“Undoubtedly, this is a case where close scrutiny is necessary in order to adjudicate on a complaint that Convention rights have been infringed. And it is the structured analysis articulated in Bank Mellat that must be applied. But the Court does not assume the role of primary decision maker on issues that turn on the exercise of judgment or the determination of policy, limiting itself instead to asking whether the decision was one properly open to the executive. …” (Emphasis added)

It may be that the Judge fell into error because of his understanding of the submission for the Secretary of State. Be that as it may, he recorded, at para 135, that Sir James Eadie had submitted on behalf of the Secretary of State (in the context of the fourth limb of Bank Mellat, fair balance) that the Secretary of State had had regard to the impact of sanctions on the Claimant and his family:

“He says that Parliament has entrusted the Secretary of State with the authority to make decisions in relation to sanctions designations and that, having conducted a careful assessment, taking account of the relevant human rights considerations, the Secretary of State was entitled to conclude that the Claimant’s designation was proportionate.”

When considering the third limb of the Bank Mellat test (absence of less intrusive measures), the Judge said, at para 131:

“In my judgment, this is an area where the Courts have to defer to the judgment of the Secretary of State. The relative benefits, disadvantages and effectiveness of different measures taken in pursuit of foreign policy objectives is not one on which the Court can second-guess the Foreign Office. All that can properly be said is that the Government’s analysis is not self-evidently irrational or outside the range of reasonable responses.” (Emphasis added)

At para 141, the Judge said that the witness statements filed on his behalf:

“demonstrate that the Secretary of State has had conscientious regard to the impact of designation on both the Claimant and his family. They have properly been taken into account but have been found insufficient to outweigh the community interest in the maintenance of sanctions in the Claimant’s case. …” (Emphasis added)

At various points in his judgment the Judge referred to the fact that the court was required to show appropriate deference to the views of the Secretary of State when carrying out the proportionality assessment. It appears that the Judge confused that issue, and the related question of what weight should be given to the views of the Secretary of State, particularly in the context of foreign relations, with the different question of whether the role of the court is actually to form its own judgment when assessing proportionality or whether it is confined to reviewing the reasonableness of the Secretary of State’s analysis. In my judgment, ultimately the Judge fell into error because he considered that there was a strict dichotomy between the primary decision-maker (the Secretary of State) and the reviewing court. By way of example, at para 92 he said:

“The Secretary of State is the primary decision-maker under statute but the Court is well placed to judge the reasonableness of his analysis.”

For those reasons, I have reached the conclusion that Ground 1A must succeed. Under CPR 52.20(1) this Court has all the powers of the lower court. Although it would be open to us to remit the case, neither party urged that course on us and I have concluded that that is not what we should do, because we are in a good position to make the assessment of proportionality ourselves. That said, in accordance with the principles which I have set out above, in particular the decision of the Supreme Court in In re B, this Court is still only conducting an appeal by way of review, not by way of rehearing.

Before I turn to Grounds 1B-1E, I will make some general observations in the light of submissions made on behalf of the Appellant.

On behalf of the Appellant it is submitted that the threshold criteria for designation under the 2019 Regulations are necessary conditions for designation but not sufficient ones. It is submitted that, precisely because the permissible grounds for designation are so broad, and because the fundamental liberties of a citizen can be so markedly curtailed for an indefinite period of time, it is imperative for the Court to scrutinise with particular care any reasoned plea that a designation is disproportionate.

The Appellant submits that his designation is disproportionate in breach of his rights under Article 8 of the ECHR and A1P1. Further, the Appellant submits that, while he was refused permission to appeal on Ground 2 (which concerned Article 14 of the ECHR), he is entitled to, and does, maintain that the Secretary of State’s arbitrary operation of the sanctions regime supports his proportionality case on Ground 1, which is the only ground for which he has permission to appeal to this Court.

It is also emphasised on behalf of the Appellant that, while a closed material procedure is in principle available in proceedings of this kind, no application was made for there to be such a procedure used in this case.

The Appellant accepts (as he did in the Court below) that the second basis for his designation is made out: that by virtue of his former non-executive directorship of Evraz, he satisfied the criterion for designation in the 2019 Regulations. What is challenged (under Ground 1B) is the first basis of his designation.

There was and is no dispute that the Secretary of State’s aim of encouraging Russia to cease actions destabilising Ukraine or undermining or threaten its territorial integrity, sovereignty and independence, is a legitimate one.

Under Ground 1B it is submitted that the Judge misdirected himself in law when determining that the Appellant was “associated” with Mr Abramovich within the meaning of Regulation 6(2)(d) of the 2019 Regulations. In particular, it is submitted that the Judge erred by:

Under Ground 1B(a), it is submitted that the correct position is that:

It is submitted that the Appellant no more received a financial benefit from Mr Abramovich than did the other 70,000 employees of Evraz.

Like the Judge, I would reject those submissions. The Judge addressed this issue at paras 98-101 of his judgment. He found that the Secretary of State had reasonable grounds to suspect that the Appellant had received significant financial benefits from Mr Abramovich, for the following reasons.

First, it was accepted in the letter from the Appellant’s solicitors dated 14 July 2022, seeking a review of his designation, that Sibneft was “Mr Abramovich’s company”. It was accepted that the Appellant was Vice-President for Finance and then President of Sibneft between 1996 and 2005, a period when the company was owned by Mr Abramovich. It was accepted (both in that letter and in the Appellant’s witness statement) that he was paid for that role. It was also accepted that he had received a “generous severance package” in the amount of approximately $10 million when he stepped down as President of Sibneft. Accordingly, I agree with the Judge that, while the Appellant may have received what were the normal incidents of his employment with Sibneft, the fundamental fact remains that he owed his employment in those roles to Mr Abramovich.

I also agree with the Judge’s second reason on this point. He found that the Claimant was one of Mr Abramovich’s two nominee directors on the Board of Evraz, a role for which he says, in his first witness statement, he was paid £204,000 per annum in the period 2013-2021. He was appointed to that role by Mr Abramovich (as was made clear in a letter from Evraz to the Office of Financial Sanctions Implementation (“OFSI”), an office within HM Treasury, dated 11 March 2022). I agree with the Judge that the Appellant obtained a financial benefit from Mr Abramovich as a result of that act of patronage.

Under Ground 1B(b) complaint is made of the Judge’s reasoning at paras 102-103 of his judgment:

“102.

Third, there was before me an interesting, but ultimately redundant, argument about the degree to which Evraz continues to be controlled by Mr Abramovich. The Claimant acknowledges, in his second statement, that Mr Abramovich and two other men, Messrs Abramov and Frolov (acting through companies owned by them) are regarded as ‘concert parties’ and therefore ‘controlling shareholders’ under the Financial Conduct Authority’s Handbook. He points out that Mr Abramovich holds 28.64% of the shares, Mr Abramov holds 19.223% and Mr Frolov holds 9.65%. However, Lord Anderson seeks to draw a fine distinction between the generally understood definition of ‘concert party’ in company law and the definition of joint arrangement under paragraph 3(2) of Schedule 1 to the 2019 Regulations. He says that in company law the phrase ‘concert party’ is understood to mean a group of shareholders who coordinate their actions to obtain a given outcome, whereas a joint arrangement under the 2019 Regulations is defined as ‘an arrangement between the holders of shares or rights that they will exercise all or substantially all the rights conferred by their respective shares or rights jointly in a way that is pre‐ determined by the arrangement.’ Accordingly he submits that to suggest that the Claimant received financial benefit from Mr Abramovich is based on an error of law.

103.

I reject the Claimant’s argument in this regard. In my judgment, Sir James was right in his submission that, given that Messrs Abramovich, Abramov and Frolov are treated by Evraz as ‘acting in concert’, there are reasonable grounds to suspect that there exists a ‘joint arrangement’ between them within the meaning of paragraph 3. Accordingly, each of them is to be treated as holding the combined shares of all three, and Mr Abramovich can be treated as owning, directly or indirectly, more than 50% of the shares or voting rights in Evraz.”

Like the Judge, I do not consider that the Secretary of State made an error of law as submitted in this regard. Rather, the point is simply the common sense one that, in circumstances where Mr Abramovich, Mr Abramov and Mr Frolov are treated by Evraz as “acting in concert” and are therefore “controlling shareholders” within the meaning of the Financial Conduct Authority’s Handbook, there are also reasonable grounds to suspect that there exists a “joint arrangement” between them within the meaning of para 3 of Schedule 1 to the 2019 Regulations. This is not a point which turns on the precise details of company law but is simply a common sense conclusion.

Under Ground 1B(c), complaint is made that the mere existence of a long-standing personal and business relationship is insufficient, without more, for finding that a person is “associated with” another person. With respect, I disagree.

In my judgment, this follows from the natural meaning of the phrase used. While the Regulations give an inclusive definition of the phrase “associated with” in regulation 6(6) and (7) (which I have set out above), that is often a drafting technique to put certain cases beyond doubt. I also do not accept Lord Anderson’s submission that the broad language used in the Regulations should be read narrowly or strictly. While the fact that the language is indeed broad may well have a bearing on the assessment of proportionality, in particular under the “fair balance” limb, it does not seem to me that the plain meaning of the words used in the Regulations needs to be, or should be, cut down because of the human rights context.

For those reasons, I would reject Ground 1B.

Under Ground 1C the Appellant makes the following complaints in the grounds of appeal:

“The learned Judge misdirected himself in concluding that the Appellant’s designation was capable of ‘contributing systematically to the desired objective’ of the 2019 Regulations, or was rationally connected to it (Judgment, §128). In particular, the learned Judge erred in concluding that:

(a)

The assessment in the Appellant’s case involved matters of executive judgement based on the Secretary of State’s institutional expertise (Judgment §116), such that the Secretary of State was better placed to make an assessment than the Court and/or that the Secretary of State’s decision was based on such judgements (a conclusion which finds no support in the Secretary of State’s evidence).

(b)

The post-decision evidence of FCDO officials is to be equated with the reasons of the Secretary of State for making the decision under challenge and/or entitled to particular weight or deference, whether for the reasons provided at Judgment §96 or at all.

(c)

The mere existence of ‘reasonable grounds’ to suspect that a state of affairs existed suffices for the purposes of the proportionality assessment.

(d)

It was permissible to impose sanctions so as a ‘send a message’ that conduct which had already ceased was unacceptable (Judgment §122) either at all, or in a discriminatory fashion.

(e)

A systematic contribution could properly be inferred because sanctions on the Appellant ‘may well discourage others from involving themselves in businesses supportive of the Russian state’ or encourage them to divest (Judgment §§118, 127), or because the Appellant ‘may well’ be able to speak out privately (Judgment §124).”

Before this Court not all these points were advanced, at least with any vigour, but other points were made. A highly detailed critique was put to this Court, criticising each of the eight ways in which FCDO officials had said there was a rational connection in this case:

At this stage I would make certain fundamental points of principle.

First, it is important to recall that what is required under the second limb of the Bank Mellat test for proportionality is a rational connection, no more and no less. There does not have to be a perfect fit between the legitimate aim and the means chosen to achieve it, provided there is a rational connection between them.

Secondly, this is an objective test. It calls for analysis by the court itself. As I have already mentioned, proportionality is, unlike conventional judicial review grounds, concerned with the substance of the matter, not the process by which the decision was reached. If, as a matter of objective analysis, there is a rational connection proved to the court’s satisfaction, it is immaterial whether or not this featured in the reasoning process of the decision-maker at the time.

Thirdly, as the Judge observed at para 128 of his judgment, the Respondent does not have to establish all eight of the factors which were argued about extensively both before him and before this Court. Some of those factors may have been weaker than others. What is crucial at the end of the day is whether there is a rational connection between the legitimate aim and the means chosen to achieve it. In my judgment, the answer to that question is obvious: there clearly is.

Finally in this context, I should mention the submission made by Lord Anderson that there was no rational connection because the measure was arbitrary. In this way Lord Anderson attempts to resurrect his discrimination argument, for which permission to appeal was refused. He submits that the decision of the House of Lords in the Belmarsh case, in particular Lord Hope’s speech, makes it plain that a discriminatory measure will be arbitrary. If it is arbitrary, there can be no rational connection. In my view, there are several difficulties with this line of argument.

First, the Appellant has been refused permission to advance the discrimination argument. It is not therefore open to him to bring it in through “the back door”. The distinction with the Belmarsh case is that, there, the House of Lords (by a majority) held that there was discrimination on the ground of nationality. The foundation for the argument that the measure adopted by Parliament was therefore irrational and arbitrary was present. In contrast, in the present case the discrimination foundation for the argument is absent.

Secondly, I agree with the Judge, at para 151 of his judgment, that the case on discrimination presented to him was “hopeless”. There was no foundation on the evidence before the Judge for the suggestion that the Appellant was designated, whereas others in a similar position were not, because of race, nationality or ethnicity. Before this Court Lord Anderson complained that this had never been part of the Appellant’s submissions. He submitted that the complaint was not one of direct racial discrimination but rather one of indirect discrimination. Be that as it may, and even if it is permissible to resurrect this argument before this Court, it would have to be shown that the Respondent had adopted a measure which was more likely to have a disproportionate impact on people from certain ethnic groups rather than others, even though it appeared on its face to be neutral. The fact is that the Respondent did not adopt any such rule or policy. As the Judge observed, at paras 151-152 of his judgment, the reason why some people were designated and others were not had everything to do with the roles that they had played in Evraz and nothing to do with their race, nationality or ethnic origins.

Accordingly, I would reject Ground 1C.

Under Ground 1D, as I have already explained, I accept the criticism which is made of the judgment below to the extent that the court must assess for itself whether each limb of the Bank Mellat test is satisfied and cannot confine itself to asking the question whether the Respondent’s choice was self-evidently irrational or outside the range of reasonable responses: see para 131 of the judgment below.

Lord Anderson submits that, if properly directed, the Judge ought to have concluded that the aim of sending a political message to the Government of Russia, the international community, and those who are currently (or who are contemplating) involvement in strategic sectors of the Russian economy could be achieved more effectively (and, indeed, had already been achieved) with less intrusive measures. Indeed, it is submitted, the UK Government has itself published a comprehensive list of the ways in which it has already sent such a message, including by providing humanitarian aid to Ukraine, by supplying weapons and military training to Ukraine’s armed forces, by changing the UK immigration system to help bring Ukrainians to safety, by the removal of Russian banks from the SWIFT system and by the imposition of properly targeted sanctions.

The fundamental problem with this line of argument is that it poses a false dichotomy between other measures and the designation concerned. Driven to its logical conclusion, it would mean that the Government would not be able to designate any individual such as the Appellant.

In formulating the third limb of the test in Bank Mellat, at para 74, Lord Reed said that it poses the question whether “a less intrusive measure could have been used without unacceptably compromising the achievement of the objective”. The crucial word there is “unacceptably”.

Furthermore, as the authorities in this area make plain, the mere fact that there may be other means available does not mean that the proportionality test is not satisfied. There is room for judgment in this area.

As Lord Reed observed in Bank Mellat, at para 75, by reference to American and Canadian caselaw, “a judge would be unimaginative indeed if he could not come up with something a little less drastic or a little less restrictive in almost any situation”, especially if he is unaware of the relevant practicalities and is indifferent to considerations of cost. He also observed that a margin of appreciation is also essential if a federal system such as Canada, or a devolved system such as that of the UK, is to work, since a strict application of a “least restrictive means” test would allow only one legislative response to an objective that involved limiting protective rights. Although he was there referring specifically to legislation, in my view, the point of principle is of more general application.

Accordingly, I have reached the conclusion that, despite the error in the court below as to approach, the third limb of the Bank Mellat test is satisfied in this case.

Ground 1E relates to the fourth and final limb of the Bank Mellat test, that is a fair balance between the rights of the individual and the general interests of the community.

Ground 1E is formulated as follows in the Grounds of Appeal:

“The learned Judge misdirected himself in respect of the proper approach to the assessment of whether a fair balance had been struck between the rights of the Appellant and the interests of the community. In particular, the Learned Judge erred:

(a)

In concluding that the Secretary of State had regard, at the material time, to the fact that the Appellant’s British citizenship meant that his designation had worldwide effects (Judgment, §§140-141).

(b)

In concluding that the effects of designation were mitigated on the basis that they are “temporary and reversible” (Judgment, §141). The sanctions imposed on the Appellant are open-ended, the government’s own statements suggest that existing Russia sanctions are liable to remain in place for the long term, there is no obligation on the Secretary of State to review their appropriateness, and (unless there is a material change of circumstances) the Appellant is not entitled to request a ministerial review.

(c)

In applying obiter remarks of Sir Ross Cranston in Dalston Projects Ltd v Secretary of State for Transport [2023] EWHC 1885 (Admin) to the assessment of fair balance. Both rational connection and fair balance properly fall to be demonstrated by reference to individual designation decisions and not by reference to ‘the cumulative effect of all the measures imposed under that regime, together with other types of diplomatic pressure’ (Judgment, §§136-138). Properly directed, the Court ought to have concluded that the Appellant’s designation imposed an unfair and disproportionate burden on him.”

As Lord Reed said in Bank Mellat, at para 74, the question is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure. In this context, it is submitted for the Appellant, particular regard has to be given to whether the individual is being called upon to bear a disproportionate and excessive burden. Lord Anderson submits that the Appellant is plainly bearing a disproportionate and excessive burden. Properly and objectively assessed, he submits, the likely benefit is non-existent: the Appellant’s designation has no real prospect of delivering any real benefit (whether practical or symbolic).

The first specific complaint that is made on behalf of the Appellant is that the Judge was wrong to conclude that the Respondent had had conscientious regard to the adverse effects of the designation on the Appellant and his family. This is demonstrably not the case, it is submitted, not least because the Respondent did not consider (so far as the contemporaneous records show) that the consequence of the fact that the Appellant is a British citizen means that he is subject to a world-wide asset freeze.

The difficulty with this line of argument is that, as I have already explained, and is common ground, the proportionality assessment required of the Court is not concerned with the decision-making process by the Respondent. It is a question of substance for the court to decide, in the light of all the material before it.

The second criticism which is made of the judgment below relates to the Judge’s conclusion that the effects of designation were mitigated on the basis that they are “temporary and reversible”. It is submitted that in truth the sanctions imposed on the Appellant are open-ended and may well be in place for an indefinite period: see the judgment of this Court in Mints & Others v PJSC National Bank Trust & Others [2023] EWCA Civ 1132, at para 181. It is pointed out that, in the light of an amendment that was made to the 2019 Regulations in June 2023, the sanctions regime may be in place even after cessation of hostilities in Ukraine because they will retain the purpose of promoting the payment of compensation by Russia for damage, loss or injury suffered by Ukraine as a result of its invasion. Furthermore, it is pointed out, there is no obligation on the Respondent to review the appropriateness of a designation and (unless there is a material change of circumstances) the Appellant is not entitled to request either a further Ministerial Review or to bring a further court challenge.

I would accept that these sanctions are both severe and open-ended. But this does not meet the fundamental point that sanctions often have to be severe and open-ended if they are to be effective. If sanctions are to be effective, a serious price has to be paid by those who are within the definition of people to be designated under the 2019 Regulations. On the other side of the balance is Russia’s very serious violation of international law and the need to bring the invasion of Ukraine to an end.

I am particularly conscious of the consequences of the Appellant’s designation for his children, whose school education was disrupted. That said, they have been able to continue their education in the United States and, if they had remained in the UK, they would have had access to the publicly funded education system in this country, even if that was not their or their parents’ first choice.

Furthermore, it is of some relevance that the Appellant and his family are able to meet the costs of their needs through the system of licensing operated by OFSI at HM Treasury. If they have reason to complain about the way in which the licensing system is operated in practice in relation to them, they have a remedy available against HM Treasury but that would not be a reason to question the lawfulness of the designation of Mr Shvidler as such.

The third criticism which is made of the judgment below is the adoption by the Judge of the remarks of Sir Ross Cranston in Dalston Projects concerning the assessment of fair balance. It is submitted that both the issue of rational connection and the issue of fair balance properly fall to be demonstrated by reference to individual designation decisions and not by reference to “the cumulative effect” of all the measures imposed under that regime, together with other types of diplomatic pressure.

For reasons I have already given in relation to the appeal in Dalston Projects, I would reject that submission. As a matter of law and of common sense, the cumulative effect of individual measures does have to be taken into account in assessing proportionality. If it were otherwise, each individual who is designated could complain that the sanction imposed on him is not going to be particularly effective. Logically that would mean that no particular individual could ever be the subject of designation. The purpose of the designation scheme is to make a real contribution: each individual designation does make a contribution to the overall impact.

Accordingly, I would reject Ground 1E.

For the reasons I have given I would dismiss the appeal in Shvidler too.