UK Law and Practice Contributed by: John Binns, BCL Solicitors LLP
38 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). The most significant of these was the Supreme Court’s decision in the case of Eugene Shvidler, whose challenge raised a significant issue on the meaning of proportionality in this context. The Supreme Court broadly endorsed the approach of the High Court and the Court of Appeal in directing that it was the proportionality of sanctions designations in general that fell to be measured against their policy aim, rather than (as Shvidler contended) the specific impact of sanctions on the individual applicant. While recognising the importance of those impacts, the Supreme Court (in its majority judgment) stressed the fact that designations had a cumulative effect, which the Foreign Secretary (given both their constitutional role in this context, and the institutional expertise of the FCDO) was better placed than the courts to deter - mine. (A strong dissenting judgment from Lord Leggatt has been widely praised by sanctions practitioners.) Enforcement: The Mints Test for Ownership and Control One of the more difficult aspects of UK sanctions reg - ulations (and one where, not coincidentally, the UK’s laws differ from those of comparable jurisdictions) is the applicability of financial sanctions to companies (and other entities) that are “owned or controlled, directly or indirectly” by a DP. The UK’s regulations say that, in addition to the more straightforward tests of 50% of shares or voting rights, the test is also made out where it is reasonable to expect the DP could cause the company’s affairs to be run in accordance with their wishes. The Court of Appeal prompted significant debate when it commented (in the case of Boris Mints v PJSC National Bank Trust) that this broader test could be applied to any Russian company, given that the nature (it said) of Russia’s economy meant that its presi - dent (a DP) could take control of them if and when he wished. Within a few days, the FCDO and OFSI issued guidance stating that they did not adopt this approach, and that each case would be considered on its own merits. But while this effectively prevents OFSI enforcing a sanctions breach on the basis of the Mints test (and subsequent case law has sought to recast the test in terms of a ‘common sense’ question of ‘who calls the shots’ at the company), it remains to
be seen whether there is still mileage in it (for instance, where a counterparty seeks to end a contract in reli - ance on it). 3.2 Future Developments Further designations and prohibitions (and the occa - sional de-listing) may safely be expected in connection with Russia sanctions. More fundamentally, debates are ongoing (in the UK as elsewhere) on the potential for forfeiture of assets currently frozen under Russia sanctions, potentially for the benefit of Ukraine’s war effort. Options include the use of fines or monetary penalties under the new reporting regime for DPs, and/or the application of proceeds of crime laws to secure the forfeiture of assets obtained through sanc - tions breaches or other unlawful conduct. Objections include the chilling effect on lawful foreign invest - ment if any new regime (or aggressive use of exist - ing regimes) is not seen to pay due regard to private property rights. The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) provides for a procedure for DPs to chal - lenge their designations. Ministerial Review Importantly, a challenge cannot be taken directly to court in the first instance. The first step (under Sec - tion 23 of SAMLA) is to apply for a ministerial review, by which the minister responsible for taking designa - tion decisions under the relevant sanctions regulations will reconsider their decision. At this point, they will consider any relevant material before them, including any representations and material provided by the DP themselves. The question for the minister, therefore, is not whether the original designation was correct, but whether the DP ought to be designated at the time the review takes place. Court Review If the minister’s decision under this procedure is adverse to the DP, they will then be able to challenge that decision (that is, the decision resulting from the ministerial review) in the High Court (under Section 38 4. Delisting Challenges 4.1 Process
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