The Supreme Court Ruling of Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs and Dalston Projects Ltd and others (Appellants) v Secretary of State for Transport

Overview

Following the invasion of Ukraine conducted by Russia, the UK along with its western allies, proceeded to place sanctions on the state to limit its economic capability to wage war. Sanctions placed on Russia weren’t just for the state, but also for individuals connected with the regime, who may in some way be contributing to the war effort through their business or assets which may be connected with the Russian economy.

In order to implement these sanctions, the government used the Sanctions and Money Laundering Act (SALMA) 2018. This Act gave individual ministers, under the secretary of state, the ability to implement stringent regulation on individuals and businesses which have the statutory right to review. In this context, the ministers used sanction rights given to them under the Russian (Sanctions) (EU exit) regulations 2019 and the amendments in 2022. 

Both pieces of legislation allow relevant ministers to designate “persons of interest” which in this context meant anyone connected with the Russian Federation or its economy. The minister then has multiple options ranging in severity. Section 2- 8 disclose shipping, financial and aircraft sanctions with the most severe being asset freezing. 

If a person is designated, then it becomes a criminal offence for any other organisation or individual to do business with them under UK law. However, to designate an organisation or an individual they must fall into the categories set out by SALMA such as section 13 (3) which specifies that “an involved person” is a person who is or has had been involved in activity which is specified in the law or is also a person who has been involved. This case involved an ex-Soviet businessman (who renounced his Soviet citizenship to emigrate to the West) and a business which operates assets owned and controlled by a Russian oligarch with the Russian government. Both appealed their respective cases, but were denied until it reached the Supreme Court. 

Shvidler case

As said, Mr Shvidler emigrated to the US before naturalising as a UK citizen in 2010. Mr Shvidler has not been on Russian soil since 2007 before both the Invasion of Crimea and Ukraine 2014 and 2022 respectively. However, Mr Shvidler was on the board and owned shares in Evraz plc, which operated in the Russian Federation and was in communication with the government to acquire permission to set up mining operations in Russian territory (a strategic sector helping fund the war in Ukraine). In addition to this, his connection with the Russian businessmen Mr Abramovich (who had connections to President Putin)  had been designated on the 10th of March 2022. 

On behalf of the Foreign Secretary, Mr Reed presented these as the reasons for Mr Shvidler's designation on the 24th of March (a month after the Invasion began). It should be noted that prior to being designated, Mr Shvidler resigned from his directorship from Evraz along with urging the invasion to end on his social media around the time of Mr Abramovich’s designation. Following his designation, Mr Shvidler appealed the decision by bringing this information to the foreign secretary and the High Court who took the first proceedings. 

The High Court and Court of Appeal oversaw the case and looked at two main points to decide whether there was a rational connection between the designation and the criteria set out in SALMA. The additions and proportionality of the sanctions against Mr Shvidler were reviewed as well as the goal of said sanctions. 

Both the High court and Court of Appeal agreed with the Foreign Office, that while the sanctions did seem harsh, in reality, they were in the best interest of the community along with citizens in Ukraine.  They were proportional in regards to achieving the aims of the Home Office (to disincentivise individuals to have contact or business with or within the Russian Federation and to dissuade President Putin from continuing his war in Ukraine). After reviewing the case for themselves, the Supreme Court ruled to uphold the lower courts rulings. They looked over the same aspects and addressed the appellant's challenges. 

I personally find this ruling interesting due to the facts stated in the case and who Mr Shvidler actually is. As stated before and by the Home Secretary, Mr Shvidler had no connection to the Russian government or a citizenship to the state. His only meaningful ties were with his business partner Mr Abramovich who did have connections with the Russian government. 

At the time of the sanctions being placed, he was accused of being a collaborator in the destabilisation of Ukraine, which Russia took advantage of in 2014. This was later debunked by the foreign office who rescinded it after the ruling. I align with the views of Lord Leggatt who highlighted “he is not accused of any crime or unlawful act”. Lord Leggatt disagreed with the other in their ruling on Shvidler’s case on the grounds that the proportionality in Shvidler's case was not there, due to the lack of connection with the Russian state. 

I agree with Lord Leggett, that this decision by the Supreme Court was unnecessarily harsh on Mr Shvidler, even after his cooperation with the UK government. He had resigned from Evraz the same day that Mr Abramovich was designated. He also released a statement in the Guardian on the 12th of March 2022, condemning the invasion and calling for an end to the bloodshed. While the lower courts highlight that he did not continue to say this as the war went on. However, supporting the Russian Government carries significant risks, given that they have a long history of persecuting opposition (such as the Salisbury poisoning in March 2018). 

Although the court did recognise the risk, I feel they did not fully factor that into their overall decision, as they still continued to highlight how he did not repeat his original statement. While I believe sanctions were required for the desired outcome of the foreign secretary, a less harsh approach should have been taken to mitigate the impact it had on the people not affiliated with Mr Abramovich or Russian business. His children who may have been offered places at UK state schools, still would have had their education disrupted due to the fact that state and private schools run on very different curriculums, meaning his children would've been forced to drop, pick up and learn a new one all in term time. 

For these reasons, I believe that the Supreme Court did not fully account for the wider effect of these sanctions and the effect on the whole family, not just Mr Shvidler. While these were designed to deter further connection with the Russian economy, the fact that the day of Mr Abramovich’s designation, Mr Shvidler resigned from his company and (real or not) published his comment that he was not in favour of Putin's war in The Guardian. I believe his Councillors' claims about sending the wrong message rings true from this point of view.

Dalston Projects Ltd

Dalston Projects operated a yacht owned by Sergei Naumenko, who is a Russian Business man living in Yekaterinburg. He has no direct connections with the Russian government, but his business in and out of Russia does contribute to their economy. This shows his eligibility within the criteria of the sanctions. 

The points raised by his defence, referred to the costs and loss of business of the Phi as it was detained in London. In contrast to my opinion of the Shvidler case, Dalston Projects Ltd and others (Appellants) v Secretary of State for Transport (Respondent) clearly displays the criteria was met. The reasoning behind the detention effectively weighed up the impact of the individual, compared to the impact of the community (i.e the Ukraine war).  

Mr Naumenko was never frozen out from his entire asset portfolio - only the ones in the UK. This still left him with an income to live off, from his assets and finance in Russia. I agree with the court, that the defence rebuttal of Mr Naumenko undervalued his net worth with the argument that he is not on the Forbes 500. The Supreme Court rejected this defence for clear reasons that he may not be on that list, but he is still in a high income bracket compared to most people in both the UK and Russia. This case is very different from the situation in the Shvidler case, allowing me to recognise the proportionality set out by the transport secretary in these sanctions.

In conclusion, it is clear that while the court understands the aim of these sanctions, their adverse effects on others may not have been entirely factored into their decision. It seems these sanctions have been thrown around quite ad hoc in response to the invasion, instead of properly weighing these outcomes or the level of impact it would actually have on Russia’s ability to wage war. 

In contrast, I fully stand by the court's decision on Dalston Ltd. The connection between Mr Namenko  and Russia along with the proportionality between the personal effect and the limits it could put on the Russian economy, were fully demonstrated. This case does raise key questions on how the law should regard the choice between the individual and the community. Additionally, is it fair to punish those who have had no connection with the sanction country apart from a parent?