A legal precedent for sanctioned controllers?
Since the Russian invasion of Ukraine, the global sanctions regime has been through significant change, with sanctions packages issued in bulk and proscribed lists amended frequently. Financial institutions, law firms, accountancies and many other firms have all worked hard to ensure that they maintain a firm understanding of the complex and ever-changing sanctions requirements.
This month, the Court of Appeal (England and Wales) made a judgement on the case between Boris Mints, Dmitry Mints, Alexander Mints, and Igor Mints (the “Appellants/Defendants”) and PJSC National Bank Trust and PJSC Bank Okritie Financial Corporation (the “Respondents/Claimants”). The appeal raised three issues in relation to sanctions:
- Can a judgment be lawfully entered for a designated person by the English court?
- Can the Office of Financial Sanctions Implementation (“OFSI”) licence settlement or fee payments to or from designated persons following a judgement?
- Does a designated person “control” an entity within the meaning of Regulation 7 of the Russia (Sanctions) (EU Exit) Regulations 2019 (“the Regulations”) where the entity is not a personal asset of the designated person, but the designated person is able to exert influence over it by virtue of the political office that he or she holds at the relevant time?
The Court determined “Yes” to the first two points, which essentially settled the case before the third issue was ruled upon. Yet, the most interesting and impactful, albeit brief point made by the Court, particularly in relation to the interpretation of the Regulations, is in relation to issue three. The Court concluded that the first Claimant, PJSC National Bank Trust, is effectively controlled by Vladimir Putin and Elvira Nabiullina, the Governor of the Central Bank of Russia, by virtue of their political offices, and as such is also a designated person. The Judge made it clear that, based on the language of Regulation 7(4), as Vladmir Putin is at the apex of a command economy, he controls everything. The same can be said of Aleksander Lukashenko of Belarus.
Whilst the Court did not make a judgment on issue three, the judge certainly shared his view of the application of the regulation, obiter dictum. This is usually not binding in terms of precedent. However, the rationale of the Court is likely to be considered in future cases, which leaves the Foreign, Commonwealth & Development Office (“FCDO”) and OFSI in a difficult position, as they do not agree with the Court’s view.
It will be interesting to see whether and how the Regulation may be amended, or indeed what the FCDO and OFSI will do next. Given the potential importance of this ruling, we recommend careful observation of any further communications in relation to this matter.
For any guidance and support in relation to sanctions, please reach out to your usual Waystone Compliance Solutions representative, or contact us below.