Plight of the Oligarchs

Putin shakes hands with Oligarch Usmanov
Vladmir Putin and Alisher Usmanov

Since Russia invaded Ukraine, we have all suddenly become far more aware of the government’s power to impose sanctions on individuals and businesses that they believe are connected to the Russian government and its murderous dictator, Vladimir Putin. These sanctions have led to sob stories with angles that would have seemed impossible just a month ago, e.g. ‘Will I be allowed a cleaner, or a driver?’ Life after sanctions for a Russian oligarch. Mr Aven, the gentleman worried about whether someone else can clean his house or drive him about, was telling Vladimir Vladimirovich way back in 2000 that he should be ruling as a totalitarian dictator and “applying the Pinochet stick”.


Much of the commentary has been extremely gung-ho for sanctions and completely devoid of any reasoned consideration of how sanctions do work and how they should work.


The power to impose sanctions is contained within the Sanctions and Anti-Money Laundering Act 2018. It allows the government to impose sanctions on a person for the following reasons:


1.     To further the prevention of terrorism, in the United Kingdom or elsewhere;

2.     In the interests of national security;

3.     In the interests of international peace and security;

4.     To further a foreign policy objective of the government of the United Kingdom;

5.     To promote the resolution of armed conflicts or the protection of civilians in conflict zones;

6.     Provide accountability for or be a deterrent to gross violations of human rights, or otherwise promote (i) compliance with international human rights law, or (ii) respect for human rights;

7.     To promote compliance with international humanitarian law;

8.     To contribute to multilateral efforts to prevent the spread and use of weapons and materials of mass destruction; or

9.     To promote respect for democracy, the rule of law and good governance.


The sanctions may be directed against a named individual or to an identifiable group or organisation where the minister imposing the sanctions has reasonable grounds to suspect that the person, group, or organisation:


1.     Is or has been involved in an activity that has been specified by regulations made by the Minister under section 1 of the Act,

2.     Is controlled either directly or indirectly by a person who is or has been involved in those activities,

3.     Is acting on behalf of, or at the direction, of a person who is or has been involved in the specified activities, or

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


Once identified, the government can impose sanctions to deal with financial, immigration, trade, aircraft, or shipping matters. They can also impose wide sanctions to comply with obligations to the United Nations. The result is that government can prohibit businesses from providing financial services being provided to sanctioned people, prevent them from being provided with economic resources. It can also ban on the sanctioned person from entering or remaining in the UK.


I’m sure we all like to imagine – and it’s clear from comments online that many do believe – that sanctions are only imposed against monsters who deserve everything they get. I’ve no idea if that is true or not but a career spent in criminal law doesn’t give me much confidence that government always gets the right person. The capacity for error, or abuse of these very significant powers, is no doubt why the Act includes provisions to challenge the imposition of sanctions.


The first port of call for a challenge is to ask the person who authorised the sanctions to think again. This right to request a variation or revocation is provided for by section 23 of the Act, which requires the Minister to decide whether to vary, revoke or do nothing. There is a burden upon the Minister found in section 22(3) that requires the sanctions to be revoked if the Minister at any time considers that the conditions for designating an individual are no longer met. You might consider that if a Minister has just imposed high-profile sanctions on somebody then that Minister is unlikely to suddenly change their mind. It is worth noting that the right to go to the Minister is exercisable only once and is a prerequisite that must be completed before a court challenge can be mounted. There are separate but similar provisions for challenging sanctions imposed following a United Nations decision.


Assuming the Minister is unwilling to publicly backtrack on his recently imposed sanctions, the person subject to sanctions may apply to the High Court in England and Wales, or the Court of Session in Scotland.


Although the application is made under section 38 of the Act, it is not a reconsideration of the decision to impose sanctions. The Court is obliged to rule based upon the principles that would apply if the case were a judicial review, although section 39(5) bars judicial review proceedings in these cases. That means that the court can only consider whether a) the decision maker acted lawfully when imposing the sanctions; and b) whether the decision to impose sanctions is unreasonable – it should be remembered that “unreasonable” in judicial review proceedings doesn’t merely mean “that seems a bit unfair”, the level is more akin to, “something so absurd that no sensible person could ever dream that it lay within the powers of the authority”Associated Provincial Picture Houses Ltd. v Wednesbury Corporation [1948] 1 K.B. 223 as Lord Green MR said at page 229. 


If a court were to set aside the sanctions as being either made unlawfully or unreasonably then section 39(2) prevents the court awarding damages except where it has been established that the Minister acted in bad faith! Where damages are permitted, they are limited to the amount specified by the Minister in the sanctions that he has been found to have imposed in bad faith.


My own view is that even where somebody is unpopular with government, the populace or both, it remains important that liberal western states continue to ensure that the rule of law is upheld and that those subject to sanctions can properly access the courts to challenge decisions against them.


I would like to see a system that does not merely freeze assets but one in which administrators are appointed to manage assets and preserve their value. Take Chelsea Football Club as an example. Nobody benefits if Chelsea were to go bankrupt, not the owner, not the fans, not the employees, not the state. The same applies to every other business owned by people subject to government sanctions, nobody benefits if the value of frozen assets are lost. Currently, the government issues special licences made under the Global Human Rights Sanctions Regulations 2020/680 that allow actions to be authorised.


Rather than merely issue licences to allow the sanctioned person to conduct specific acts, I would like to see their assets properly managed by administrators who act as trustee of the asset. They would be tasked with preserving the value so that either the asset can be returned to the owners if appropriate or be seized by the state after a proper process has been gone though in the courts.


Those administrators would also be required to release sufficient and reasonable funds to allow the person subject to sanctions to provide for their living costs and so that they can pay lawyers to act specifically to challenge the sanctions.


Turning to the court process. The current rules only permit the court to set aside sanctions if the decision is unlawful or unreasonable. I would like to see courts giving thorough consideration to the evidence behind the decision so that they are essentially deciding whether the designation of the person was correct rather than merely lawful and reasonable. That may well require some deviation from the normal situation of open justice where the evidence relates to national security, but I think that is something courts are well able to deal with. I do not think that the court should deal with issues such as what sanctions have been imposed except to the extent that the law currently allows, i.e. where those restrictions are unreasonable or unlawful. That is because the wider political context of the sanctions is not something that the court should be considering.


Finally, I’d like to see an amendment to the Regulations. They currently permit financial institutions to continue with some limited actions despite the existence of sanctions, such as crediting frozen accounts with funds. I would like to see a similar provision that permits solicitors and barristers to provide legal services to somebody subject to sanctions to allow them to challenge the imposition of sanctions. I think making that a clear exception to the sanctions for that purpose would be helpful given the reports of law firms refusing to provide legal advice even though doing so is not currently covered by any sanctions. The changes I’ve suggested would also mean that the lawyers knew they would be able to be paid for their work, which I suspect is also a stumbling block in many cases.


Sanctions are an important weapon at the disposal of government. I do not think there is any case for arguing that the imposition of sanctions should be done by application for an order to a court, that is too slow and too cumbersome. But there should be proper and robust challenges to ensure that powers are used fairly, reasonably, and proportionately.


Why do I think any of this is important? Because countries that do not want to succumb to totalitarianism, as Russia seems to have today, as Germany, Spain and Italy did in the 1920s and 1930s, then it is important to have checks and balances in place that prevent powerful leaders using the law to put down opponents and place themselves in a position of supreme authority. On a less dramatic scale, it is also important that if we want to lecture other countries about how they conduct themselves then we should be above reproach


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