From Riches to Frozen

With American President, Donald Trump threatening to sanction Russian oil and gas harder if its war with Ukraine is not concluded soon, there does not seem to be any let up in sight for people and businesses whose assets have been frozen or detained under a Russian sanction regime. One such case involves a superyacht called Phi that has been anchored in Canary Wharf, London and unable to leave since March 2022, following her detention in British waters under the Russia (Sanctions) (EU Exit) Regulations 2019 reg.57D, which allowed the detention of a ship owned, controlled, chartered or operated by persons connected with Russia in furtherance of the Government's policy to sanction elite or wealthy persons, to put pressure on the Russian regime following the war in Ukraine.

The legal owners of Phi, the St Kitts and Nevis company, Dalston Projects Ltd and Mr Naumenko brought a case to the High Court,? arguing that the Direction that superyacht should continue to be detained at Canary Wharf infringed rights under Article 1 of the First Protocol to the European Convention on Human Rights (ECHR) (a person’s right to peacefully enjoy their possessions) and as irrational on public law grounds.?

The High Court found for the Secretary of State for Transport and the case was appealed to the Court of Appeal - Dalston?Projects?Limited, Sergei Georgievich Naumenko, Prism Maritime?Limited?v Secretary of State for Transport[2024] EWCA Civ 172, 2024 WL 0077956.

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The Court of Appeal decision

When considering whether a public authority’s decision was compatible with a right under the ECHR, the Court considered the judgment in by Lord Reed JSC in?Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700. Lord Reed provided that when deciding on such a matter, the Court must determine:

a)??? whether the objective of the measure is sufficiently important to justify the limitation of a protected right;

b)??? whether the measure is rationally connected to the objective;

c)???? whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective; and

d)??? whether the measure's contribution to the objective outweighs the effects on the rights of those to whom it applies.

Concerning the question of in what manner a higher court should consider the decision of a lower court on appeal, Lord Reed turned to In?re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911, where Lord Neuberger PSC stated:

“If, after reviewing the judge's judgment and any relevant evidence, the appellate court considers that the judge approached the question of proportionality correctly as a matter of law and reached a decision which he was entitled to reach, then the appellate court will not interfere?. If, on the other hand, after such a review, the appellate court considers that the judge made a significant error of principle in reaching his conclusion or reached a conclusion he should not have reached, then, and only then, will the appellate court reconsider the issue for itself if it can properly do so (as remitting the issue results in expense and delay, and is often pointless).”

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The Court of Appeal emphasised that any findings related to fact by a lower court had to be respected. The appeal court’s focus must be restricted to the outcome of the assessment of proportionality. Otherwise, the first instance decision would be downgraded to a mere rehearsal.

Concerning whether the Secretary of State’s decision to detain Phi breached Article 1 of the First Protocol to the ECHR, the Court of Appeal concluded that the High Court Judge’s decision that such an action was both a lawful exercise of the Secretary of State’s powers and a proportionate interference with the Appellant’s right to enjoy peaceful enjoyment of its/his possessions.

Appeal to the Supreme Court

In mid-January 2025, the Supreme Court, presided over by Lord Reed, Lord Sales, Lord Leggatt, Lady Rose, and Lord Richards, heard that the Secretary of State was not basing the decision to detain Phi on solid evidence that taking such action would achieve a specific goal, namely putting pressure on the Russian Government to cease hostilities in Ukraine. It was argued that the detention of the superyacht was based on a mere assumption that Mr Naumenko had economic ties to the Russian Government and this was not enough to interfere with his property rights under Article 1 of the First Protocol. The Appellant’s Counsel also argued that the power of the UK Government to freeze assets and detain property should be used carefully, with clear evidence linking the freezing/detaining of assets to a defined purpose. In this case, Mr Naumenko was not on any sanctions list and the Foreign Office had not supported him being added.

Getting legal advice if your assets have been frozen or confiscated

If your assets have been frozen or confiscated either due to sanctions or via POCA proceedings, it is vital to instruct a highly experienced Barrister as quickly as possible. Tanveer Qureshi has a robust track-record of successfully defending cases involving Russian, Iranian, and other sanctions, put in place by the UK, EU, US, or UN.

Tanveer Qureshi specialises in business crime, white-collar crime and regulatory investigations including ESG, and prosecutions.??If you require legal representation, please contact Tanveer directly at?[email protected]?or via his chambers, 4-5 Gray's Inn Square. for more about Tanveer or to subscribe to his newsletters, please go to?www.tqlegal.co.uk?