Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs; Dalston Projects Ltd & Ors v Secretary of State for Transport

Factual and Procedural Background

Following the Russian invasion of Ukraine, the United Kingdom introduced The Russia (Sanctions) (EU Exit) Regulations 2019 under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”). A minister used those Regulations to:

• freeze all worldwide assets of Appellant, a British citizen with historical business links to Person A and to Company B (a mining company with Russian subsidiaries); and
• detain a luxury vessel belonging to Company A, whose ultimate beneficial owner is Person B, a Russian resident.

Appellant started judicial review proceedings in the High Court challenging the designation; Company A challenged the detention of the yacht. The High Court dismissed both claims. The Court of Appeal partly agreed that the High Court had applied the wrong test in Appellant’s case but nevertheless rejected the appeals. Both appellants were granted permission to appeal to the Supreme Court.

Legal Issues Presented

1. Whether an appellate court should make its own proportionality assessment on a sanctions designation or intervene only for an error of law by the lower court.
2. Whether the worldwide asset-freeze imposed on Appellant is lawful and proportionate under the Regulations, SAMLA and the European Convention on Human Rights.
3. Whether the detention of the yacht owned by Company A lawfully furthers the purposes of the sanctions regime.

Arguments of the Parties

Appellant’s Arguments

• The designation constitutes an extreme and indefinite interference with property and private-life rights under Article 1 Protocol 1 and Article 8 ECHR.
• The Government offered only “flimsy” or conjectural reasons; there is no rational connection between the freeze and the stated foreign-policy aims.
• Less intrusive measures (e.g., limiting the freeze to UK assets or imposing a time limit) were available.
• The courts must carry out an independent proportionality analysis and not defer to ministerial assertions.

Respondent’s Arguments

• Foreign policy and sanctions are areas where the executive has superior institutional competence; a “wide margin of appreciation” is appropriate.
• Freezing Appellant’s assets sends a deterrent signal to others, pressures Person A, and cumulatively advances the objectives in Regulation 4.
• The measures are consistent with the expanded definition of “involved person” in Regulation 6 and therefore lawful.
• For the yacht, preventing Person B from deriving revenue from a luxury asset rationally supports the sanctions strategy.

Table of Precedents Cited

Court’s Reasoning and Analysis

Judge Leggatt, writing in dissent on the Appellant appeal, accepted that the Supreme Court should perform its own proportionality assessment because of the high constitutional significance of sanctions. His analysis proceeded as follows:

1. Scope of Interference. The worldwide, indefinite asset-freeze makes it a criminal offence for Appellant to deal with any property, subject only to narrow, discretionary licences. This “strikes at the very heart” of individual liberty.
2. Role of the Courts. Under the separation of powers, determining whether fundamental rights must yield to public interest is for the judiciary, not the executive; excessive deference (“wide margin of appreciation”) would amount to abdication of the judicial role.
3. Rational Connection. The Foreign, Commonwealth and Development Office provided only speculative “arm-chair theories” that designating Appellant would influence Russian policy. Assertions about deterrence, pressure on Person A, and signalling to others were unsupported by evidence and, in places, incoherent.
4. Less Intrusive Means. The Government could have limited the freeze to UK assets or imposed a temporal limit; no explanation was offered for choosing the most restrictive option.
5. Fair Balance. Even if a tenuous rational connection existed, the gravity of the interference far outweighed any demonstrated benefit. Penalising a British citizen for past lawful conduct, effectively because of nationality, was characterised as arbitrary and unjust.
6. In contrast, Judge Leggatt agreed—though with different reasoning—that detaining the yacht owned by Company A was rational and proportionate, given the clear link between Person B (a Russian resident) and the Russian economy.

Holding and Implications

Holding: The Supreme Court (majority) upheld the lawfulness of both sanctions. The appeal by Company A concerning the yacht was unanimously dismissed. The appeal by Appellant was dismissed by the majority, with Judge Leggatt dissenting; he would have declared the asset-freeze unlawful.

Implications: The judgment confirms the broad discretion afforded to the executive in imposing individual sanctions under SAMLA, signalling judicial willingness (by the majority) to defer to foreign-policy judgments where some rational basis is asserted. Judge Leggatt’s dissent, however, underscores continuing judicial concern over indefinite, worldwide asset-freezes lacking concrete evidence of efficacy. No new legal test was created, but the case illustrates the tension between national security/foreign policy aims and robust protection of individual rights.