Designated Individuals’ Access to Courts

Angelika Hellweger details a case that confirms that sanctioned persons have the right to access English courts.

In a case of great significance, the Court of Appeal has ruled that the fact that two Russian banks have been sanctioned does not prevent the Court giving judgements in their favour.

The Court of Appeal has upheld findings that the two sanctioned Russian banks, PJSC National Bank Trust and PJSC Bank Otkritie Financial Corp, could pursue litigation against Boris Mints and his sons. Mints is an oligarch accused of embezzling hundreds of millions of dollars.

The decision means that the two banks can now proceed with their $850 million fraud lawsuit against Mints.

However, the decision also contains a statement on the “control” test under UK sanctions, which causes uncertainty. Although strictly obiter, the Court of Appeal held that PJSC National Bank Trust (NBT) is controlled by President Putin and/or the Governor of the Central Bank of the Russian Federation (CBRF).

No Restrictions

The Court ruled that British sanctions imposed on a person create no restrictions on that person’s right to pursue legal action in English courts or on those courts’ ability to find in their favour.

Justice Julian Flaux said in the Court’s judgement that there was no part of the sanctions imposed on persons connected to Russia that “contains any clear and unambiguous curtailment on the right of access to the courts."

He added: "On the contrary ... the Sanctions and Anti-Money Laundering Act is predicated on the designated person being able to pursue civil proceedings to judgment.’’

The court also held that Britain's sanctions body, the Office of Financial Sanctions Implementation (OFSI), could grant a licence to the banks enabling them to pay Mints' legal costs if he is successful when the matter goes to trial.

The Court of Appeal ruling upholds findings by High Court Judge Sara Cockerill in January that there was no clear indication that Parliament meant to interfere in the right of access to the courts when it was drafting the sanctions regulations.

Lawyers for Mints had argued at an appeal hearing in July that the sanctions regime prohibited designated people and entities from their "fundamental" property rights, including monetary judgments in their favour.

But the Court of Appeal found that sanctions restrict property rights but say nothing about restricting the right of access to the courts. The Court also rejected the argument made by Mints’ legal team that the proceedings could be stayed until sanctions were dropped, as this would be an "intrusion on the right of access to the courts."

Accused

Mints is accused of stealing billions of rubles from Bank Otkritie shortly before it collapsed in 2017. It was then nationalised, with its toxic assets transferred to National Bank Trust.

The two banks allege that Bank Otkritie was defrauded by Mints, his sons and former bank executives in a scheme to pay off the debts of his spin-off business, O1 Group. The Mints family has denied the claims. Mints has countersued for $950 million, claiming that the banks have run a campaign against him and his family aimed at forcing them to give up their assets.

Wide-Ranging

This is a case whose outcome could potentially have had a wide-ranging effect on the legal landscape in relation to sanctioned persons.

The judgment is of great significance as it confirms that designated persons do have the right to access English courts. This, in turn, ensures the continued functioning of the rule of law.

The Court rightly stated: “The right is not limited to litigants of whom the court approves or who satisfy some objective moral standard. The court system in England and Wales does not have outlaws or pariahs.”

Any other outcome would have meant that sanctioned persons would have faced massive hurdles when it came to bringing cases or engaging in litigation. This has to be seen, therefore, as the right outcome.

Obiter

The Court of Appeal - albeit strictly obiter - made a statement on the “control test” under the UK sanctions regulation which causes uncertainty and will hopefully be addressed in due course by the UK government. The Court of Appeal held that PJSC National Bank Trust is 99% owned by the Central Bank of Russia and is “controlled” by Vladimir Putin and/or Elena Nabiullina (the governor of the Central Bank of Russia), both of whom are designated persons.

The Court of Appeal stated that the judge in the lower court erred in determining that there was an exception in the control test for those in political office, and that this is not borne out in the language of the regulation. It held that any absurd consequences arising comes not from the interpretation of the regulation but from the designation of Putin without having thought through the consequence of that. The judge stated that “in a very real sense,…..Mr Putin could be deemed to control everything in Russia.’’

The judge in the lower court put a gloss on the language of the control test because she was concerned that interpreting it to apply to those in political office might result in every company in Russia being determined to be “controlled” by Putin. The Court of Appeal stated that if that is the consequence the remedy is for government to amend the wording of the legislation. Regulation 7 of the Russia Regulations has two conditions – regulation 7(2) and regulation 7(4). The Court of Appeal stated that both conditions relate to “ownership or control” and that it is not the case that the first condition is about ownership and the second about control.