The imposition of sanctions to curb access to international markets has long since been a strategy used against states and individuals to weaken them in times of conflict. It is not only the carrot, but also the stick, which is used to herd those who are deemed to have strayed outside of what is internationally lawful and acceptable.

Notwithstanding the international community’s aims when imposing such sanctions, a degree of tension has always existed between these aims and the fundamental rights of individuals protected by the EU Charter of Fundamental Rights and the European Convention of Human Rights (ECHR).

Since its annexation of Crimea in 2014, Russia has been met with international condemnation and a raft of measures designed to influence the country’s conduct. The intensity and scope of those measures have since been increased to unprecedented levels by the US, UK, EU, Canada and Australia following the invasion of Ukraine in February 2022.

The stated purpose of the sanctions imposed by the 2019 Regulations is to encourage Russia to cease its actions destabilising Ukraine and threatening Ukrainian territorial integrity, sovereignty and independence. It is clear, therefore, that the purpose of the sanctions imposed by the 2019 Regulations is to enforce Russia’s compliance with the international rule of law.

Nevertheless, private individuals to whom the financial sanctions imposed by the 2019 Regulations apply continue to assert that the effect of those sanctions is to disproportionately infringe their rights under the ECHR and to undermine the rule of law.

It has been argued that financial sanctions imposed by the 2019 Regulations – particularly the freezing of assets - constitute a disproportionate interference with individuals’ rights under Article 1 of the First Protocol of the ECHR, which protects the right to the peaceful enjoyment of property. In Dalston Projects Ltd v Secretary of State for Transport, for example, the claimant contended that the 'seemingly indefinite' detention of a yacht constituted a disproportionate interference with its property rights.

A well-established principle of the rule of law is that laws should be prospective, not retrospective. However, in response to the claimant’s argument that sanctions could not permissibly be imposed as punishment for past acts which are only now regarded as objectionable, the court in Shvidler recognised that 'any sanctions regime is likely to be backward looking, focusing on past actions not then unlawful'.

Furthermore, the law should be accessible and, so far as possible, intelligible, clear and predictable. However, the claimant in Mazepin v Secretary of State for Foreign, Commonwealth and Developmental Affairs described the designation criteria of the 2019 Regulations as 'insufficiently clear, coherent and accessible, and…liable to produce arbitrary and capricious outcomes'.

Sanctioned individuals, in exercise of their Article 6 ECHR right to access the courts to challenge the lawfulness of any curtailment of their legal rights, may apply to the court under Section 38(2) of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) for the secretary of state’s decision to make them a 'designated person' to be set aside.

Challenges under Section 38 have not, on the whole, been successful. In Shvidler, for example, the claimant’s arguments against his designation under the 2019 Regulations were given short shrift by the judge, who dismissed the challenge to the designation and stated that the secretary of state had not failed to 'strike a balance between the rights of Mr Shividler and his family and the interests of the community'. The claimant’s challenge in Dalston Projects failed on account of the weight given to the UK’s foreign policy response, the fact that sanctions did not cause the claimant 'financial hardship', and judicial deference to the executive within the arena of foreign policy.

Two aspects of the court’s application of the proportionality test raise particular issues in this regard: judicial deference to the judgment of the executive in determining whether less intrusive measures could be used and the 'broad margin of discretion' granted to the executive in determining whether a 'fair balance' has been struck between individual rights and community interests. Foreign policy objectives and executive judgment are accorded 'special weight' in assessing the proportionality of infringements of individuals’ rights.

With the increase of sanctions a recent development, there is relatively little case law on these issues, especially at the appellate level. Conclusions on the approach to balancing the competing interests of foreign policy and the protection of individuals’ rights may be premature. It is clear, however, that this will remain a hotly contested issue whilst private individuals remain subject to financial sanctions.

 

Iskander Fernandez is partner, Alexander Scard is legal director and Rob Stevenson is a trainee solicitor at Kennedys

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