A British citizen (Shvidler) and a yacht owner (Dalston Projects) challenged UK sanctions imposed following Russia’s invasion of Ukraine. The Supreme Court upheld both sanctions as proportionate, finding rational connections to the legitimate aim of pressuring Russia, though Lord Leggatt dissented on Shvidler’s designation as unjust and disproportionate.
Background
These conjoined appeals concerned challenges to sanctions imposed under the Russia (Sanctions) (EU Exit) Regulations 2019 (as amended), made pursuant to the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). Eugene Shvidler, a British citizen of Russian birth who had lived in England for many years and had not visited Russia since 2007, was designated by the Foreign Secretary on 24 March 2022 and subjected to a worldwide asset-freeze. His designation was based on two grounds: his association with Roman Abramovich, a designated person involved in obtaining a benefit from or supporting the Russian government; and his former non-executive directorship of Evraz plc, a company carrying on business in the Russian extractives sector. Dalston Projects Ltd owned a luxury motor yacht, M/Y Phi, beneficially owned by Sergei Naumenko, a Russian businessman with no political connections to the Putin regime. The Phi was detained at London docks by the Transport Secretary on 28 March 2022 under shipping sanctions provisions. Both appellants challenged the sanctions under section 38 of SAMLA. The High Court dismissed both challenges. The Court of Appeal heard both appeals together and also dismissed them.
Mr Shvidler’s circumstances
Mr Shvidler left the USSR in 1989 as a stateless refugee before the Russian Federation existed, became a US citizen, and was naturalised as a British citizen in 2010. He had five British children and had owned property in Surrey since 1999. His designation froze all his assets worldwide and made it a criminal offence for anyone to deal with him commercially or privately. His children were expelled from their schools and the family relocated to the United States.
Dalston Projects’ circumstances
The Phi, valued at over €44 million, had been in London for a winter stopover and was due to depart for the Mediterranean. Mr Naumenko had no political role or connection to President Putin, had not been designated under the Regulations, and the FCDO had specifically considered and rejected designating him personally.
The Issue(s)
The central issues were:
- The proper approach for a court when assessing the proportionality of sanctions measures that interfere with Convention rights (article 8 ECHR and article 1 of Protocol 1);
- The proper approach for an appellate court reviewing a lower court’s proportionality assessment;
- Whether the sanctions measures satisfied the four-stage proportionality test from Bank Mellat v HM Treasury (No 2) [2013] UKSC 39: (i) legitimate aim; (ii) rational connection; (iii) less intrusive means; (iv) fair balance;
- Whether the Phi Direction adequately stated grounds for detention under regulation 57D(5)(c);
- Whether the Transport Secretary committed the tort of conversion in respect of the Phi.
The Court’s Reasoning
Approach to proportionality assessment
The majority (Lord Sales and Lady Rose, with whom Lord Reed and Lord Richards agreed) confirmed that the court must make its own assessment of whether a measure is proportionate, rather than merely reviewing whether the decision-maker properly considered the question. However, the court is not the primary decision-maker in the full sense:
The public authority decides on the action it will take, and hence is the primary decision-maker; but the court makes its own assessment whether such action is proportionate, and hence lawful, or not.
The majority emphasised that the Foreign Secretary and Transport Secretary should be accorded a wide margin of appreciation given their constitutional responsibilities for national security and foreign affairs, and their superior institutional competence in assessing the likely impact of sanctions:
It is also well established that the executive government has superior institutional competence to make the relevant judgments regarding the possible impact of sanctions such as those in issue in these cases, since the Government has access to relevant experts and a wide range of information, some of which may be secret.
Appellate approach
The majority rejected the Court of Appeal’s three-category framework for appellate review of proportionality assessments. Instead, the court identified a spectrum: the ordinary starting point is a review approach (checking whether the lower court directed itself correctly and reached a reasonable conclusion), but in certain paradigm cases — involving new legislative regimes, points of general principle, or matters of high social significance — the appellate court should make its own fresh assessment. Both appeals fell into the latter category as effective test cases for the Russia sanctions regime.
Legitimate aim
The legitimate aim was unchallenged. The court noted Russia’s invasion constituted the most serious threat to European security since the Second World War. As the majority stated:
There can be no doubt that the aim of limiting and deterring Russian aggression in Ukraine is one of the most vital aims that the UK government has been called upon to pursue in recent years.
Rational connection
For Dalston Projects, the court found both an economic link (chartering income would benefit the Russian economy) and a political link (depriving a wealthy Russian of a prestige asset would encourage disaffection with the regime). The court accepted the Government’s evidence about the patronage-based nature of the Russian political system.
For Mr Shvidler, the court accepted the FCDO’s evidence that designating him would send signals to others associated with involved persons, incentivise distancing from Russian business, encourage pressure on Mr Abramovich, and contribute to the cumulative effect of the sanctions regime. The court endorsed Garnham J’s reasoning:
As a matter of common experience, an individual may more readily act when it is at the request, or in the interests, of his friends and colleagues than when it is only in his own interests. In any event, the availability of a more direct means of putting pressure on Mr Abramovich does not undermine the value of additional pressure provided by the Claimant.
Less intrusive means
The majority found no less intrusive measure available that would not unacceptably compromise the objective.
Fair balance
For Dalston Projects, the majority considered fair balance ‘straightforward’: Mr Naumenko suffered no hardship in daily life from the detention of a luxury superyacht, and the OFSI licensing regime provided scope for addressing maintenance concerns.
For Mr Shvidler, while acknowledging the sanctions were ‘severe and open-ended’, the majority concluded:
The main point… is that sanctions often have to be severe and open-ended if they are to be effective. The object of the designation in relation to Mr Shvidler is that he should so far as possible be disabled from enjoying his assets and pursuing his wealthy lifestyle.
The majority noted his children’s education could continue via publicly funded schools or overseas, and the OFSI licensing system could meet core needs.
Capriciousness argument
The majority distinguished Bank Mellat and the Belmarsh case. Unlike those cases, the non-designation of some wealthy individuals connected to Russia did not establish a baseline of sufficient response — it was no response at all. Each additional designation legitimately contributed to the cumulative strategy.
Lord Leggatt’s dissent on Mr Shvidler
Lord Leggatt dissented solely on the Shvidler appeal. He criticised the majority’s approach to the separation of powers, arguing courts must not rubber-stamp executive assertions:
I consider that judges are abdicating their responsibility if in making these judgments they defer to the executive’s own view that it has struck a ‘fair balance’.
He found the FCDO’s reasons ‘so inadequate and lacking credibility that they do not establish a rational connection between the measure taken and the desired aims’, describing them as ‘no more than armchair theories’ unsupported by evidence of sanctions efficacy. He characterised the sanctions as unjust, noting Mr Shvidler suffered more severe sanctions solely because of his British citizenship, the Government sought to penalise him for lawful past conduct, and the pressure to speak ‘more robustly’ had ‘sinister connotations’:
It implies that it is legitimate in a democracy for the executive to freeze a person’s assets in order to put pressure on that person to speak out in support of government policy. Such an Orwellian approach should be rejected.
Practical Significance
This is the first Supreme Court judgment on the proportionality of individual sanctions imposed under the UK’s Russia sanctions regime. It establishes several important principles: (1) courts must conduct their own proportionality assessment rather than simply reviewing the rationality of ministerial decisions, but a wide margin of appreciation applies in matters of foreign policy and national security; (2) the cumulative effect of sanctions is relevant — individual measures need not be shown to be independently effective, only to make a plausible contribution; (3) appellate courts should adopt a flexible approach to reviewing proportionality assessments, with fresh assessment appropriate for test cases of general principle or high social significance; (4) the OFSI licensing regime operates as a ‘safety valve’ supporting proportionality; and (5) the absence of a published designation policy does not render individual designations arbitrary. Lord Leggatt’s powerful dissent, though unsuccessful, provides a significant counterweight articulating the constitutional duty of courts to protect individual liberties against executive overreach even in matters of foreign policy.
Verdict: Both appeals were dismissed by a majority of 4-1. The Supreme Court upheld the proportionality and lawfulness of both Mr Shvidler’s designation (asset-freeze) by the Foreign Secretary and the detention of the yacht M/Y Phi by the Transport Secretary under the Russia (Sanctions) (EU Exit) Regulations 2019. Lord Leggatt dissented on the Shvidler appeal, finding the designation unjust and disproportionate and stating he would have allowed that appeal and declared the removal of Mr Shvidler’s basic freedoms unlawful. All five Justices agreed the Dalston Projects appeal should be dismissed.
Source: Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs [2025] UKSC 30
