This month has seen a dramatic sanctions ruling in UK courts as the Court of Appeal appeared to find that the regulations currently set out in the Sanctions Act determine that a Russian entity, PJSC National Bank Trust, should be considered sanctioned by virtue of being controlled by President Putin. The ruling recommended that Parliament and the executive look to change the regulations to avoid the possibility of all Russian entities being viewed as subject to President Putin’s control, and therefore sanctioned, and the FCDO has announced a review.
Elsewhere, the EU has announced new programs in respect of Niger and Sudan, and its Parliament has called for sanctions against Azeri officials responsible for ceasefire violations in Nagorno-Karabakh. The German Government has created a new AML / Sanctions body and the US has introduced targeted sanctions against a limited number of Hamas leaders and financiers in the wake of the October 7th attacks.
Enforcement
- The highest profile development in the sanctions world this month came in the form a ruling handed down in the UK Court of Appeal in the Mints v National Bank Trust and Bank Otkritie case, and specifically its potential ramifications for how the so-called ‘ownership and control test’ is interpreted in the UK. The defendants had applied for a stay of proceedings on the grounds that the claimants could not lawfully satisfy adverse costs orders or provide security for costs that might be awarded because the second claimant, Bank Otkritie, is sanctioned, and the first claimant is, they alleged, owned or controlled by President Putin, also sanctioned.
- In January 2023, the High Court had rejected this application and this month the Court of Appeal dismissed an appeal against that judgement, holding amongst other things that PJSC National Bank Trust is “controlled” by President Putin within the meaning of the Russia regulations laid out in the UK Sanctions Act. The court appeared to concede that its logic might potentially be used to argue that every company in Russia is deemed to be controlled by Putin and hence sanctioned, adding that it is for the executive and Parliament to amend the wording of the regulations to avoid that consequence.
- The FCDO later published a statement following the judgement in which it said it is looking at options to clarify the position, but maintained that there is no presumption on the part of the Government that a private entity based in or incorporated in Russia, or any jurisdiction in which a public official is designated, is in itself sufficient evidence to demonstrate that the relevant official exercises control over that entity.
- Elsewhere in UK courts, the High Court rejected Mikhail Fridman’s application to challenge OFSI’s decision to refuse to grant him 3 licenses for his property, Athlone House, and its management company. OFSI has already granted licenses to the tune of several million to Fridman, who has moved to Israel and cannot now return to the UK. The judgment confirms that OFSI has discretion as to whether or not to grant licenses, and that the rationality of OFSI’s licensing decisions is to be assessed by reference to the material that was before OFSI at the time of the decision.
- On October 30th, French police reportedly arrested Russian businessman Alexey Kuzmichev in an investigation into money laundering, tax fraud, and violations of sanctions. Police carried out multiple searches at several locations in France. Kuzmichev is a shareholder of Fridman’s Alfa Group, which was designated in March 2022.
- Dutch shipbuilder Damen Shipyards has according to local media sued the Dutch government over damages it claims it suffered due to EU sanctions against Russia. A company spokesman said that Damen is seeking compensation for business lost due to the sanctions after it cancelled a number of delivery contracts for vessels in its portfolio. Damen filed the suit in May at the district court in Rotterdam and is awaiting its further progress.
- On October 5th, John Can Unsalan, US national and president of Metalhouse LLC, pled guilty to engaging in a conspiracy to commit money laundering to promote violations of US sanctions by conducting transactions to acquire over $150 million in metal products from companies owned by designated Ukrainian businessman, Sergey Kurchenko. Unsalan also forfeited $160 million in proceeds he obtained as a result of the conspiracy.
- On October 23rd, the US Department of Justice filed a civil forfeiture complaint in the Southern District of New York against a superyacht, the Amadea, reportedly worth more than $300 million and beneficially owned by sanctioned Russian businessman, Suleiman Kerimov – which was seized in 2022 by Fiji at the request of the US. The DOJ alleges that the superyacht was improved and maintained in violation of sanctions against Kerimov and those acting on his behalf and the yacht is forfeitable pursuant to the International Emergency Economic Powers Act.
- In December 2022, the US seized munitions which were being transferred from Iran to the Houthis in Yemen in violation of the arms embargo imposed by UNSC Resolution 2216. Following successful civil forfeiture claims brought by the DOJ, the US Central Command announced this month that it had transferred the 1.1 million 7.62mm rounds to the Ukrainian armed forces.
Designations
- The EU has established a new Sudan sanctions framework imposing asset freezes on people and entities engaging in actions that threaten the peace, stability or security of Sudan, obstructing or undermining efforts to resume the political transition in Sudan, obstructing the delivery of, access to, or distribution of humanitarian assistance, or engaging in acts that constitute serious human rights. The new sanctions build on existing EU sanctions which implement the UN arms embargo, asset freezes, and travel bans on those who impede the peace process or constitute a threat to the stability in Darfur.
- The EU also set up a Niger sanctions framework this month sanctioning individuals and entities responsible for actions that threaten the peace, stability and security of Niger, undermine the constitutional order, democracy, the rule of law, or constitute serious human rights violations or abuses, or violations of applicable international humanitarian law. The Niger sanctions consist of asset freezes, travel bans, and a prohibition to make funds available and include a humanitarian exemption. The sanctions follow the military coup and the detainment of President Bazoum on 26 July 2023.
- Finally for the EU, its Parliament this month called for targeted sanctions on Azeri officials responsible for ceasefire violations and human rights abuses in Nagorno-Karabakh. MEPs also called on the EU to undertake a comprehensive review of its relations with Baku and consider suspending the application of the EU visa facilitation agreement with Azerbaijan.
- The German Government has approved a new law to set up the Federal Office to Combat Financial Crime (BBF) as the country’s new comprehensive authority on AML and sanctions. Analysis, criminal investigations, and supervisions will all be included under the organisation’s remit. The Financial Intelligence Unit and the Central Office for Sanctions Enforcement will both be integrated into the BBF.
- In the US, OFAC this month designated 28 individuals and entities involved in the international proliferation of illicit drugs, including a China-based network responsible for the manufacturing and distribution of fentanyl, methamphetamine, and MDMA precursors. Following the “democratic developments” in Venezuela, OFAC issued six general licenses and suspended a small handful of measures in an apparent easing of the country’s sanctions following the signing of an electoral roadmap agreement. Finally, following the Hamas attacks of Israel on October 7th, OFAC announced sanctions on 10 “key Hamas terrorist group members, operatives, and financial facilitators in Gaza and elsewhere including Sudan, Türkiye, Algeria, and Qatar”.
- Five US congressmen have introduced a bipartisan bill to impose sanctions against people and entities engaged in the proliferation or use of foreign commercial spyware. The bill proposes the imposition of asset freezes and travel bans on those who develop, sell, or otherwise make available spyware that has enabled the targeting of US government officials or intelligence officials. The bill must now be approved by the House of Representatives, the Senate, and the President before becoming law.
- In a debate in the UK House of Commons following the Hamas attacks on Israel this month, MPs repeated calls for the government to proscribe Iran’s Islamic Revolutionary Guard Corps as a terrorist organisation. James Cleverly, the Foreign Secretary, responded by noting that the IRGC is already sanctioned and that there “are advantages and disadvantages to proscription, which fundamentally would mean that we could have no direct diplomatic relations with Iran.” He would not speculate on future proscription designations.
