Mid-year review of UK sanctions measures
In a significant development for the UK's sanctions regime, the Supreme Court handed down its decision on two appeals challenging sanctions imposed under the UK's Russia sanctions regime on 29 July 2025. Simultaneously, the Office of Financial Sanctions Implementation (OFSI) issued a penalty notice to Markom Management Limited (MML) for a breach that occurred in February 2018.
Supreme Court Ruling on Sanctions Challenges
The Supreme Court dismissed the appeals by Eugene Shvidler and Dalston Projects Ltd, upholding the legality of sanctions imposed by the Foreign Secretary and Transport Secretary. This decision confirmed the government's authority under the Russia (Sanctions) (EU Exit) Regulations 2019 to designate individuals and detain assets such as yachts.
Guidance on Proportionality Assessments
The Supreme Court provided important guidance on how courts should review government decisions interfering with human rights via sanctions. Courts must conduct their own proportionality assessment, not just review for irrationality or procedural error. On appeal, a flexible approach applies, with appellate courts deferring to the lower court’s assessment but re-assessing proportionality if the matter is significant or requires guidance for future cases.
Sanctions Effectiveness and Less Intrusive Means
The Court emphasized that the effectiveness of Russia sanctions depends on their cumulative effect. It rejected challenges arguing that less intrusive means could achieve the same objectives, observing that no viable less-intrusive alternatives were identified by the appellants’ counsel.
Detention of Assets and Proportionality
In the Dalston Projects case, the detention of a Russian-linked luxury yacht was challenged as disproportionate. The Supreme Court, consistent with the Court of Appeal, held that the detention was proportionate since it caused no significant financial hardship to the yacht’s beneficial owner and contributed to sanctions effectiveness.
OFSI Penalty Notice to Markom Management Limited
Separately, OFSI issued a penalty notice to MML nearly seven years after an initial self-report. While details of the penalty are less emphasized, the case highlights OFSI’s ongoing enforcement role and willingness to impose penalties long after initial breaches come to light.
Together, these developments establish the UK Supreme Court’s authoritative framework for proportionality review in sanctions cases, affirm the cumulative nature of sanctions effectiveness, confirm asset detention powers’ legality, and illustrate OFSI’s robust enforcement powers. The rulings underscore the complexity and fact-specific nature of sanctions challenges under UK law.
Noteworthy Aspects
- Lord Leggatt described the designation of Eugene Shvidler as "Orwellian" and argued that no fair balance was being struck between Shvidler's individual rights and the interests of the community.
- The duration of OFSI's investigation, nearly seven years from the breach to the final penalty notice, is noteworthy.
- OFSI did not commence its investigation until June 2021, with the initial delay attributed to OFSI's engagement with an unnamed third party.
- The majority of the Supreme Court concluded that the sanctions imposed were proportionate, but Lord Leggat issued a dissenting judgment.
- The penalty relates to a breach where MML facilitated a payment to a person designated under UK Russian sanctions rules.
- MML reported the breach to OFSI via its legal representatives in October 2018.
- The payment amount was £416,590.92.
- The Shvidler and Dalston Projects cases were considered test cases for the UK's sanctions regime.
- On appeal, appellate courts may defer to the lower court's proportionality assessment in some cases, but should conduct a fresh assessment in certain circumstances.
- No justification was offered for the lengthy investigation in a case of a single payment that was voluntarily self-reported.
- Lord Leggatt's dissenting views may be used as arguments in future sanctions designation challenges.
In the realm of finance and business, the Supreme Court's decision on two appeals served to uphold the legality of sanctions imposed on individuals under the UK's Russia sanctions regime, thereby affirming the government's authority to designate individuals and detain assets. Simultaneously, the Office of Financial Sanctions Implementation (OFSI) issued a penalty notice to Markom Management Limited (MML) for a breach that occurred in 2018, emphasizing their ongoing enforcement role in financial matters.
