Phi, the 60-meter luxury motor yacht owned by Russian businessman Sergei Naumenko, has been the inadvertent face of the UK’s sanctions regime in response to the Russian invasion of Ukraine. After the latest Court of Appeal ruling dismissing Naumenko’s challenge of the High Court ruling, Phi remains docked at London’s Canary Wharf as the Court of Appeal Judges remain in the view that her detention contributes to the overall sanctions regime aiming of pressuring Russia to cease sanctions destabilizing Ukraine or undermining or threatening its territorial integrity.
The appeal in Dalston Projects Limited and others v The Secretary of State for Transport was dismissed in February 2024 alongside a challenge presented by Eugene Shivlder, in what marks the first Appellate Court ruling relating to the UK sanctions regime pursuant to the Russian invasion of Ukraine in March 2022.
What happens now? Typically, after appellants have had their challenge dismissed by the UK High Court or Court of Appeal, the next step would be to take the appeal to the UK Supreme Court. The Supreme Court is the final court of appeal in the UK’s court system for any judicial review. This seems to be the direction for Dalston Projects Limited (the special purpose vehicle for Phi) according to Sir Ian Collett, who is representing Naumenko. Speaking to The National, there are plans to challenge the Court of Appeal ruling at the UK Supreme Court. Yet standing before the Supreme Court is not granted to any case, it must be contingent on the reasons why Naumenko wants to appeal, and if it concerns public importance.
To proceed to a full hearing before this Court, the appellants must obtain a successful “permission to appeal” (PTA) application. If permission is not given from the lower court, then this is determined by an Appeals Committee composed of three Supreme Court Justices. However, this application is only granted under specific cases. A PTA from the Supreme Court is only granted in circumstances where there are principles of the law concerning general public importance, which means most of the cases requesting permission are not given the green light. In the Supreme Court annual report, the Court decided 273 PTA applications, of which only 70 were granted, accounting for a “grant rate” of 26%. The disparate statistics presented begs one question, how likely is it that the UK Supreme Court will grant a PTA to Mr. Naumenko in regards to his detained motor yacht?
The qualifier of “Public importance” denotes that the importance of the case transcends the appeal of Naumenko but touches on general parts of the law. In the event that a successful PTA application is granted, Sir Ian explains that there is a “number of issues within the judgment in which they disagree, and they may form the background to an appeal”.
Back in March 2022, Grant Shapps, then Secretary of State for Transport, detained the yacht under the Russia (Sanctions) (EU Exit) Regulations 2019, where Section 57(b) of the Act states that a mere connection to Russia would suffice as grounds for detention, despite the owner of the asset never being a designated person in the UK, as was the case with Naumenko. During the Court of Appeal hearing, the question that the Court had to contend with was whether the measures used against Naumenko were “rationally connected” to the aim of encouraging Russia to desist in its attack on Ukraine. This ground of this appeal concerned a ruling made by the High Court Judge, deemed the detention of the vessel proportionate, albeit the fact that Naumenko had “no proximate responsibility for the events around Ukraine, and could not have been said to have assisted the Russian regime”. The main test of proportionality the Court relied on concerned “the extent to which the decision will contribute to the overall objective needs to be balanced against the benefit to the general interests of the community.”. The appellants relied on the crutch of Article 1 to the First Protocol of the European Convention on Human Rights (“A1P1”), noting that the detention decision is a disproportionate interference with Naumenko’s right to peaceful enjoyment of possessions. During the Appellate hearing, The ground of proportionality, under A1P1 of the ECHR, was given great prominence by the Court and is perhaps the most crucial issue the Court had to reconcile with. The Judges had to examine if the detention of Phi was proportionate to the legitimate aim pursued and if the detention was in pursuit of a legitimate aim in the public interest.
If precedent taught us anything about A1P1 cases in the Supreme Court, it is a tall order to argue. The 2013 SC case of Cusack v. London Borough of Harrow concerned a litigator who argued that the London highway council’s decision to forbid him from the right to park on his property (in the interest of pedestrian safety) breached his A1P1 rights. Although the Court of Appeal ruled in his favor, the London council won its appeal at the Supreme Court. Lord Carnwath, sitting as SC Judge, was in the view that “the issue of proportionality is not hard-edged, but requires a broad judgment as to where the “fair balance lies.”. In addition to this case, a more recent SC judgment was also referenced during the Appellate hearing. Lord Justice Singh commented on the recent SC judgment of re Abortion Services when examining proportionality in the context of the ECHR, commenting on the nature of considering proportionality as a matter of substance itself. Therefore for Naumenko’s challenge, how the Supreme Court plans to interpret the violation of his A1P1 rights may be done in a different light than that of the Court of Appeal judges. It also should be noted that the public law aspect of this case could have implications in itself.
A further point to draw attention to when dealing with public cases is the Supreme Court’s observed restraint. A study by Lewis Graham evidenced that there has been a more restrained approach in deciding public law cases by the Supreme Court, notably after the retirement of Lady Hale in 2020. This will make it interesting to see how the case of Bank Mellat v HM Treasury, is approached. A case that was also brought forward by the appellants during the Appellate hearing. The case concerned the legality of sanctioning a single Iranian bank would have a material effect on the Iranian nuclear program. Lord Justice Singh noted that the circumstances of this case differ from that of Dalston, as the motor yacht Phi was the only ship docked at the time of detention. Yet, Bank Mellat still shares similarities in the context of a political aim and respect for the rule of law, therefore it stands to see if the SC Judges will agree with the Appellate Court.
Applications must be made within 28 days of the Appellate Court decision, which would have happened at the time of this publishing. There are many other factors the Supreme Court will take into decision when deciding PTA applications, those of which include the caseload and political involvement. The involvement of a government department, according to a 2020 study conducted by Chris Hanretty analyzing the court process in selecting cases, saw that a public law case bringing a judicial review by a public authority renders the chances of a successful PTA more likely, although the chances of government advantage were not clear, Hanretty noted. Notably, Hanretty also observed a “preference” for public authorities to have a second and third chance to defend their decisions.
Dalston Projects, especially if paired with Shvidler’s appeal, will be a unique case for the Supreme Court to assess. It would be the first SC case that will contend with the UK’s sanctions measures for the Russian invasion of Ukraine and the detention of a motor yacht owned by a non-designated person. Further, the Supreme Court will have to examine the enforcement of these measures, which have become open-ended, and make future appeals to these sanctions a lot more difficult to challenge in the courtroom.