You may recognize M/Y Phi as the backdrop of then UK Secretary of State for Transport Grant Shapps’ polemic at West India & Millwall Docks in London, delivering a stark warning of how the country plans to address Russian individuals as a result of the Russian invasion of Ukraine, using the yacht as an emblem of Russian power and authority.
There was one issue, however, Phi’s ultimate beneficial owner was never sanctioned.
This would be the overarching theme of Phi’s court battles, contesting the legality of her detention. It was in the sensitivity of the courts to discern between the larger picture of her arrest and the rights of Phi’s proprietor.
Backstory – The yacht initially arrived in the UK in March 2022 to be displayed for the World Superyacht Awards. When it was time to depart to Malta, she was detained by the British police under Mr. Shapps’ directive. Two years later, with a fleet of legal battles, her owner fought for her release to no avail. Her ultimate beneficial owner, Sergei Naumenko, is not a sanctioned individual and has never been connected to President Putin. What’s more, the rest of his yachts are free to roam Mediterranean waters with no concern.
Legal grounds
Mr. Shapps relied on The Russia (Sanctions) (EU Exit) Regulations 2019 to detain Phi, made under the Sanctions & Anti Money Laundering Act 2018. Section 57C(1)(b) of the 2019 Regulation states that a mere connection with Russia in any way would constitute a detention. While it was section 57D(1)(a) that gave Mr. Shapps the authority to exercise this decision.
May & July 2023
Dalston Projects Ltd & Ors v Secretary of State for Transport
EWHC 1106/ EWHC 1885
After challenging the continuation of detention direction in April 2022, and January 2023, Mr. Naumenko and Dalton Projects, the corporate ownership structure (SPV), have issued a High Court filing challenging the legality of Phi’s detention.
On 21 July 2023, The High Court ruled that Mr. Shapp’s decision to detain Phi was deemed lawful. High Court Judge Sir Ross Cranston found that although the detention intercepted Mr. Naumenko’s property rights under the European Convention on Human Rights. there was no violation, but the decision to detain the yacht was a legitimate aim in the public interest.
January 2024
Dalston Projects Limited and others (appellants) v The Secretary of State for Transport (respondent)
Shvidler (appellant) v Secretary of State for Foreign, Commonwealth and Development Affairs (respondent)
The briefing above brings us to January 2024, when Dalston Projects took matters to the UK Court of Appeal, challenging the July 2023 decision by the London High Court which rejected the yacht’s release. The proceedings took place between Wednesday 17 and Friday 19 January, with the court justices’ verdict set to come out in the coming weeks.
During the January 2024 proceedings, lawyers representing the Security of State for Transport pleaded that, irrespective of whether Phi’s owner is on the sanctions list or not, the detention decision is paramount for the government’s efforts in encouraging Russia to cease actions destabilizing Ukraine. While Phi’ captain Guy Booth, speaking to BOAT, is in the view that “The detention of Phi cannot be justified as encouraging Russia to cease action against Ukraine. This should have been apparent to the government from the outset,”.”The effects of the detention are disproportionate.”.
Comment
Phi is only one of the several yachts involved in the sanctions imposed by the UK, US, and EU against Russian individuals. While each yacht had its own set of circumstances, the case of Phi’s detention is a commentary on the UK’s exercise of power and handling of the Russian sanctions regime.
Looking at M/Y Amadea, for example, the Russian-owned yacht seized by the US government in Fiji, the Treasury Department was able to prove the owner’s cause of violations of U.S. law and rationalize her detention. Contrasting this with Phi, it is a puzzling endeavor to discern how the owner’s connection to Russia would be cause for arrest.
Reading the July 2023 case brought about questions and not many answers to what the legal justification is for this seizure if the yacht’s owner is not sanctioned. What does it say about the sanctions regime when the only connection is the individual’s nationality? & how is the “objective test” for establishing the link to Russia hypothesized? So far, it has not been a legible process.
It remains to be seen what Court of Appeal Justices Geoffrey Vos, Rabinder Singh, and Phillipa Whipple come to decide next month. One thing is for sure, the ruling will undoubtedly set a precedent that will cause a ripple for all future cases of this nature. If ruled in favor of the appellant, the panacea for the attendant financial damages should be very intriguing to witness.