Sanctions regime put to legal test in UK as oligarch seeks release of assets
The lawfulness of the UK sanctions regime set up in the wake of Russia’s invasion of Ukraine faces its biggest legal test on Thursday when a Sovietera oligarch and ally of Roman Abramovich seeks a court order to release his assets including two private jets.
The case being brought by Eugene Shvidler, a billionaire oil businessman, follows similar challenges by oligarchs now entering the courts in Europe where a separate but similar sanction regime operates.
At stake is billions of pounds worth of assets, some of which the west wants to siphon off to help fund Ukraine’s reconstruction.
Shvidler’s request for the release of his assets is the first case to reach the UK high court involving an individual. A number of other cases are waiting to be heard if he succeeds.
In March last year, the then foreign secretary, Liz Truss, imposed sanctions on Shvidler, two weeks after ministers took the same action against Roman Abramovich, citing Abramovich’s links to Vladimir Putin.
The Foreign Office said Shvidler had obtained financial benefit from his relationship with the Russian regime. The sanctions legislation is drawn broadly so that it covers anyone who is benefiting or has benefited from supporting the Russian government, whether financially or politically. The aim has been to maximise ministerial discretion, making the grounds for delisting more narrow.
Shvidler will argue that his involvement with the Russian state was as long as 20 years ago and the freezing of his assets cannot possibly meet the purpose of the legislation, which is to cease Russia’s efforts to destabilise Ukraine. In theory, his assets could remain frozen not just until the war is over but until Russia has paid reparations.
Anthony Hanratty, of the law firm Withers LLP, said: “The case will set an important precedent on how the UK courts deal with the applications to have persons delisted and the sort of factors that the courts need to examine. The vast majority of these oligarchs have actually fallen out with the regime, or have publicly denounced Putin and the regime for the last five to 10 years, yet they are finding themselves falling foul of the sanctions regime, and that’s what a lot of these claims will be based on.”
Shvidler has never been a Russian national and is now a UK-US citizen. At the time of his sanctioning, the Foreign Office put his net worth at £1.2bn. He built his fortune from the oil firm Sibneft after the privatisation of Russian industrial assets during the final era of the Soviet Union, and he is said to have a close connection to Abramovich. Until the sanctions hit, the two held stakes in the London-registered steelmaker Evraz.
A separate case brought by Nikita Mazepin, a former Formula One driver and the son of Dmitry Mazepin, the billionaire former owner and CEO of Uralchem, suggests the EU and UK courts may diverge. In March, Nikita Mazepin was granted interim relief in the EU on the basis that the EU evidence was faulty, but not in the UK where the judge said he should wait for his imminent full hearing.
Hanratty suggested that this may prove to be one of many cases on which the UK jurisdiction takes a stronger line on preserving sanctions than the EU. The UK also allows sanctions to be imposed for past connections with the regime.
New provisions in the UK sanctions will allow individuals to apply for their frozen assets to pay reparations to Ukraine.
Hanratty said: “Obviously, the UK government cannot come out and say ‘if you pay reparations, then we’ll lift sanctions’. But I suspect it would help very strongly in challenging a designation if you can say ‘I’m not connected to the regime and some of the benefit I did make in the past is now handed over to Ukraine to support its rebuilding efforts’.”
The UK has sought to cap the level of compensation for an unlawful sanction at £10,000.
In the EU, the leading case is being taken by one of Russia’s most prominent businessmen, Mikhail Fridman. Along with his partners, he made $14bn from the sale of the oil company TNKBP to the state-controlled Rosneft in 2013. He subsequently moved to the UK. His lawyers claim his business has been destroyed by EU sanctions and he regards the war as a tragedy.
The EU says its evidence shows Fridman is a co-founder of Alfa Group, which controls Russia’s largest retailer and private bank, and has close ties to the Russian political regime. It was these connections that allowed him “to acquire state property as a reward from Alfa Group for his loyalty to the political regime”, according to the EU.
Fridman argues the sanctions against him are disproportionate, and no link between him and the Russian Federation has been established.
In June a total of 1,601 individuals and 228 entities were subject to UK sanctions in relation with the Russian regime. Most are military or political figures in Russia itself.