On Friday, 6 October 2023, the Court of Appeal handed down judgment in the case of Mints v PJSC National Bank Trust & Anr [2023] EWCA Civ 1132. The case is relevant for its contribution to the jurisprudence of the ‘overall control’ test. The principal issues on appeal were:
- whether a judgment can be lawfully entered for a Designated Person by an English court where it has been established that the Designated Person has a valid cause of action; and
- whether OFSI can also licence the payment by a Designated Person of an adverse costs order.
The court concluded that the principle of legality was engaged in this case and needed to be considered as one of the principles of construction relevant to discerning the meaning of the Sanctions and Money Laundering Act 2018 (“SAMLA”).
Factual background
The claimant banks claimed against the appellants (who were the first to fourth defendants in the original claim brought by the banks) for US$850 million on the basis that they conspired with representatives of the claimant banks to enter into uncommercial transactions with companies connected with the appellants by which loans were replaced with worthless or near worthless bonds. Freezing orders were obtained against the appellants. The Secretary of State sanctioned the second claimant on the basis of being satisfied that it was “supporting and obtaining a benefit from the Government of Russia”. The first claimant (“NBT”), which was a 99%-owned subsidiary of the Central Bank of Russia, was not sanctioned in name. However, the appellants’ case before the Court was that it was subject to the same asset freeze as the second claimant because it was “owned or controlled” within the meaning of Regulation 7 of the Russia (Sanctions) (EU Exit) Regulations 2019, by at least two designated persons.
The judgment:
The control issue did not arise, since even if the first claimant was a ‘controlled’ entity, the claimants were entitled to pursue the proceedings on which, if the claim was successful, the court would be able to lawfully enter a money judgment. In such an event, the claimants would both be able to obtain a licence for said judgment. The court clarified that there was no prohibition on a designated person obtaining such a judgment, stating:
“It is quite clear that an indefinite stay of proceedings, which is what the appellants’ application was seeking, would amount to an intrusion on the right of access to the court.” [132]
However, although the Court of Appeal upheld the lower court’s substantive decision, it disagreed with that court’s findings on the limits of the “ownership and control” test in a sanctions context. The Court stated that the “control” test is to be interpreted broadly and subjects any entity in which a designated person “calls the shots” to UK sanctions. The court remarked that:
“… the absurd consequences arise not from giving the Regulation its clear and wide meaning but from the subsequent designation by the Government of Mr Putin, without having thought through the consequences that, as he put it, Mr Putin is at the apex of a command economy. In those circumstances, consistently with the concession I mentioned in [63], in a very real sense (and certainly in the sense of Regulation 7(4)), Mr Putin could be deemed to control everything in Russia.” [223]
How Gherson can assist
Gherson’s sanctions team are highly experienced in advising on UK sanctions matters. If you have any questions arising from this blog relating to issues of ownership and control or any other sanctions related issues, please do not hesitate to contact us for advice, send us an e-mail, or, alternatively, follow us on Twitter, Facebook, Instagram, or LinkedIn to stay-up-to-date.
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