Key takeaways
Sanctions designation
A designated individual can apply for a statutory review of the decision to designate.
Proportionality of designation
The Secretary of State has a wide discretion in making his decision.
Public policy objectives
These may outweigh an individual’s personal rights.
The Supreme Court’s decision in Shvidler -v- Secretary of State for Foreign, Commonwealth and Development Affairs [2025] UKSC 30 set out the principles governing court review of sanctions designations; in particular, the assessment of the proportionality of the designation in light of the designated individual’s personal and private rights. For more details, see our article Supreme Court Upholds Sanctions Designations | Hill Dickinson
In this recent decision, the Court has adopted the Supreme Court’s reasoning and once again highlighted that the Secretary of State tasked with making and maintaining sanctions designations has a wide discretion in exercising his powers to do so. The approach taken by the English Court is that the relevant public authorities are best placed to decide whether a designation is proportionate in the light of the public policy objective - in this case, of putting pressure on Russia to end the war in Ukraine.
The case raises important issues, such as proportionality, in circumstances where an individual designation is a draconian measure, which can be applied even where the designation is not based on individual conduct. The assessment in cases such as these is whether the sanctions measures justify the limitation of a fundamental right, and whether a fair balance is achieved by the designation on the one hand and public policy objectives on the other.
The background facts
In July 2022, Mr Sarvar Ismailov became designated under UK sanctions relating to Russia because he is the nephew of Mr Alisher Usmanov, said to be closely associated with President Putin and also a sanctioned individual since March 2022.
The sanctions imposed on Mr Ismailov included an asset freeze with far-reaching financial and personal consequences for him and his family. In particular, Mr Ismailov lived in the UK since he was 13 and has strong and substantial personal and business connections with the UK.
The designation was made by an official acting under the authority of the Secretary of State for Foreign, Commonwealth and Development Affairs under regulation 6(2)(d) of the Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations) on the basis that the Secretary of State had reasonable grounds to suspect that he was an ‘involved person’. An ‘involved person’ includes a person ‘associated with’ a person who is or has been involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.
Mr Ismailov became designated following amendments to the Russia Regulations introduced on 18 July 2022, whereby ‘associated with’ was amended to include ‘being an immediate family member of that person’: regulation 6(6)(b) of the Russia Regulations, as amended.
Additionally, regulation 6(7) was amended to provide that: “‘immediate family member’ means—(a) a wife or husband; (b) a civil partner; (c) a parent or step-parent; (d) a child or step-child; (e) a sibling or step-sibling; (f) a niece or nephew; (g) an aunt or uncle; (h) a grandparent; (i) a grandchild”.
Pursuant to s.23 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), Mr Ismailov applied for a review of the designation. In September 2022, the Secretary of State decided to maintain the designation.
Therefore, pursuant to s.38 of SAMLA, Mr Ismailov applied for a statutory review of the decision to maintain his designation.
Mr Ismailov’s designation
Mr Ismailov was designated as a consequence of the decision to amend the Russia Regulations to broaden the definition of ‘associated with’ to include specified family members. The Court referred to this as the family designation criterion. Of relevance is the fact that he was born in Uzbekistan; has never lived in Russia, has no political profile or political connections in Russia, nor any personal or other relationship with, or close access to, President Putin or any other decision-makers within the Russian Government.
He was one of 36 individuals designated on 22 July 2022. He and his family suffered from increasing difficulty in accessing funds in the UK and were forced to relocate abroad temporarily.
When Mr Ismailov asked for his designation to be reviewed, the evidence indicated that the FCDO had conducted a full proportionality assessment and decided that continued designation was proportionate. Among other things, the FCDO decided there were overlaps in the business interests of uncle and nephew. Mr Usmanov had sponsorship deals with a football club at the time Mr Ismailov held a position with the club. Furthermore, Mr Ismailov had allegedly acted as an advisor to one of his uncle’s companies.
Mr Ismailov challenged the decision to maintain his designation on seven different grounds. The Court dismissed all the grounds of challenge and the application for review.
The Administrative Court decision
Legality and proportionality of family designation criterion
The Court stated that for the purposes of public legality, if the relevant legislation was sufficiently clear and unambiguous, then it did not violate the principle of legality. The applicable regulations in this case operated in a foreseeable manner and did not give the Secretary of State an unfettered discretion.
The regulations prescribed the specific circumstances in which a person may be designated on the basis of the family association criterion, and their scope and effect was clear. The fact that the ‘trigger’ for designation was one of family association, rather than individual conduct, did not render the regulations obscure or unforeseeable: a person either was, or was not, the immediate family member of an involved person.
Furthermore, proportionality did not constitute a freestanding basis for challenging subordinate legislation as unlawful. The applicant would have to show that the Russia Regulations gave rise to an unjustified interference with his rights under Article 8 ECHR, which protected his private, home and family life.
In this case, any exercise of the power to designate on the basis of familial association was subject to statutory safeguards against arbitrariness, such that the regulations were plainly capable of being operated compatibly with Article 8 ECHR in all or almost all cases.
Ultra vires
The Court dismissed the argument that in amending the Russia Regulations to incorporate the family designation criterion, the Minister concerned failed to consider the appropriateness of the amendment to the regulations for the purpose stated.
The relevant question for the Minister was not whether the specific amendment proposed was appropriate for the relevant purpose, but whether the Russia Regulations as a whole, once amended, were so appropriate. On the evidence, the Minister received specific advice on that matter and concluded that the amendments were appropriate for that stated purpose.
Furthermore, the fact that the amendments meant that the UK sanctions regime did not conform with the EU sanctions regime did not make the amendments ultra vires. Post-Brexit, the Russia Regulations and SAMLA constituted a freestanding domestic sanctions regime.
Decision to make or maintain a designation
The language of the relevant provisions did not require the Secretary of State to make the decision personally. Otherwise, the burden placed on the Secretary of State would render the sanctions system effectively unworkable.
Proportionality of the decision to maintain the designation
The Secretary of State was accorded a wide margin of discretion when determining whether the objectives of sanctions measures justified the limitation of a fundamental right. Taking into account the public policy objectives of the sanctions, the Court decided that a fair balance had been achieved between Mr Ismailov’s rights on the one hand and the rights of the general community on the other hand. The Secretary of State had concluded that less intrusive measures would have compromised the objectives of the Russia Regulations.
Irrationality of the decision to maintain the designation
Applying conventional public law standards, the decision to maintain the designation was open to the Secretary of State as a matter of rationality. The evidence showed that those involved in this process reviewed a wide range of material before coming to their conclusions and acted with care and professionalism.
This was clearly a decision which had a political, presentational and signalling aspect, as all sanctions decisions did, but that did not make it irrational. Those were all legitimate factors in a decision of the present type.
The Secretary of State was uniquely well-placed to assess whether sanctions decisions would achieve their intended purpose, and a wide margin of appreciation applied. In the present case, there was no basis for a finding that the decision to maintain Mr Ismailov's designation was irrational.
Arbitrariness
There was no public law error by the Secretary of State under this head. The fact that family members of one ‘involved person’ might be designated when others were not could be due to a large number of reasons. That resulted from the multifactorial nature of the assessment as to whether to exercise the power to designate and was not necessarily arbitrary.
Designation was a matter of judgment involving a significant pool of potential designees. It would be wrong in principle to fetter the statutory discretion of the Secretary of State by requiring designation in every case in which there existed a power to designate by virtue of family association. That would be unworkable.
While the Russia Regulations enabled the designation of individuals who were ‘associated with’ involved persons by virtue of family connection, it did not follow that all persons within this group should be designated. That was a matter of discretion to be exercised by reference to the Government’s foreign policy and intelligence assessments.
Public Sector Equality Duty (PSED)
What this duty required depended on the context and the nature of the function being exercised. Provided the Court was satisfied that there had been a proper consideration of the duty, it was for the Minister to decide how much weight should be given to the various factors informing the decision.
In this case, the Court decided there had been no breach of the PSED.
Comment
Absent evidence of bad faith, it appears that sanctions designations decisions such as these would be difficult to challenge in a statutory review, particularly where it is underpinned by public policy objectives.
For more information about how we can advise on sanctions matters, visit our Sanctions practice page to find out how we can help.
