Sanctioned company has “right to access courts”, appeal judges rule

Flaux: SAMLA does not restrict access to courts

The Court of Appeal has rejected a Russian tycoon’s bid to stay an $850m claim brought against him by two Russian banks, despite one of them being sanctioned, citing the right to access the courts.

The judges also held that the Office of Financial Sanctions Implementation (OFSI) can license a sanctioned (or ‘designated’) person to pay an adverse costs order, as well as pay their own lawyers.

Anti-corruption campaigners said the ruling, though “good news for the legal sector”, raised questions about whether sanctioned people and companies should have “unfettered access” to the courts.

PJSC National Bank Trust and PJSC Bank Okritie Financial Corporation are suing Boris Mints and members of his family, claiming that they conspired with representatives of the banks to enter into uncommercial transactions with companies connected with the family, by which loans were replaced with worthless or near-worthless bonds.

The defendants are subject to freezing orders and the litigation had been progressing towards trial when Russia invaded Ukraine. The second defendant is a ‘designated person’ under the sanctions regime.

At first instance, Mrs Justice Cockerill rejected the application for an indefinite stay, holding that a court could lawfully enter judgment for a designated person following a trial at which it was established that the designated person had a valid cause of action.

She also ruled that, where OFSI could license the payment of a designated person’s own legal costs, it could also license payment of an adverse costs order, satisfaction of an order for security for costs made against the designated person, payment of damages pursuant to a cross-undertaking in an injunction, and payment of a costs order in favour of a designated person.

Third, she found that a designated person – specifically Vladimir Putin or Elena Nabiullina, the governor of the Central Bank of Russia – did not control the first claimant, 99% owned by the Central Bank of Russia, within the meaning of the Russia (Sanctions) (EU Exit) Regulations 2019.

This was because it was not a personal asset of the designated person; rather the designated person here could exert influence over it by virtue of their political office.

The Court of Appeal, with Sir Julian Flaux, Chancellor of the High Court giving the ruling, dismissed the defendants’ appeal.

He said the “fundamental” common law right of access to the courts, including entry of judgment, was not excluded or curtailed by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) or the regulations. They would need to be “clear and unambiguous” to do so and were not.

“On the contrary, I agree with the judge that section 44 of SAMLA is predicated on the designated person being able to pursue civil proceedings to judgment since otherwise the statutory defence under that section would be unnecessary.”

Sir Julian said it would be “surprising” if OFSI could not licence the payment of adverse costs orders, as this could lead to the other party obtaining a stay of the proceedings until the orders were paid.

“That would frustrate the right of access to the court, through no fault of the designated person’s own.”

He went on to find that OFSI could issue a licence in each of the scenarios in the appeal, including in relation to favourable costs orders.

Such a payment would not represent “a net gain to the claimants’ funds”, and if OFSI could not grant such a licence, “an opposing party could take every unmeritorious point with impunity safe from any costs liability, which obviously cannot have been the intention of Parliament in passing the regulations”.

As a result of these findings, the control issue did not arise but, given it was fully argued, the court decided it and said it would have allowed the appeal.

Sir Julian said that, under the “clear and wide meaning” of the regulations – which did not provide the ‘carve-out’ that Cockerill J had found – the second claimant was controlled by Mr Putin and/or Ms Nabiullina because they were able to exert influence over it by virtue of their political office.

Commenting on the ruling, Dr Helen Taylor, senior legal researcher at Spotlight on Corruption, said: “While business as usual may be good news for the legal sector, there are important questions to be asked about how desirable it is for sanctioned persons to be given a blank cheque to bring any civil claim they like to the UK courts.

“These are the tough calls that the government and Parliament need to make in laying down clear lines for when and how sanctioned individuals and companies should continue to have the benefit of unfettered access to bring litigation in the civil courts and top legal advice to do so.”

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