High Court dismisses first SAMLA licensing challenge

26/10/23

The High Court (Mr Justice Saini) has today handed down its decision in R (Fridman) v HM Treasury [2023] EWHC 2657 (Admin), dismissing Mr Fridman’s challenges to decisions by HM Treasury refusing to grant him various licences.

Mr Fridman is a prominent businessman who has been sanctioned under the Russian Sanctions Regulations since 15 March 2022. In August 2022, Mr Fridman applied for licences to make a number of payments based on the derogations in Schedule 5 of the Regulations for basic needs, prior obligations and routine maintenance of assets. In December 2022, his application was determined by the Office of Financial Sanctions Implementation (“OFSI”). While many payments were permitted, three payments in respect of his property at Athlone House were refused.

Mr Fridman challenged the decisions on three grounds, all of which were dismissed by the High Court:

1. Ground 1 concerned the payment of a monthly management fee of £30,000 to Athlone House Limited, which was responsible for managing the Athlone House property. OFSI refused this on the basis that it would amount to an “indirect payment” to another designated person, Ms Zairova, who was the sole shareholder and director of Athlone House Limited. Mr Justice Saini agreed with OFSI’s interpretation of an “indirect payment” under Schedule 5 to the Russian Sanctions Regulations: [73]-[80].
2. Ground 2 concerned the payment of a monthly fee of £1,850 to a company known as Ideaworks for providing lighting and communication services for the house. Mr Justice Saini agreed with OFSI that this did not amount to a “basic need”: [86]-[90].
3. Ground 3 concerned the ongoing payment of staff for Athlone House, including six housekeepers, an estate director and a handyman. The High Court dismissed the challenge to OFSI’s exercise of discretion, which was on the basis that it was not appropriate to permit continuing payments which would enable the designated person to continue his pre-designation lifestyle: [97]-[107].

The judgment also provides helpful guidance on a number of general issues arising under the Russian Sanctions Regulations and the Sanctions and Money Laundering Act 2018 (“SAMLA”). First, the High Court confirmed that OFSI retains a residual discretion under Regulation 64 of the Russian Sanctions Regulations to refuse to licence a payment even if the conditions for a derogation are met: [59]. Second, in respect of Tameside obligations and procedural fairness, the High Court confirmed that the onus is on applicants to furnish all relevant evidence and that “no principle of common law fairness requires a public body in the position of OFSI to effectively become some form of adviser to applicants” at [68]. Third, the High Court confirmed that the proper approach to a review under s. 38 of SAMLA is by reference to the evidence before the decision-maker, and that such challenges should not give rise to “rolling” evidence updates: [61]-[65].

The judgment is available here.