Payment of statutory demand doesn’t breach sanctions on LIA; Court of Appeal judgment in Maud

The Court of Appeal has allowed the Libyan Investment Authority’s (the LIA’s) appeal against a High Court judgment setting aside the LIA’s statutory demand for payment under a 2008 guarantee made by Glenn Maud – Libyan Investment Authority v Maud [2016] EWCA Civ 788 (see previous blog).  A link to the judgment is here.

Mr Maud had successfully argued at first instance that any payment he made to LIA would breach the EU’s sanctions relating to Libya, which froze LIA’s assets, and therefore the demand for payment should be set aside. The Court of Appeal said the EU’s sanctions measures must be construed as far as possible compatibly with the UN Security Council Resolutions they were intended to implement, and noted the easing of UN sanctions on the LIA “to enable the Libyan people to have the benefit” of its assets.  Mr Maud argued that his guarantee fell within the definition of funds, and so payment under the guarantee would breach the requirement that the LIA’s existing funds or assets should remain frozen. The Court held that payment of the guarantee was caught by a separate prohibition on making funds available to the LIA, from which EU and UN sanctions provide a derogation for payments due under agreements that were concluded before the person was designated and paid into frozen accounts and which in any event no longer applies to the LIA, as is the case with Mr Maud’s guarantee to the LIA.  The Court also dismissed Mr Maud’s argument that the LIA’s statutory demand for payment was a form of claim, and so by not setting it aside the Court would be satisfying a claim on behalf of the LIA in contravention of a prohibition on doing so under EU sanctions.

Khaled; High Court judgment on disclosure in sanctions JR

Abdulbaqi Khaled, a British/Libyan citizen, is claiming misfeasance in public office and conspiracy to injure, challenging the decision to recommend that he be sanctioned by the UN Security Council (and then the UK) for ties to Al-Qaida.  His case is that the recommendation was made on the basis of information the Government knew to be unreliable and/or illegally obtained, in bad faith.

The High Court has given judgment in his application for standard disclosure of the information relied on by the Government when it recommended that he be listed.  Judgment here: Khaled v Security Service & Ors [2016] EWHC 1727 (QB). This is another judgment, post Sarkandi (see previous blog) on the extent to which AF (No. 3) v Secretary of State for the Home Department [2010] standards of disclosure apply in decisions to propose people for sanctions designations, and where declarations have been made under the Justice & Security Act (JSA).

The High Court (Mr Justice Irwin) said AF (No. 3) enhanced disclosure obligations did not apply in this case, therefore as much as possible had to be disclosed consistent with section 8 of the JSA but no more.

UK Court dismisses sanctions funding judicial review

The Administrative Court in the UK has dismissed a claim for judicial review brought by Egyptian businessman Ahmed Ezz, which challenged the rationality of an HM Treasury decision on the release of his frozen funds for the payment of legal expenses in Egypt – R (on the application of Ezz) v HM Treasury [2016] EWHC 1470 (Admin).  Mr Ezz is subject to an asset freeze under the EU’s sanctions on Egypt (see previous blog), for allegedly misappropriating public funds.  The decision at issue was to assess the reasonableness of the legal fees charged by Mr Ezz’s Egyptian lawyers by taking the maximum London legal rates and converting them to a reasonable rate in Egypt via the IMF’s purchasing power parity (PPP) ratio.  The ratio compares the relative costs of living in different countries, and in this way HM Treasury reduced the maximum daily rate payable for appearing in court from £15,000 in the UK to $5,790.98.

The Court found that, in accordance with general principles of interpreting EU law, the derogation from the asset freeze under the EU’s Egypt sanctions for payment of legal expenses must be interpreted restrictively.  It said that this was particularly so given that the objective of the sanctions was to recover misappropriated public funds, which would allegedly be undermined were Mr Ezz’s application successful.  It noted that HM Treasury had been generous in using the maximum daily rate in London as its starting point, and that the “reasonable” fees allowed by the EU did not necessarily mean the highest legal fees payable.  The Court concluded by saying that it was not unreasonable for HM Treasury to use the PPP conversion ratio, even though the cost of legal services in Egypt may not be perfectly reflected by a ratio based on general living expenses.

AG opinion in Rosneft’s EU reference

Advocate General Wathelet (the Belgian AG) has given an opinion in a request to the European Court of Justice for a preliminary ruling in relation to a judicial review brought in the UK by Rosneft (see previous blog) – Case C-72/15 Rosneft Oil Company OJSC v HM Treasury [2016].  His opinion is not binding on the ECJ. Rosneft’s judicial review challenges the Export Control (Russia, Crimea, and Sevastopol Sanctions) (Amendment) Order 2014 which gives effect to some of the EU’s sanctions on Russia in the UK.  When the ECJ gives judgment (in a few months’ time), the UK court will apply the ECJ’s judgment.

AG Wathelet considers that:

  1. Jurisdiction: the ECJ does have jurisdiction to give a preliminary ruling, after a detailed review of the parts of the EU’s common foreign & security policy that are reviewable and those that are not.
  2. Validity: Provisions of Regulation 833/2014 and Decision 2014/512, which it implements, are valid, apart from Article 3(5) of Regulation 833/2014, which allows a Member State to authorise certain transactions arising out of contracts concluded before 1 August 2014, which he considers invalid because it contradicts Decision 2014/512 on which it was based (which does not affect contracts concluded before 1 August 2014).
  3. Vagueness: Regulation 833/2014 was not too vague to mean that a member state could not impose criminal penalties for breach before its scope had been clarified by the Court of Justice.
  4. Interpretatation:
    1. the term “financial assistance” includes the processing of a payment by a bank or other financial institution relating to an underlying transaction covered by Article 3(1) of Regulation 833.
    2. Article 5(2) of Regulation 833 prohibits the issuing of or dealing with GDRs (global depository receipts) issued by Rosneft irrespective of when those shares were issued.
    3. The meaning of “waters deeper than 150m” is to be taken as meaning vertically from the point of drilling.

UK Appeal Court in Bank Mellat holds that gist must be disclosed in UK Terrorism Act challenges

As previously reported (here), in 2013 the UK Supreme Court held that the UK Order in 2009 imposing financial restrictions on Bank Mellat in the UK was unlawful. Bank Mellat is now in the middle of challenging the subsequent UK Orders made in 2011-2012 which are targeted at all Iranian banks, not just at Bank Mellat. The Court of Appeal has just given an important judgment on disclosure in that context; link here Bank Mellat v HM Treasury [2015] EWCA Civ 1052.

The Terrorism Act provides for closed material procedures in the context of a challenge of this kind. The issue on appeal was the disclosure to which Bank Mellat was entitled within that closed procedure. The Bank argued that Article 6 of the European Convention on Human Rights requires in a Terrorism Act challenge, just as in a case of detention or a control order, as an “irreducible minimum”, that a sufficient gist of the essential allegations is disclosed to the bank to enable it to refute as well as deny the allegations, even where there are national security concerns that would not otherwise permit disclosure (this is the standard set out in AF (No. 3) in the House of Lords).

The Court of Appeal held that this AF (No. 3) standard of disclosure does apply, because “restrictions on the freedom to do business or to engage in financial restrictions can be as serious for a bank as restrictions on personal liberty for an individual”, there is “no doubt” that the standard of disclosure required by AF (No. 3) would apply in an asset freezing case, and although the orders against Bank Mellat were not asset freezing, they were “highly restrictive measures with very serious effects”, and therefore the same standard of disclosure applies to challenges to these Orders.

The Court also gave a closed judgment overturning the judgment below on whether there had been sufficient disclosure (Ouseley J held that there had been even if AF (No. 3) applied); the Court of Appeal disagreed and remitted the case back to the Administrative Court for reconsideration of disclosure in light of these judgments.

UK COURT OF APPEAL JUDGMENT ON IMPACT OF RUSSIA SANCTIONS ON FAMILY MAINTENANCE PAYMENTS

In R v R [2015] EWCA Civ 796, the Court of Appeal has dismissed an appeal by a Russian citizen against a UK court order requiring him to pay interim maintenance into the Russian bank account of his UK-resident ex-wife. The husband had argued that, by ordering him to make payment into the Russian account, the court had circumvented the EU’s Russia sanctions in Council Regulation (EU) 269/2014 which would have prevented the Court from ordering payment into her UK bank account. The Court held that there was no circumvention because the Regulations do not have the objective of preventing an English court from ordering a Russian husband to make maintenance payments to his Russian ex-wife. Maya Lester acts for the husband.

COURT OF APPEAL REJECTS SARKANDI APPEAL ON CLOSED MATERIAL PROCEDURES

We have previously reported on the Sarkandi case here, a judicial review of a decision by the Foreign Secretary to propose the listing of 5 Iranian people for the EU’s Iran sanctions, in which the High Court granted the Government a declaration under section 6 of the Justice & Security Act that these were proceedings in which an application for a closed hearing may be made.

The Court of Appeal has now upheld that judgment in Sarkandi & Ors v Secretary of State for Foreign and Commonwealth Affairs [2015] EWCA Civ 687. The Court found that the judge was right to find that the 2 preconditions for allowing a closed hearing, that the Foreign Secretary would be required to disclose sensitive material in the course of the proceedings and that a closed hearing would be in the interests of the fair and effective administration of justice, were met.

The court rejected the argument that sensitive material could not be relevant because it was legally impermissible for the FCO to rely on it. On the second condition, the court rejected the submission that a declaration ought to be a last resort because of the inherent unfairness of a closed material procedure. The appellants had said that although Parliament has decided that there are some circumstances in which a closed procedure ought to be permitted, it had provided this should only be done where a Court is satisfied that such a course is in the interests of the fair and effective administration of justice in the proceedings, and the assessment of whether it is fair to make the declaration is left to the discretion of the Court, and should be exercised from the starting point that a CMP is itself inherently unfair, and that the Act ought to be read restrictively in accordance with the principle of legality.

Maya Lester acts for the appellants.

UK HIGH COURT REFUSES INJUNCTION TO UNFREEZE BANK ACCOUNTS OF LISTED PERSON’S WIFE

In Hmicho v Barclays Bank PLC, the High Court refused Mrs Hmicho’s application for an interim injunction to require Barclays Bank to unfreeze her accounts which the bank had frozen in May 2015, following her husband’s designation under the EU’s sanctions on Syria earlier in the year.

The Court said it could not say with “a high degree of assurance” (the test for grant of the injunction) that Barclays did not have reasonable cause to suspect that Mr Hmicho controlled or would benefit from the money in Mrs Hmicho’s accounts, since there had been (inter alia) transfers from Mr Hmicho into his wife’s accounts at the time of his designation, just before his own accounts were frozen, and cash payments into her accounts following his being denied access to a deposit box.

The Court said it could not say that Barclays wouldn’t succeed at trial in showing that it would risk criminal liability under UK regulations prohibiting it from dealing with funds or economic resources belonging to, owned, held, or controlled by a designated person, or making funds available to or for the benefit of a designated person, were it to unfreeze the applicant’s accounts. The Court also said the balance of convenience firmly favoured the bank given its potential criminal exposure, and that damages would not be an inadequate remedy for the applicant in the event she was successful at trial.