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.

HIGH COURT DECIDES PRELIMINARY ISSUES IN BANK MELLAT’S FAVOUR

As reported on this blog, the UK Supreme Court held in 2013 (here) that the 2009 Order imposing financial restrictions on Bank Mellat in the UK was unlawful. Bank Mellat then brought an action for damages against HM Treasury for resulting losses. The English High Court has just decided 3 preliminary issues, all in favour of the Bank, in a judgment handed down on 6 May 2015 (link here), namely:

1) HM Treasury was wrong to say that the Supreme Court had not decided that the 2009 Order was incompatible with the European Convention on Human Rights as well as the common law;

2) HM Treasury could not rely on the “reflective loss” principle, i.e. that Bank Mellat’s losses should be disregarded as losses suffered by a shareholder where the company had not brought a claim; and

3) HM Treasury could not limit damages to “possessions” within the meaning of the ECHR.

The damages action continues…

UK HIGH COURT REFUSES INJUNCTION TO PREVENT RE-LISTING OF NATIONAL IRANIAN TANKER COMPANY AND GHOLAM GOLPARVAR ON EU IRAN SANCTIONS LIST

The National Iranian Tanker Company and Gholam Golparvar both won applications in Luxembourg (the General Court of the European Union) to annul their inclusion on the EU’s sanctions list against Iran (see previous blogs on NITC v Council and Nabipour & Ors v Council).  The Council of the EU then indicated its intention to re-list them at a meeting on 9 February 2015.  NITC and Mr Golparvar applied to the High Court in London for an urgent injunction to stop the British Government voting in favour of their re-listing, which the High Court has refused in a judgment handed down by Mr Justice Green on 9 February (a link to the judgment is here).

The applicants sought orders from the High Court declaring it unlawful for the Foreign Secretary to propose, support, or participate in their relisting, and prohibiting the Foreign Secretary from taking any action to give effect to an EU decision to relist them.  The Court refused, on the basis that although the applicants raised serious arguments that their proposed re-designations were unlawful, they were the same as the arguments that could be made before the General Court in an application to annul a re-listing decision.  Mr Justice Green also held that the balance of convenience weighed against granting an injunction given what he described as the availability of “the full gamut of remedies” in the European court, and “the acutely political nature” of EU sanctions listing decisions, which are scrutinised by UK parliamentary select committees.

The EU published measures re-listing NITC and Mr Golparvar on 12 February 2015 (Council Implementing Regulation (EU) 2015/230 implementing Council Regulation (EU) 267/2012 and Council Decision (CFSP) 2015/236 amending Decision 2010/413/CFSP).

ROSNEFT v HM TREASURY: UK COURT REFERS QUESTIONS TO ECJ ON INTERPRETATION OF THE EU’S RUSSIA SANCTIONS

On 9 February 2015, the Divisional Court in the UK referred questions to the European Court of Justice for a preliminary ruling in the course of Rosneft’s judicial review proceedings challenging UK legislation that gives effect to EU sanctions against Russia (see previous blog on an earlier stage of Rosneft’s case). A link to the judgment is here.

The legislation at issue is the Export Control (Russia, Crimea and Sevastopol Sanctions) (Amendment) Order 2014, which came into force on 29 November 2014.  The questions referred concern the interpretation and validity of Council Decision 2014/512/CFSP and Council Regulation (EU) 833/2014, which that order is intended to enforce in the UK.

The Divisional Court (Beatson LJ and Green J) said it was making a reference to the ECJ because it was necessary in order to resolve the judicial review, and in the interests of clarity and uniformity of interpretation.  The Court recognised it was unusual to do so while Rosneft has an application for annulment pending in the General Court, but in this case it was necessary as:

  1. it could not say with confidence that all courts across the EU would reach the same conclusions on the interpretation of these sanctions;
  2. there were already differences in interpreting the measures between competent authorities in different Member States;
  3. a reference would allow for submissions from other Member States, the Commission and Council; and
  4. since Rosneft’s standing to bring an annulment action was in issue, the General Court might not rule on the merits.

The Court referred the following questions to the Court of Justice:

  1. Whether the ECJ has the power to review Council decisions adopted pursuant to the EU’s Common Foreign and Security Policy;
  2. Whether the EU’s Russia sanctions regime breaches the EU-Russia Partnership and Cooperation Agreement;
  3. Whether certain expressions in the sanctions legislation, in particular “waters deeper than 150 metres” and the word “shale” in the phrase “projects that have the potential to produce oil from shale formations” are so unclear as to violate the principle of legal certainty;
  4. Whether the term “financial assistance” includes the processing of payments, for which authorisation from the competent member state authority would then be required before being provided to the Claimant;
  5. Whether EU sanctions prohibit the issuing of global depository receipts in respect of shares issued by the Claimant at any time, or only those issued after 12 September 2014.

All sanctions currently in force against Russia are in the “sanctions in force” section of this blog.

ROSNEFT TRIES TO STOP UK LAW CRIMINALISING RUSSIA SANCTIONS

A Divisional Court in the UK has rejected an attempt by Rosneft (the Russian oil company) to stop UK laws criminalising breach of EU sanctions against Russia from coming into force, on the basis that the criminal offences were insufficiently clear and in breach of the principle of legal certainty under the European Convention on Human Rights and the common law.  A link to the judgment is here.

The UK legislation is the Export Control (Russia, Crimea and Sevastopol Sanctions) (Amendment) Order 2014, which came into force on 29 November 2014 (just after the judgment) and makes it an imprisonable offence in the UK to breach the prohibition in Article 3a of EU Regulation 833/2014 on providing certain services, such as drilling and the supply of floating vessels, necessary for the exploration and production of oil in deep water and the Russian Arctic, and for providing services relating to shale oil projects in Russia.

Rosneft applied for an urgent injunction, arguing that the UK legislation depended on terms in the EU Regulation such as ‘deep water’ and ‘arctic’ which were so vague that they violated common law and European human rights principles requiring criminal laws to be clear and precise.  The Government argued that there was no serious doubt about their legality and that delaying implementation would “undermine the co-ordinated international effort to make an effective response to Russia’s actions in Ukraine”.

The Court (Beatson LJ and Simon J) held that Rosneft had not shown that the relevant provisions were invalid, since the laws would have clear application in some cases; e.g. whilst there may be doubt about whether a depth of 500 feet would constitute deep water, it was clear that 1000 metres would. They found that there was no risk to Rosneft of serious irreparable harm and took into account that a delay in implementation would undermine the effectiveness of the sanctions.

The Court will hold a hearing in January in which Rosneft will seek a reference to the Court of Justice on the validity of the EU Russia sanctions legislation.  Rosneft has also lodged an application for annulment in the General Court of the EU asking for various provisions of  Regulation 833/2014 (EU Russia sanctions) to be annulled; summary here.

UK EXPORTER WHO BREACHED IRAN SANCTIONS ORDERED TO REPAY PROFIT

On 21 November 2014, a judge at the Central Criminal Court in London made two confiscation orders against a Managing Director and his company to pay a total of £1.14 million, after breaching trade sanctions with Iran.

The Managing Director, Gary Summerskill, received a 30 month prison sentence in March 2014, after pleading guilty to knowingly exporting alloy valves illegally to Iran, via his company Delta Pacific Manufacturing Limited. The total value of the exports to Iran was in excess of £3 million.

The court had found that Delta Pacific Manufacturing Limited made three illegal shipments of alloy valves to Iran without an export licence and tried to conceal the breach by diverting the components through Hong Kong and Azerbaijan. The export of alloy valves to Iran is currently subject to EU sanctions (EC Regulation No 428/2009), due to their potential for use in the construction of weapons.

Mr Summerskill has been ordered to pay £68,000 in confiscation, within six months or serve a further 15 months in prison. His company, Delta Pacific Manufacturing Limited, was ordered to pay £1,072,000 after having already been fined £225,000 in March 2014.

Peter Millroy, assistant director, criminal investigation, HM Revenue & Customs said “Summerskill knew that he was acting illegally – he manipulated a system which has been put in place to protect public safety simply to line his own pockets. He has not only paid the price by losing his liberty but he now has to pay back the money he has made from his criminal activities or face more time in jail.”

 

DISCLOSURE IN UK SANCTIONS CASES: BANK MELLAT

A judgment of the UK High Court in Bank Mellat v HM Treasury [2014] EWHC 3631 (Admin) (judgment here) has just held that the essence of allegations against a person or entity justifying their inclusion in UK terrorist / proliferation sanctions must be disclosed, even where national security concerns prevent full disclosure.

The context is Bank Mellat’s ongoing application to set aside Financial Restrictions (Iran) Orders made against it under the Counter-Terrorism Act 2008, which permits the British Government to impose financial restrictions on people and organisations said to be connected with terrorism or nuclear proliferation (these Orders were imposed on the bank before the EU’s sanctions against Iran took over from the UK proliferation sanctions).  We reported that in June 2013 the Supreme Court of the UK held that the 2009 Order was unlawful (judgment here: [2013] UKSC 39).  The bank is now applying to set aside the 2011 and 2012 Orders, which have frozen 183 million Euros of its assets, under the UK Counter-Terrorism Act which permits closed hearings to be held and security-cleared Special Advocates to be appointed on the listed entity’s behalf.

A dispute arose about what level of disclosure the Government had to make to the bank (as oppose to the bank’s Special Advocates) to enable it to challenge the reasons given for its designation.  The Government argued that the principles set down in Secretary of State v AF (No 3) [2010] 2 AC 269 in the UK and A v UK (2009) 49 EHRR 29 in the European Court of Human Rights, to the effect that sufficient allegations must always be disclosed to enable the person / entity to refute them and mount a defence, do not apply to asset-freezing cases (as opposed to detention cases), based on a UK Supreme Court case Tariq v Home Office [2012] 1 AC 452.  The Court rejected that argument, holding that because EU law applies to the Orders (and therefore the principles in Case C-300/11 ZZ v Secretary of State for the Home Department), and given the “utterly damaging effect on [the bank’s] ability to function”, the essence of allegations must be disclosed.

The judgment is particularly interesting in the light of the proposals by the European Court of Justice (currently being considered by the Council of the EU) to permit closed hearings which would not require this minimum level of disclosure in sanctions cases (see previous blog).

UK SUPREME COURT TO HEAR YOUSSEF CASE ON UN TERRORIST SANCTIONS

The Supreme Court of the United Kingdom will hear an appeal this October in the Youssef case (R (on the application of Youssef) v Secretary of State for Foreign and Commonwealth Affairs) [2014] Q.B. 728).
Youssef is a judicial review of the Foreign Secretary¹s decision to consent to the addition of Mr Youssef (an Egyptian national resident in the UK) to the United Nations’ Consolidated List of members of Al-Qaida and its associates (UN resolution 1617).  At issue is the source and nature of the United Kingdom’s powers to take action before the UN Security Council directed at a specific individual, the correct test for determining whether a person meets the criterion for designation (e.g. reasonable suspicion / reasonable grounds for suspecting involvement in terrorist activity), the appropriate standard of judicial review, and the permissibility of relying on evidence obtained by torture in Egypt.
The Supreme Court has also suggested to the parties that they should consider the following issue: whether Article 103 of the United Nations Charter applies to Human Rights Act claims in the UK.