Mid-Year Review of United Kingdom's Sanctions
The UK Supreme Court has provided guidance on how courts should approach proportionality assessments when reviewing government decisions interfering with human rights, particularly in the context of sanctions designation decisions. This guidance, outlined in the Shvidler & Dalston Projects Supreme Court decision, is based on a four-stage test originally set out in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39.
In the Shvidler case, the Court affirmed that the aim of limiting and deterring Russian aggression in Ukraine is a critically important legitimate aim recognized by the UK Government. The assessment of proportionality involves a structured examination of the sanctions' purpose, their logical fit with that purpose, consideration of less invasive alternatives, and a balancing exercise weighing individual rights against national and international interests.
The first stage, Legitimate Aim, requires courts to determine whether the measure’s objective is sufficiently important to justify limiting a fundamental right. The second stage, Rational Connection, involves assessing whether the measure is rationally connected to achieving that legitimate aim. The third stage, Less Intrusive Means, requires an assessment of whether there is a less intrusive measure available that could achieve the objective. The fourth and final stage, Fair Balance / Proportionality in Strict Sense, involves demonstrating that the public interest outweighs individual rights without causing an imbalance.
The Supreme Court confirmed that appellate courts may conduct a fresh (de novo) assessment of proportionality in cases of significant public interest or social/political implications, rather than merely reviewing the decision for errors. However, in the Shvidler case, the majority upheld the proportionality of the sanctions imposed, emphasizing strong governmental evidence linking the sanctions to a vital security objective. Lord Leggatt dissented, holding that in Mr. Shvidler’s case the designation lacked a rational connection to the sanctions’ objectives and was disproportionate.
In a separate development, OFSI, the UK's financial sanctions regulator, imposed a £300,000 penalty on a UK company, Markom Management Limited (MML), on 31 July 2025. This penalty relates to a breach that occurred in February 2018, when MML facilitated a payment to a person designated under UK Russian sanctions. MML reported the breach to OFSI via its legal representatives in October 2018.
The tardiness and duration of OFSI's investigation merits consideration. It took a further four years for the final penalty notice to be issued, with the initial delay attributed to OFSI's engagement with an unnamed third party. The investigation's length and the lack of justification for the delay raise questions about the efficiency and transparency of the sanctions enforcement process.
The Shvidler & Dalston Projects cases were considered test cases for the UK's sanctions regime and were assessed by the Supreme Court due to their significance. The decision provides valuable guidance for future sanctions designation cases, emphasizing the importance of proportionality assessments and the role of courts in scrutinizing government decisions. However, the impact of Lord Leggatt's dissenting views on future cases remains to be seen.
In the context of the Shvidler & Dalston Projects cases, the Supreme Court highlighted the significance of business and finance, as key areas where proportionality assessments are crucial in sanctions designation decisions. The Court's decision provides guidance for future cases, underlining the importance of examining whether less intrusive business alternatives are available, and maintaining a fair balance between individual rights and national or international interests. Furthermore, the OFSI's enforcement process, as demonstrated in the case of Markom Management Limited, serves as an illustration of the practical implications of these principles in finance-related business matters.