On March 14, 2023, the UK High Court issued a judgment in the first challenge to a UK sanctions listing under Section 38 of the Sanctions and Anti-Money Laundering Act 2018 ("SAMLA"). The challenge was brought by LLC Synesis, a Belarusian technology company ("Synesis") and followed an unsuccessful ministerial review of Synesis' UK designation. The High Court rejected the challenge on the grounds that the decision to maintain Synesis' designation was reasonable and proportionate. Mr. Justice Jay's judgment addressed both the threshold for a UK listing and the standard of review the court is required to undertake when assessing a designation decision under Section 38 of SAMLA, points which will have broader relevance to future UK delisting cases.
The UK Designation
Synesis was designated in the UK on December 31, 2020. The stated reason for its designation was its provision of the "Kipod" video surveillance system to the Republican System for Monitoring Public Safety ("RSMPS"), which is used by the Belarusian Ministry of Internal Affairs, including its security and police units. According to Synesis' original UK designation notice, it "bears responsibility for providing support and technology to the Ministry of Internal Affairs that enhances the capacity of the Lukashenko regime to carry out human rights violations and repress civil society."
Ministerial Review of the Decision to Designate Synesis
On April 7, 2021, Synesis notified the Foreign Secretary of its intention to seek a revocation of its designation by ministerial review pursuant to Section 23(1) of SAMLA. Having sought and received copies of the evidence supporting the original UK designation decision, Synesis formally applied for a ministerial review on January 18, 2022, on the grounds that the basis for its designation was wrong and founded on vague, unsubstantiated, and incorrect assertions. The decision was taken to uphold the designation and Synesis was informed of that outcome on July 7, 2022, and provided with an updated Sanctions Designation Form ("SDF") and Sanctions Designation Form Evidence Pack ("SDFE").
Court Review of the Decision to Maintain Synesis' Designation
Synesis subsequently applied to the High Court to set aside the Foreign Secretary's decision to maintain its listing pursuant to the procedure under Section 38 of SAMLA. Pursuant to Section 38(4) of SAMLA, the principles applicable to a judicial review were required to be applied to the review undertaken by the court. Judicial review proceedings permit a judge to review the way in which a decision has been made, but not the merits of the conclusion that is reached. Traditionally, judicial review can be brought on the basis of three grounds:
- illegality (e.g., the decision maker acted beyond their powers or the decision was taken for an improper purpose);
- irrationality/unreasonableness; or
- procedural impropriety (e.g., bias or restriction of the right to be heard).
Synesis argued that the decision to maintain its designation was:
- irrational, either because the wrong standard of proof was applied or the decision and its outcome were irrational;
- ultra vires, because the powers conferred on the Foreign Secretary were exceeded, the Foreign Secretary breached the duties imposed by SAMLA and/or the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 ("Belarus Regulations"), and/or the Foreign Secretary's decision frustrated the purposes conferred by SAMLA and the Belarus Regulations; and
- disproportionate because the decision failed to show that it was rationally connected to a legitimate aim.
In applying the judicial review principles to the facts of the Synesis case, Mr. Justice Jay concluded that the reference in the Belarus Regulations to a person "being involved" also covers past activities and a person having been involved in a proscribed activity. Mr. Justice Jay also held that the designation criteria applicable to Synesis were extremely broadly framed to require only that the goods or technology (i.e., the Kipod surveillance system) could contribute to a proscribed activity; namely, the repression of civil society and democratic opposition in Belarus, a requirement that was satisfied on the facts before the court. The amended SDF provided to Synesis at the time of its unsuccessful ministerial review also was held to have addressed the issue of proportionality in detail. Mr. Justice Jay therefore dismissed Synesis' challenge on the grounds that the Foreign Secretary's decision to maintain Synesis' designation was not unreasonable or disproportionate.
The judgment addressed a number of points of broader relevance to future delisting challenges concerning the test for UK designation and the standard of review for listing decisions.
The Test for UK Designation
As originally enacted, SAMLA required the fulfillment of two conditions before a person could be designated under secondary legislation such as the Belarus Regulations. First, there must be reasonable grounds to suspect that the person is a so-called "involved person." Second, the Minister must consider that it is appropriate to make the designation in light of the regulatory purposes of the particular UK sanctions regime. The Belarus Regulations replicated the SAMLA conditions.
This test was amended by The Economic Crime (Transparency and Enforcement) Act 2022 ("ECA"), which came into force on March 15, 2022. Section 58 of the ECA had the effect of removing the appropriateness criterion set out in the original SAMLA test for designation. Certain other provisions of the ECA further deemed "pre-commencement regulations" such as the Belarus Regulations to omit any reference to the appropriateness test.
Mr. Justice Jay held that reasonable grounds to suspect, the UK threshold for designation, is a well-established test in UK law and is part objective and part subjective in nature. The test requires that the decision maker "must consider all the material or information known to him or [that] ought to have been within his knowledge following reasonable inquiry."
For this purpose, "material" or "information" is not limited to evidence that would be admitted in a court of law. As a consequence, the decision maker can take hearsay, allegations, multiple hearsay, and (in appropriate cases) intelligence into account. It is for the decision maker to assess the weight that should be given to these types of information or material, albeit that Mr. Justice Jay stated that the court normally will expect that "at least some recognition has been given to its inherent quality."
Mr. Justice Jay also held that the reasonable grounds to suspect criterion does not require a finding of fact. Rather, it requires an assessment or evaluation of the available information and material, with inferences being drawn from all of the circumstances, and the formation of a good faith state of mind at the conclusion of the process. Among the points adduced in support of this approach, Mr. Justice Jay identified both the public interest in the preventive purpose of designation and the ability to act in concert with the UK's allies as reasons why a standard less than proof is appropriate. The practical difficulties associated with securing proof of a fact to the civil standard when a designated entity is based and operating outside the UK also were highlighted in his judgment.
The Standard of Review for Designation Decisions
Mr. Justice Jay held that the standard of review to be applied by the court when reviewing a decision not to de-list under Section 38 of SAMLA does not require the court to place itself in the decision maker's shoes. Rather, the court is required to examine whether the decision maker's decision was based on no evidence or was irrational.
Noting that the Wednesbury test (i.e., that a decision is unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it) incorporates a certain degree of flexibility, Mr. Justice Jay held that a broad margin of appreciation is appropriate in the context of expert judgments in an area of government policy. He also stated that the information and material before the decision maker must be considered holistically and "cannot be disaggregated or salami-sliced."
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