The Latest From The Court Of Appeal On A1P1 And Proportionality

In the recent cases of Dana Astra IOOO v Secretary of State for Foreign, Commonwealth and Development Affairs [2026] EWCA Civ 160 and R (On the Application Of BYL & Anor) v Chancellor of the Exchequer [2026] EWCA Civ 170 the Court of Appeal has further considered protection of property rights under Article 1 Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR) and the application of proportionality in the human rights context. 

Despite the cases arising in different factual situations some common themes emerge from the judgments, including the Court of Appeal’s acknowledgment of the lack of clarity in the authorities in relation to many key concepts. 

Key Points

• The non-exhaustive list of factors identified by the Supreme Court in Shvidler provide useful guidance in determining whether a fresh proportionality assessment should be conducted by appellate courts. However, novel fact patterns do not automatically justify a fresh proportionality analysis. 
• Assessments of proportionality in a human rights context should focus on the methodical application of the legal test established in Bank Mellat. Concepts such as the 'margin of appreciation' afforded to the legislature can act as helpful tools but must not substitute the application of the relevant legal test. 
• The distinction between marketable goodwill and future income for A1P1 purposes remains complex and mere expectations as to future income will not be sufficient to constitute a protected possession. 

Dana Astra IOOO v Secretary of State for Foreign, Commonwealth and Development Affairs

For a detailed discussion of the High Court decision and background to the case, see our previous blog post. In brief, the Court of Appeal unanimously upheld the High Court's conclusion that Dana Astra IOOO (Dana) – a Belarusian company with no property or assets in the UK which was designated under the Sanctions and Anti-Money Laundering Act 2018 – did not fall within the UK's jurisdiction for the purposes of Article 1 ECHR. As in the High Court, the Court of Appeal noted the established exceptions to the principle of extraterritoriality and refused to extend them to the sanctions context. 

(i) A1P1

The Court of Appeal considered Dana's submission that, notwithstanding its lack of business and assets in the UK, it had a possession for the purposes of A1P1 in the form of a "marketable bundle of business interests" which could be sold, emphasising the potential for future goodwill in the UK. 

The court reiterated the position in Breyer Group plc v Department of Energy and Climate Change [2015] 1 WLR 4559, which the judge below had correctly applied (see our previous blog post). Bean LJ commented that the idea that potential future goodwill in a business that has not yet been started in the UK could establish ECHR jurisdiction was an invitation not only to "run ahead of the Strasbourg jurisprudence, but flatly to contradict it". This expansive argument would mean any company in the world wanting to do business in the UK would fall 'within the jurisdiction' for Article 1 purposes.

(ii) Proportionality 

Despite the conclusion that Dana's ECHR rights were not engaged, LJ Elisabeth Laing considered the proportionality of the designation decision. Taking into account the options open to an appellate court following Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs [2024] EWCA Civ 172 (Shvidler), the Court of Appeal declined to conduct a fresh proportionality assessment. Shvidler had authoritatively examined proportionality in the sanctions context, in a situation where the effects of measures were considerably greater and more intrusive than in the present case. LJ Elisabeth Laing did not consider the "theoretical, if not illusory effects of the designation" on Dana's goodwill to justify a re-assessment. The mere fact that the present case was the first to involve a claimant outside the UK with no assets in the country did nothing to improve the justification for a fresh assessment. 

In conducting an analysis of the "full and clear reasons" given by the High Court in examining whether the designation met the four-part test established in Bank Mellat v HM Treasury [2013] UKSC 39 (Bank Mellat), the Court of Appeal reinforced the importance of a structured approach to proportionality assessments. Whilst an "especially broad margin of discretion" had to be given to matters of executive judgment on foreign policy, it was clear that Saini J had decided the question of proportionality himself and not merely based his decision on a public law rationality review. There was nothing wrong with his assessment. 

Dana's submissions on irrationally at common law were also dismissed. 

BYL & Anor, R (On the Application Of) v Chancellor of the Exchequer 

In this well-publicised challenge, the Court of Appeal dismissed the appeals of two claimant groups – Charedi Orthodox Jewish children and their parents, and Evangelical Christian children, parents and schools – challenging the ECHR compatibility of the legislation which applies VAT to private school fees. 

The claimants unsuccessfully sought to rely on three ECHR rights: the right to property under A1P1, the right to education under Article 2 Protocol 1 and freedom from discrimination under Article 14. We focus here on A1P1 and the approach to proportionality. 

(i) A1P1

The Court of Appeal upheld the Divisional Court's conclusion that there were no relevant “possessions”. The schools argued that legislation which threatens their viability interferes with their A1P1 possessions in the form of 'goodwill'. Whilst the court referred to various authorities such as Breyer (see above), it ultimately chose to apply what it considered the "clearer test" from R (Countryside Alliance) v. Attorney General [2007] UKHL 52 distinguishing between goodwill and "future income not yet earned and to which no enforceable claims exists", rather than attempting to identify and distinguish 'marketable' goodwill from future income. Although it acknowledged the dividing line between goodwill and future income is "far from straightforward", the Court of Appeal concluded that the schools’ ultimate concern was reduced expectations of being able to generate income in future. If the existence of the business was actually in jeopardy (e.g. the school would shut as a result of the measure with the loss of all existing as well as prospective custom) that would be a stronger argument in terms of A1P1 rights, but although the schools raised concerns about viability the evidence did not go further than that.

(ii) Proportionality 

The Court of Appeal concluded that the appeals "fall squarely" within circumstances requiring a fresh proportionality analysis, relying on the non-exhaustive list of factors set out in Shvidler. These included that the appeals had been granted on substantive grounds, and involved the first consideration at appellate level of a new legislative regime with considerable potential significance for society. Submissions from the Government that a more limited form of review was appropriate due to the "seniority of the judges" in the Divisional Court were not found to be persuasive or consistent with Shvidler.

In conducting a fresh review, the Court of Appeal acknowledged that the Divisional Court had not clearly identified the proportionality test applied, having instead appeared to focus on whether the decision fell within the 'margin of discretion' afforded to the legislature. Whilst authorities refer to metaphors such as 'margin', 'area' and varying intensities of review, the Court of Appeal noted these are "not legal tests to be applied by a court". Instead, these "helpful tools" should assist courts in answering the questions posed by a legal test, here, the four-stage proportionality assessment established in Bank Mellat. 

The Court of Appeal differed from the Divisional Court in emphasising that practical considerations were "cogent" and placed weight on the amount of income brought in by the tax, as well as the administrative difficulties and burdens that would result from a finding of incompatibility and consequent amendment of the legislation. Ultimately the court concluded that all four stages of the Bank Mellat test were fulfilled and the Government had provided an "objective and reasonable" justification for the measure. 

Comment 

In the context of two vastly different fact patterns and novel arguments, the comparable conclusions reached by the Court of Appeal are a helpful indication of the current position on A1P1 and proportionality. The comments in both cases concerning marketable goodwill highlight that the boundaries of this concept are complex and not easy to apply. However, it is clear that a reduced expectation of future profits or a reduced potential future income stream will not be protected under A1P1. Similarly, the focus in both cases on the structured approach courts should take to proportionality assessments demonstrates that the strict application of the established Bank Mellat test is key, without getting distracted by the language of varying intensities of review and margins of discretion to be afforded to decision makers. Overall, both decisions are an acknowledgement of the ongoing uncertainties in these areas of law but also a reminder to cut through them by focusing on established legal principles. 

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