Russia sanctions – “reasonable cause to suspect” test triggering asset freeze provisions
The High Court has held that the Russia (Sanctions) (EU Exit) Regulations 2019 as amended [the “Regulations”] provisions relating to the freezing of assets are not triggered if there is a reasonable cause to suspect that an entity was owned or controlled by a sanctioned person or entity. The provisions are triggered if it is proved that there is as a matter of fact such ownership or control.
As part of preliminary hearings preceding a main fraud trial, the defendant in the case (D) alleged that there was reasonable cause to suspect that the litigation funder of the Claimants (C) was owned or controlled by a designated person or persons within the meaning of Regulation 5 and 6 of the Regulations. A declaration to that effect was sought. Had the declaration been granted, that would have impacted substantially on the funding of the litigation and therefore on the progress of the litigation itself.
The Court found that had the relevant test been “reasonable cause to suspect”, it would have been met. However, the Court concluded that was not the test and it was not willing to find as a matter of fact that the funder was indeed owned or controlled by a designated person or persons.
The Court’s conclusion on the relevant test was predicated on a detailed statutory construction of Regulation 11, one of the relevant asset freeze provisions. The Court had “no hesitation” in finding against D’s submissions. If D’s approach was correct, the relevant provisions in the Regulations would prohibit dealing with funds or economic resources held by a person in respect of whom there are reasonable grounds to suspect is, but who is in fact not, a designated person (or owned or controlled by a designated person); and that a person who did so would, under Regulation 19, be liable for conviction on indictment – a conviction punishable by up to seven years’ imprisonment. C asserted and the Court accepted that would represent a “monumental extension of criminal liability” and would self-evidently offend against the principle of strict interpretation of penal legislation.
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