Dalston Projects Limited & Ors v The Secretary of State for Transport

The detention power for ships connected with Russia is distinct from the designation regime. It may be used even where the owner has not been designated, and is not confined to disrupting Russian maritime trade. Its broad purpose includes exerting pressure on Russia and signalling consequences to persons connected with it. In an A1P1 challenge, proportionality is assessed objectively by considering the importance of the aim, rational connection, less intrusive measures and fair balance. The Government need not prove the efficacy of each individual detention. A rational connection with the wider sanctions strategy is sufficient, particularly in foreign-policy matters where the executive has a broad margin of discretion. The detention of a luxury vessel did not amount to conversion.

The claimants applied to the High Court under section 38 of the Sanctions and Anti-Money Laundering Act 2018 to challenge the Secretary of State’s detention of the MY Phi under the Russia (Sanctions) (EU Exit) Regulations 2019. The vessel was beneficially owned by a wealthy Russian resident who had not been designated under Part 2 of the Regulations. Detention directions were made in March 2022 and continued in April 2022 and January 2023.

The claimants alleged improper purpose, disproportionate interference with property rights under Article 1 of the First Protocol to the Convention, irrationality and breach of the Tameside duty. They also challenged the grounds stated in the detention direction and alleged conversion. The central issues were whether the statutory detention power was available on the facts and whether its exercise was lawful.

1. Disposition. The claim for review was dismissed.
2. Statutory purpose. Regulation 57D created distinct routes for detention of ships owned, controlled, chartered or operated by designated persons and by persons connected with Russia. The latter route was not limited to designated persons. The Foreign, Commonwealth and Development Office’s decision not to designate the beneficial owner therefore did not affect the Secretary of State’s power under regulation 57D. The powers in Part 6 stood on an equal footing. Detention was not merely ancillary to the prohibition on port access.
3. The purpose of the connected-with-Russia detention power was broad. Its language, legislative history and parliamentary materials supported sanctions intended to exert maximum pressure on Russia in varied ways. The purpose was not confined to disrupting Russian trade or the transport of goods and personnel. Detaining a high-value vessel owned by a wealthy Russian resident could rationally contribute to that purpose by affecting the owner and signalling consequences to others in a similar position.
4. Proportionality. The challenge concerned the operation of the legislation in an individual case, not its validity. Applying the approach in Bank Mellat v Her Majesty’s Treasury [2013] UKSC 39, and the guidance in Belfast City Council v Miss Behavin’ Limited [2007] UKHL 19 and R (Begum) v Special Immigration Appeals Commission [2021] UKSC 7, the court assessed proportionality objectively by reference to the evidence and substance of the decision. The executive had an especially broad margin in foreign-policy matters, as explained in R (Al Rawi) v Secretary of State for Foreign and Commonwealth Affairs [2006] EWCA Civ 1279 and R (Lord Carlile of Berriew) v Secretary of State for the Home Department [2014] UKSC 60.
5. The detention was rationally connected to the legitimate aim. The Secretary of State did not need to demonstrate the efficacy of that individual detention or prove that it would itself influence Russia’s conduct. It was enough that the measure formed part of a wider sanctions strategy and had a rational connection with the aim. The interference with the owner’s property rights was significant, but the detention was temporary and reversible, concerned a luxury superyacht, and caused no claimed financial hardship. The weighty public interest and the executive’s margin of discretion justified the balance struck.
6. The rationality challenge failed. Signalling the consequences of Russia’s conduct and the possibility that release might be perceived as relaxation of sanctions were considerations that could rationally be taken into account. The April 2022 decision was not merely a holding decision pending further evidence, so the Tameside duty did not assist the claimants.
7. Regulation 57D(5)(c) required the detention direction to state the grounds of detention, but did not require grounds equivalent to a statement of reasons under regulation 8(4). Finally, following Club Cruise Entertainment & Travelling Services Europe BV v Department for Transport (The Van Gogh) [2008] EWHC 2794 (Comm), detention did not amount to conversion because it involved no assumption of ownership or dominion. The length of detention was not determinative.

not stated in the judgment.