Mikhail Fridman, R (on the application of) v HM Treasury

Under regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019/855, satisfying a licensing purpose in Schedule 5 does not compel the Treasury to grant a licence. The Treasury has a residual discretion, which must be exercised consistently with the statutory scheme and the purposes of the sanctions regime.

Review under section 38 of the Sanctions and Anti-Money Laundering Act 2018 applies ordinary judicial review principles. The court generally assesses rationality by reference to the material before the decision-maker when the decision was made. It must not become a primary licensing decision-maker or conduct a rolling review.

The applicant bears the evidential burden of establishing the relevant derogation. Payments enabling a designated person to continue a pre-sanctions lifestyle may rationally be refused, even where prior obligations exist.

The claimant challenged three decisions by OFSI, part of HM Treasury, refusing licences for payments connected with his London residence: a monthly management fee to Athlone House Limited, an Ideaworks service fee, and continuing wages for non-security household staff.

The challenges were brought under section 38 of the Sanctions and Anti-Money Laundering Act 2018. The claimant also sought, at the start of the hearing, to introduce human-rights and unpublished-policy grounds. Permission to amend was refused. The central issues were the scope of the Treasury’s discretion under regulation 64, the proper approach to post-decision and expert evidence, the construction of the prior-obligations derogation, and the rationality and fairness of OFSI’s decisions.

1. The claim was dismissed. None of the three refusals was unlawful.
2. Regulation 64(2) confers a residual discretion. Even where a payment falls within a purpose in Part 1 of Schedule 5, the Treasury may refuse a licence if that is appropriate. The discretion is not at large and must be exercised consistently with the purposes of the statutory scheme and the sanctions regime. It may be used where licensing would undermine those purposes.
3. Under section 38(4) of the Sanctions and Anti-Money Laundering Act 2018, the court applies judicial review principles. It reviews the decision and process, rather than deciding the licence applications itself. Rationality is ordinarily assessed by reference to the material before OFSI at the time of decision. Post-decision evidence is generally irrelevant, save where an pleaded issue requires an objective proportionality assessment. The court should not permit proceedings to become a rolling licensing application.
4. The claimant bore the burden of supplying evidence supporting the relevant derogation. OFSI was not required to identify evidential gaps, advise the applicant on alternative grounds, or conduct an iterative investigative process. The Tameside duty requires reasonable and proportionate inquiry in context, not an advisory service for applicants.
5. The prior-obligations derogation did not permit the management fee or Ideaworks payments. The phrase “directly or indirectly” had to be construed consistently with the Regulations as a whole and regulation 7. A payment to a company wholly owned by a designated person could properly be treated as an indirect payment to that person. The sanctions regime deliberately accommodates the practical reality of ownership and control.
6. OFSI rationally distinguished accrued staff wages and orderly winding-down payments from future payments for continuing household services. It was entitled to regard the latter as enabling continuation of the claimant’s pre-designation lifestyle rather than meeting a basic need or routine maintenance requirement.