L1T FM Holdings Limited, R (on the application of) v Chancellor of the Duchy of Lancaster in the Cabinet Office

Under Article 1 of the First Protocol, compulsory divestment to address a national-security risk may be proportionate without guaranteeing the owner the shares’ fair market value. The court should assess the statutory scheme as a whole. Classification as deprivation or control of use is not decisive because the substantive proportionality inquiry is essentially the same. A reasonable relationship between compensation and property value is required, but full compensation is context-dependent. Where owners can sell on the open market, retain the proceeds and choose a buyer subject to national-security constraints, forced timing and resulting diminution do not necessarily create an entitlement to additional compensation. Parliament’s statutory choice and financial-assistance mechanisms may inform the fair balance, subject to the court’s own proportionality assessment.

The appellants challenged a final order made under section 26(3) of the National Security and Investment Act 2021, requiring divestment of their shareholding in a fibre broadband company because of national-security risks arising from its ultimate beneficial ownership.

The company was sold to Virgin Media O2, and the appellants retained the sale proceeds but received no further compensation. The Administrative Court dismissed the judicial review claim: [2024] EWHC 2963 (Admin). Permission to appeal was granted on the issue whether Article 1 of the First Protocol required compensation beyond the sale proceeds, including compensation for any shortfall from fair market value.

The Court of Appeal, in a judgment given by Singh LJ with which Males and Popplewell LJJ agreed, dismissed the appeal.

1. Nature of the interference. The distinction between deprivation of possessions and control of use should not be exaggerated. The substantive inquiry is whether the interference is lawful, pursues a legitimate aim and is reasonably proportionate. Although the court considered that the statutory scheme could properly be viewed as control of use when assessed as a whole, it proceeded on the assumption that the compulsory divestment was a deprivation.
2. Compensation. Article 1 of the First Protocol requires a reasonable relationship of proportionality between property value and compensation, but it does not guarantee full compensation in every context. James v United Kingdom (1986) 8 EHRR 123, Holy Monasteries v Greece (1995) 20 EHRR 1 and R (SRM Global Master Fund LP) v Treasury Commissioners [2009] EWCA Civ 788 supported that contextual approach. Osmanyan and Amiraghyan v Armenia Application No. 71306/11 was distinguishable because the expropriated land had been the applicants’ means of subsistence.
3. Proportionality. The court applied the four-stage approach in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39. Following Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs [2025] UKSC 30, the court made its own proportionality assessment while giving special weight to national-security assessments made by institutions with relevant expertise. The availability of financial assistance under section 30 of the National Security and Investment Act 2021 was relevant to the overall balance.
4. Application. The appellants could sell on the open market, retain the sale proceeds and choose a purchaser who did not pose a national-security risk. The fact that the sale was compulsory and occurred at an inconvenient time did not require compensation for any diminution from fair market value, past investment or future profits. Parliament’s decision not to include a general compensation scheme did not count against the proportionality of the statutory scheme. There was no directly applicable Strasbourg authority requiring such compensation, and domestic courts should not extend Convention rights beyond what they can confidently predict the European Court would require.

The order remained valid. No remission for assessment of compensation was required.

1. Court of Appeal (Civil Division): Appeal dismissed. [2025] EWCA Civ 1528.
2. High Court, Administrative Court: Farbey J dismissed the judicial review claim following a rolled-up hearing. [2024] EWHC 2963 (Admin).