Supreme Court upholds sanctions on Eugene Shvidler and Dalston Projects in test case for UK regime
18 August 2025
By Talia Zybutz
Introduction
These appeals – Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs and Dalston Projects Ltd v Secretary of State for Transport – were a test case for the operation of the UK’s sanctions regime introduced in response to Russia’s invasion of Ukraine.
The Supreme Court confirmed that while the court’s task is to assess proportionality for itself, a wide margin of appreciation will be afforded to the executive in judging how best to respond to and restrain Russia’s actions in Ukraine.
It therefore rejected the challenges brought by Eugene Shvidler and Dalston Projects to the sanctions imposed upon them. Whilst the sanctions interfered with their rights under the European Convention on Human Rights, that interference was held to be justified by the importance of the public policy aims in question.
Lord Leggatt, however, took a different view in relation to Mr Shvidler. In his stringent dissent, he stated (at [254]):
Making it a criminal offence for an individual who has done nothing unlawful to deal with any of his own assets withot the government’s permission, and imposing this sanction without any geographical or temporal limit, is a serious invasion of liberty. The court on an application for judicial review of such a measure should require cogent reasons to justify it. In my view, the flimsy reasons relied on by the government in this case do not begin to do so. My wider concern is that, if the courts are not prepared to protect fundamental individual freedoms even in a case like this, the right to a judicial review of the minister’s decision to curtail such freedoms under sanctions regulations is of little worth.
Background
Eugene Shvidler
Eugene Shvidler is a long-time associate of Roman Abramovich and a businessman with extensive, lucrative ties to major Russian entities. From 2011, he was a non-executive director of Evraz plc, a company trading on the London Stock Exchange which was active in the Russian extractive sector. He is a British citizen.
On 10 March 2022, sanctions were imposed on Mr Abramovich. On the same date, trading in Evraz plc shares on the London Stock Exchange was suspended and Mr Shvidler (along with eight other directors) resigned from the board.
On 24 March 2022, a month after Russia invaded Ukraine, Mr Shvidler was designated.
The effect of this was to freeze his assets worldwide and to make it a criminal offence for other people to deal with him in either a private or commercial capacity, subject to a few exceptions.
By the time Mr Shvidler brought his challenge, the grounds for Mr Shvidler’s designation, which had been amended in November 2022, were as follows
- Mr Shvidler is “associated with” a person (Mr Abramovich) who is involved in obtaining a benefit from or supporting the Government of Russia by owning or controlling various companies including Evraz plc.
- Mr Shvidler has been involved in obtaining a benefit from or supporting the Government of Russia through working as a non-executive director of Evraz plc, which carries on business in the Russian extractive sector.
It was not in dispute in the appeal that these grounds satisfied the criteria for designating a person under The Russia (Sanctions) (EU Exit) Regulations 2019.
Dalston Projects
Dalston Projects is a special purpose vehicle incorporated to hold the legal title to the Phi, a €44 million luxury yacht.
On 28 March 2022, the Transport Secretary made a detention direction requiring the Phi to be held at West India & Millwall Docks, together with a movement direction that she remain there.
The beneficial owner of the Phi is Sergei Naumenko, a Russian businessman living in Russia. He claimed he was losing between €450,000 and €650,000 per week in potential charter income over the summer season, and that the yacht’s condition was deteriorating due to outstanding repairs.
Judgment
The approach to assessment of proportionality
The Appellants argued that the sanctions decisions interfered with their rights under Article 8 (family life) and Article 1 of Protocol 1 (property).
The issue was whether any such interference was proportionate, applying the four-stage test set out in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39 (at [6]):
(i) is the aim sufficiently important to justify interference with a fundamental right? (ii) is there a rational connection between the means chosen and the aim in view? (iii) was there a less intrusive measure which could have been used without compromising the achievement of that aim? (iv) has a fair balance been struck between the rights of the individual and the general interest of the community?
The Supreme Court confirmed that in applying this test a court must make its own assessment, but may in suitable cases give appropriate weight to the views of the executive or the legislature.
This was such a case. The Court held that a wide margin of appreciation should be afforded to the Foreign Secretary and the Transport Secretary when making judgments at each stage of the four-stage test, given:
- their special constitutional responsibilities for measures taken to respond to and contain Russia’s invasion of Ukraine; and
- their superior institutional competence to assess whether the sanctions imposed in these cases could serve a useful purpose in achieving that aim.
Application to the facts of the case
The Supreme Court held that each stage of the four-part test was satisfied.
Legitimate aim
It was common ground that The Russia (Sanctions) (EU Exit) Regulations 2019 pursued a legitimate aim. The Supreme Court nevertheless emphasised that there “can be no doubt that the aim of limiting and deterring Russian aggression in Ukraine is one of the most vital aims that the UK government has been called upon to pursue in recent years” (at [173]).
Rational connection
For Dalston Projects, the Supreme Court found both an economic and political connection between the detention of the Phi and the aim of putting pressure on Russia.
- Economically, the link was described as “straightforward”: the income Mr Naumenko would make from chartering the Phi was likely to find its way to Russia and contribute to its economy. Even if spent overseas, it would increase his disposable wealth and prestige in Russian society.
- Politically, the Court accepted the Government’s assessment that disadvantaging the wealthy elite could encourage opposition and public disquiet towards the state institutions behind the war in Ukraine.
For Mr Shvidler, the Supreme Court agreed with the courts below that the effectiveness of the sanctions regime depended on the cumulative effect of the measures imposed under that regime, and the designation of Mr Shvidler contributed that to that effect.
Although Mr Shvidler told The Guardian he was hoping and praying for an end to the “senseless violence” in Ukraine and for “the war” to be brought to an immediate end, the Court shared the Government’s view that this was a limited statement which did not clearly condemn Russian aggression. He stepped down from the board of Evraz plc only on the day Mr Abramovich was designated and trading in Evraz shares was suspended by the London Stock Exchange, having retained that position for several years after Russia’s illegal annexation of Crimea.
Less intrusive means
Given the nature of the objective sought to be achieved and the sanctions imposed, the Supreme Court held it was clear that no less intrusive measure could have been used which would not have compromised the achievement of the objective in an unacceptable way.
Fair balance
The Supreme Court held that the sanctions on both Dalston Projects and Mr Shvidler struck a fair balance given the importance of the public policy aim in issue. In each case, the Court described this conclusion as “straightforward”.
For Dalston Projects, the detention of the yacht would only have a limited impact on Mr Naumenko, who had bought it as a trophy asset to advertise his extensive wealth.
For Mr Shvidler, the impact was “very drastic”, and the impact on his family was also “substantial” (his children’s private school education in the UK having been interrupted). Even so, the Court agreed with Singh LJ in the Court of Appeal that sanctions must often be severe and open-ended to be effective. The purpose of his designation was to disable him, as far as possible, from enjoying his assets and wealthy lifestyle. If the strategy of imposing sanctions on individuals is to have any hope of being effective, the Court stated that the designation has to hurt those who are subject to it.
Lord Leggatt’s dissent
Lord Leggatt “profoundly disagree[d]” with the majority’s view that the executive should be accorded a “wide margin of appreciation” because of its greater institutional competence to decide whether restricting a person’s liberty strikes a fair balance with the interests of the community.
In his view, the courts are better placed to decide such questions because they:
- are independent of, and impartial towards, the parties to the dispute;
- are not tasked with promoting the collective interest in the way a minister is, making ministers ill-suited to decide whether that interest should outweigh a fundamental right;
- have a distinctive competence in resolving disputes through the application of demanding standards of public reason;
- hold a responsibility, deeply rooted in British history, to protect the liberties of individuals.
As regards Mr Shvidler, Lord Leggatt concluded there was no rational connection between his designation and the stated aims. He gave a detailed critique of the Foreign, Commonwealth and Development Office’s reasoning, questioning, for example, how the claim that Mr Shvidler’s designation would deter others from associating with those “close to President Putin” would be workable if such individuals were not already deterred by the risk of being designated themselves. On Evraz plc, he noted that none of the other directors were sanctioned alongside Mr Shvidler, nor were any directors of BP, which also had interests in the Russian extractives sector at the time of the invasion.
Comment
At the heart of this judgment are sharply divergent views on the separation of powers under the UK constitution and the appropriate role of the courts.
The majority’s decision is grounded in its recognition of the critical importance of restraining Russian aggression in Ukraine, which the Government is said to have “rightly describe[d] … as representing a most egregious violation of international law and the UN charter” and to regard it as “the most serious threat to European security and the international order since the end of the Second World War”. It also reflects the Court’s appreciation of the intricacies of wielding such foreign policy tools, where pressure on a foreign regime may need to be applied in “subtle and invisible ways”.
By contrast, Lord Leggatt’s dissent envisages a more active role for the courts. While he says that he agrees with the need to recognise and respect the separate role and competences of different organs of state, and the executive’s particular constitutional responsibility and institutional competence in foreign policy, he believes the majority’s judgment does not adequately recognise the role which, under the constitution, the courts are called to play in protecting individual liberties. Lord Leggatt draws a distinction between reasons based on experience or special sources of knowledge or expertise, which the court is less well-equipped to assess, and reasons whose logical validity, consistency, and basic rationality can be tested for compatibility with common sense.
What is clear from this case is that proportionality assessments are highly fact-sensitive, with issues such as the margin of appreciation to be afforded to the decision-maker and the scope of appellate review depending on the context. In the specific context of the sanctions regime introduced in response to Russia’s invasion of Ukraine, the Shvidler and Dalston Project appeals offer authoritative guidance.
Talia Zybutz is a barrister at Twenty Essex.
