Anzhelika Khan v The Secretary of State for Foreign, Commonwealth and Development Affairs

Hearing dates: 23 January 2024

APPROVED JUDGMENT

INTRODUCTION

Ms Anzhelika Khan (“Ms Khan”) is a Russian born British citizen. She has lived in the UK since 2013 and became a citizen in 2019. She applies to set aside a decision of the Secretary of State for Foreign, Commonwealth and Development Affairs (“the Secretary of State”) to take no action (ie. to maintain) Ms Khan's sanctions designation under the Russia (Sanctions) (EU Exit) Regulations 2019 (“the 2019 Regulations”) following a review of the original designation decision. Ms Khan's claim is brought pursuant to s 38(2) of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”).

In essence the circumstances of her designation and her challenge to that designation are as follows.

Ms Khan's primary role in life is as mother and caregiver to her children, of whom there are four: ranging in age from a married daughter with her own family, down to a son who is not yet in his teens. Secondarily Ms Khan is the manager of various properties which she owns and is an art collector of some note. It is common ground that she (i) is not, and has never been, involved in political affairs (in Russia or elsewhere); (ii) has never provided material support to the Putin regime; and (iii) wields no personal economic influence capable of affecting the foreign policy of the Government of Russia.

Ms Khan is, however, the wife of Mr German Khan (“Mr Khan”). Mr Khan was born in Kyiv, Ukraine. He has over the years amassed a very substantial fortune, estimated in open source reporting as about US$7.55 billion. A substantial part of that fortune derives from investments and businesses in Russia, such as the Alfa Group and Alfa Bank — Russia's largest privately owned bank. At the time of Ms Khan's designation he was said to be on the Supervisory Board of the Alfa Group Consortium and the Board of Directors of ABH Holdings S.A., owner of Alfa-Bank (Russia), and Chairman of the Supervisory Board of A1 Investment Holding S.A., a company described by the Alfa Bank website as a “ leading investment company in Russia – an expert in resolving complex business cases and corporate disputes”.

As such Mr Khan has a proximity to the Russian government and Mr Putin. Mr Khan remained primarily resident in Russia when Ms Khan and their children relocated to the UK. Mr Khan was designated under the UK sanctions regime on 15 March 2022. That designation has never been challenged.

Over the years Mr Khan has given Ms Khan many very substantial gifts, including his shares in four properties and financial gifts totalling some hundreds of millions of pounds. In early March 2022 – just before he was sanctioned — he gave Ms Khan the single largest gift to date (“the March Gift”): one which represents a significant proportion of the amounts given over the years.

Ms Khan was designated on 20 April 2022. The basis for this designation is that there are reasonable grounds for believing that Ms Khan is a person who is “associated with” an involved person, i.e. Mr Khan (this falls within Regulation 6(2)(d), described further below). Ms Khan is regarded as being associated with Mr Khan both because she is married to him and because she has obtained “ a financial benefit or other material benefit” from him. Ms Khan was subject to an asset freeze and a transport sanction.

On 22 November 2022, Ms Khan requested a Ministerial review of her designation under s.23(1)(b) SAMLA. On 28 February 2023, following a Ministerial review, her application was refused and her designation maintained.

On 21 March 2023, Ms Khan's designation was varied to impose a trust services sanction.

By these proceedings, Ms Khan challenges the decision to maintain her designation on three grounds. She contends that:

1) The Secretary of State failed to consider whether her designation was likely to further the statutory purpose of the 2019 Regulations, thereby acting ultra vires the 2019 Regulations, and/or failed to have regard to a mandatory relevant consideration, and/or acted unreasonably;

2) The designation constitutes a disproportionate interference with her rights under Article 8 and Article 1, Protocol 1 (“A1P1”) of the European Convention on Human Rights (“ECHR”); and

3) Regulation 6(2)(d) of the 2019 Regulations is incompatible with Article 8 and A1P1 ECHR.

THE UK SANCTIONS REGIME

The UK Sanctions regime operates under the umbrella of SAMLA. The background to the sanctions regime is described in some detail in the judgments of the Court of Appeal in Mints v PJSC National Bank Trust and another [2023] EWCA Civ 1132 and Garnham J in Shvidler v Secretary of State for Foreign, Commonwealth, and Development Affairs [2023] EWHC 2121 (Admin). The account below concerns only those portions of the regime which are necessary for the understanding of the judgment; those wishing for further detail can find them in the earlier judgments.

Section 1 of SAMLA provides for the power to make sanctions regulations:

“1 Power to make sanctions regulations

(1) An appropriate Minister may make sanctions regulations where that Minister considers that it is appropriate to make the regulations—[…]

(c) for a purpose within subsection (2).

(2) A purpose is within this subsection if the appropriate Minister making the regulations considers that carrying out that purpose would — […]

(b) be in the interests of national security,

(c) be in the interests of international peace and security, […]”

Section 11(2) of SAMLA originally provided as follows:

“The regulations must contain provision which prohibits the Minister from designating a person by name except where the Minister—

(a) has reasonable grounds to suspect that that person is an involved person (see subsection (3)), and

(b) considers that the designation of that person is appropriate, having regard to—

(i) the purpose of the regulations as stated under section 1(3), and

(ii) the likely significant effects of the designation on that person (as they appear to the Minister to be on the basis of the information that the Minister has).”

This provision was amended by the Economic Crime (Transparency and Enforcement) Act 2022 (“the 2022 Act”). Section 58(3) of the 2022 Act amends s. 11(2)(b) of the SAMLA to remove the requirement that regulations made under the SAMLA must contain a provision prohibiting the designation of an individual unless the Minister considers, inter alia, “ that the designation of that person is appropriate”, having regard to (i) the purposes of the regulations; and (ii) the likely significant effects of the designation on that person.

Section 23 of SAMLA provides that:

“23 Right to request variation or revocation of designation

(1) At any time while a relevant designation has effect, the designated person may—

(a) request the Minister to vary the designation, or

(b) request the Minister to revoke the designation. […]

(3) On a request under this section the Minister must decide whether to vary or revoke the designation or to take no action with respect to it (but see section 22(3)).”

Section 38 of SAMLA provides that:

“38 Court review of decisions

(1) This section applies to—

(a) any decision under section 23( 3) or 24(2) (decision, following a request to or review by an appropriate Minister, on whether a designation of a person made under a designation power should be varied or revoked); […]

(2) The appropriate person may apply to the High Court or, in Scotland, the Court of Session, for the decision to be set aside.

(3) “The appropriate person” means—

(a) in relation to a decision within subsection (1)(a), the person named by the designation or, where the designation is of persons of a specified description, any person of that description; […]

(4) In determining whether the decision should be set aside, the court must apply the principles applicable on an application for judicial review.

(5) If the court decides that a decision should be set aside it may make any such order, or give any such relief, as could in the absence of this section be made or given in proceedings for judicial review of the decision; but this is subject to section 39(1) to (4). […]”

The 2019 Regulations were made pursuant to SAMLA. They implement a system of sanctions designation for purposes connected with the Russian actions in relation to (and later invasion of) Ukraine. The 2019 Regulations are made under the power conferred by s 1(1)(c), read together with ss. 2(b) and (c).

Regulation 4 of the 2019 Regulations establishes the purposes of those regulations:

“Purposes

4. The regulations contained in this instrument that are made under section 1 of the Act are for the purposes of encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.”

Pausing here, that purpose reflects entirely the 11 April 2019 Report which was laid before Parliament and which is quoted at [52] of Shvidler. That makes clear that sanctions do not stand alone but form one element of a broad strategy – a point which was made thus in Shvidler at [137]: “ the effectiveness of any sanctions regime depends, not on the effect of...