Sanctions after Shvidler: a narrowing path for legal challenge

In Vladimir Menshov’s Oscar-winning 1980 Soviet film, Moscow Does Not Believe in Tears, a factory director has a brusque exchange with a subordinate who wants to explain why something cannot be done. “Nikolai Vasilyevich,” she says, “shall I sit here with you and commiserate about your difficulties? You must understand that overcoming these difficulties is your job. Going forward, let us agree: I am not interested in why it cannot be done. I am interested in what you have done to make it happen.”

This exchange came to mind on reading a recent tale of woe from Shvidler, a Russian billionaire, despairing at how difficult it is to get off the UK’s sanctions list.  The question is a pressing one and the Supreme Court has answered in a similar vein to that of the factory director. Its judgment in Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs; Dalston Projects Ltd and others v Secretary of State for Transport [2025] UKSC 30, handed down on 29 July 2025, is not interested in why individual sanctions measures cannot be shown to move Russian policy. Rather, it is interested in whether the system, as a whole, plausibly might. 

Much has been written since the judgment was delivered, however for clarity, to my mind there are three main issues arising from the judgment that anyone advising a designated individual must now confront.

Advising Designated Individuals: Navigating the New Landscape

While designated persons “are not alleged to have committed any criminal offences or to have otherwise engaged in any wrongdoing”, measures under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) “can […] have a prolonged and potentially devastating effect on the individuals and their families” [para 1]. So the practical message of the judgment is that the threshold for a successful challenge is high.

The first learning from the judgment that informs advice to clients is that hallenges based on an individual’s contribution to the effect of the Russia sanctions policy will fail. The Supreme Court confirmed that the government is not required to show that a particular measure would by itself achieve the sanctions purposes. What is required is that the measure makes some plausible contribution to the cumulative effect of the regime as a whole [para 191]. The Court went further - the assessment of whether pressure is being exerted on Russia, even in what the Court described as “subtle and invisible ways”, is one for which a court is “wholly unqualified in constitutional terms” to substitute its own view for that of the executive [para 193]. An argument that a client’s individual designation makes no difference to Russian policy is therefore foreclosed as a standalone point.

Second, the wide margin of appreciation the court affords to ministers applies across all four limbs of the proportionality test, not just on the question of aim. The Supreme Court held that because these cases involve foreign policy and national security, ministers must be accorded a wide margin of appreciation at every stage of the Bank Mellat analysis [para 130]. 

Third, demonstrable failure of the OFSI licensing system in a client’s specific case is a direct route to undermining the ‘fair balance’ finding. The majority of judges treated the availability of OFSI licences as “a form of safety valve” that reinforced the conclusion that Mr Shvidler’s designation struck a fair balance [para 212]. However, where a client can demonstrate that the licensing system has not, in practice, enabled them to meet basic needs, fund legal representation or conduct essential transactions, it would directly undermine the fair balance conclusion so evidence of licensing failure should be gathered and documented from the outset of any instruction.

Fourth, by operation of section 21 of SAMLA and regulation 3 of the 2019 Regulations, prohibitions imposed on a designated person apply to conduct outside the United Kingdom where that person is a British citizen. As the Supreme Court explained, this means that unlike a non-British national whose freeze is limited to UK assets, a British citizen is prevented from dealing with any of their assets wherever in the world they are located [para 260]. This needs to be understood before any litigation or review strategy is considered, as it fundamentally affects the scope of the restrictions that UK persons face.

Finally, the quality and credibility of the government’s evidence for rational connection should be challenged forensically. Lord Leggatt’s dissenting judgment examined the FCDO’s witness evidence in detail and found the reasons advanced to be “no more than armchair theories” [para 307], describing one specific assertion as “incoherent” [para 308], and concluding that the reasons as a whole “do not establish a rational connection between the measure taken and the desired aims” [para 319]. Because this reasoning appears in the Supreme Court’s judgment, it is available to practitioners as a framework for subjecting the government’s rational connection evidence to scrutiny in future cases, even though it did not command a majority.

How Courts Are Assessing Proportionality and Influence

The Supreme Court provided conclusions under each of the four limbs of the Bank Mellat test – ie the proportionality of a decision that restricts rights, as the sanctions regime is designed to do. .

Limb (i) (Legitimate aim). 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” [para 173]. The Court held that this finding of vital importance is not confined to Limb (i): it may justify measures where the connection to the aim is less direct than would otherwise be required [para 166], and it carries weight through every subsequent stage of the analysis.

Limb (ii) (Rational connection and influence). The Court confronted the question of influence directly. It acknowledged that it is difficult for both the government and the court to understand what may, or may not, exert influence on President Putin and equally difficult to assess whether any particular measure has had, or may have, any effect [para 179]. The Court’s conclusion was not that this uncertainty undermines a designation, it was the opposite. The assessment of whether a measure contributes to pressure on Russia, even where that pressure operates in what the Court called “subtle and invisible ways”, is one for which a court is “wholly unqualified in constitutional terms and on grounds of relative expertise to substitute its own view” [para 193]. The unprovability of influence is itself the reason the court defers, not a ground of challenge. What the government must show is only that the measure makes some plausible contribution to the cumulative effect of the regime as a whole [para 191].

Limb (iii) (Less intrusive means). The Court found that no less intrusive measure was available that would not have compromised the objective in an unacceptable way. Counsel for the appellants could point to none [para 203].

Limb (iv) (Fair balance). The Court described the fair balance assessment as “straightforward” in both cases [paras 205, 213]. In Shvidler, the Court acknowledged the worldwide asset freeze was “obviously very drastic” in its effect [para 210] but concluded that sanctions must be severe and open-ended to be effective [para 213]. The OFSI licensing system, described as “a form of safety valve” enabling core needs to be met, reinforced this conclusion [para 212]. In Dalston Projects, the fair balance was equally straightforward - Mr Naumenko lost use of a trophy asset and chartering income, but the Court found this did not cause him individual hardship in his normal daily life and the imposition of those costs was central to the point of the sanction [paras 204, 207].

In contrast, Lord Leggatt’s conclusion on fair balance was that judges “abdicate their responsibility” if they defer to the executive’s own view that it has struck a fair balance [para 286] and that the restrictions on Mr Shvidler were “unjust and disproportionate” [para 324].

Which Arguments Have Traction in Designation Challenges?

Within the courtroom, the arguments that can survive are those grounded in the specific facts of a client’s situation rather than in general propositions about the futility of sanctions. 

Where the OFSI licensing system has demonstrably failed to meet a client’s basic needs, that failure strikes directly at the fair balance finding on which the majority relied [para 212] because the majority treated the licensing regime as load-bearing. 

Where the government’s evidence for rational connection is thin, contradictory or amounts to little more than assertion, Lord Leggatt’s dissenting judgement opens a possibility for that challenge. 

But perhaps the most important observation this judgment prompts has nothing to do with the courtroom at all. Sanctions exist to “change behaviour, constrain damaging action or send a signal of condemnation” [para 36]. The purpose of the Russia sanctions regime is, in the words of regulation 4, “encouraging Russia to cease” its destabilising actions [para 31]. Behaviour change is the objective. If that is so, then demonstrating changed behaviour is a more direct route to delisting than any court can offer.