On 14 March 2023, Mr Justice Jay handed down judgment in LLC Synesis v Secretary of State for Foreign, Commonwealth and Development Affairs [2023] EWHC 541 (Admin). The case is the first to come before the UK courts under the Court Review provision under section 38 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).

A surveillance system

LLC Synesis is a Belarussian technology company that developed and sold Kipod, a ‘find and track’ surveillance software that could use CCTV to track people and vehicles. Synesis provided the software to the government of Belarus, which allegedly used it to track down civil society activists and protesters, who were detained and tortured.

The EU and USA designated Synesis under their respective sanctions regimes. On 31 December 2020, the company was designated under the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 (Belarus Regulations).

On 18 January 2022, Synesis applied under section 23(1) of SAMLA for a ministerial review of its designation. It argued that the designation did not contribute to the relevant activity under regulation 6(2) of the Belarus Regulations, the evidence did not refer to the company, and there were no reasonable grounds to suspect Synesis was an “involved person”. The Secretary of State reviewed Synesis’ designation and upheld the decision: by providing the technology, Synesis had been involved in serious human rights violations or abuse in Belarus, the repression of civil society or democratic opposition, and/or been involved in the supply of technology which could contribute to these activities.

Three-ground challenge

Synesis challenged the designation on three grounds. However, as Justice Jay observed in his judgment, the real battleground between the parties was whether there were reasonable grounds to suspect Synesis was an “involved person” under the Belarus Regulations.

Synesis argued that the Secretary of State had applied the wrong standard of proof. “Reasonable grounds to suspect” was an objective question of fact which required more than speculation or bare allegation. In any event, the outcome was irrational because it was based on speculation, rumour, and surmise.

State of mind v state of affairs

Justice Jay distinguished the statutory threshold of “reasonable grounds to suspect” and the standard of review to be applied by a court. The former required a “state of mind rather than a state of affairs” which varied according to the context and whether human rights were in play.

To suspect was to assess all the available information, draw inferences from the circumstances, and reach in good faith a state of mind. Requiring less than proof recognised the public interest of enabling punitive and restrictive measures, even where a civil court would not be satisfied on the same material. Parliament had also recognised that proof of fact to the civil standard may be difficult against companies operating outside of the UK’s jurisdiction, such as Synesis. Moreover, this approach was also consistent with the UK’s international obligations where it may be expected to act alongside others.

The standard of review was Wednesbury irrationality. This was a well-established and flexible standard. However, there was a broad margin of appreciation in the context of sanctions where decision making involved making expert judgements in areas of government policy.

On the Secretary of State’s findings, Justice Jay focused on the wording of regulation 6(3)(d) of the Belarus Regulations which involved the supply to Belarus of technology which “could contribute” to activities such as the repression of civil society. He found that the Secretary of State had been entitled to conclude that the Kipod system fell within that part of the Regulations.

What next for section 38 SAMLA court review challenges?

Ultimately, the judgment does not come as a surprise. Nor is the standard approach that “each case will turn on its own facts” given the individualistic, and specific nature of a sanctions designation.

Each designation has its own factual basis, and each sanctions regime has its own specific purpose (ordinarily explained at regulation 4 of the regime specific regulations). For the Belarus Regulations, the purposes are substantial, diverse, and wide ranging, which among others more specific aims, include encouragement to comply with international human rights law (regulation 4(d)); respect democracy and the rule of law (regulation 4(a)); refrain from actions that repress civil society in Belarus (regulation 4(b)).

By way of example, the Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations) are much more focused in their purpose, namely, to encourage Russia “to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine”.

It is therefore important to bear in mind some of the precise features of Synesis when considering the judgment, in particular that:

(a) it concerned a corporate entity;
(b) the entity in question is incorporated in the EU (rather than, for example, in the UK or British Overseas Territories);
(c) the designation concerned involvement with human rights violations;
(d) the designation occurred before the invasion of Ukraine; and
(e) the acts which led to the designation were tangibly linked to the conduct the sanctions regime sought to target.

This is demonstrably a different factual matrix to other cases that are likely to come before the court, particularly given the vast expansion in the designation of individuals and entities under the Russia Regulations.

As of 15 March 2023, there are over 1,550 individuals, and 180 entities designated under the Russia Regulations. By way of contrast, just over 100 individuals and 16 entities have been designated under the Belarus Regulations.

Given the vast nature of the Russia Regulations, particularly in respect of the number of individuals designated, it will be interesting to see, if even considering the amendments contained within the Economic Crime Act 2022 (as Justice Jay noted the Foreign, Commonwealth & Development Office still consider proportionality within the section 23 ministerial review process under SAMLA), the court engages more with human rights and proportionality arguments when an individual is concerned, rather than a non-UK corporate entity.

This article was co-written by Joseph Sinclair, Pupil Barrister at Mountford Chambers.

A version of this article also appeared in Law360, under the title ‘UK Ruling Clarifies Standard To Be Used In Sanctions Reviews’.