Cyprus Mail
CM Regular ColumnistFeaturedOpinion

The super-rich grandchildren of the Russian revolution

file photo: football chelsea v crystal palace barclays premier league
FILE PHOTO: Football - Chelsea v Crystal Palace - Barclays Premier League - Stamford Bridge - 3/5/15 Chelsea owner Roman Abramovich in the stands. Action Images via Reuters /John Sibley
Russians love to litigate in England and the legal profession in London loves Russian litigation as it is extremely lucrative

By Alper Ali Riza

After the Soviet Union collapsed an ugly capitalist ideology gripped the former communist bloc and within ten years a new class of super-rich Russian oligarchs surfaced in the West in places like London’s Royal Borough of Kensington and Chelsea and Cyprus’ Larnaca-Limassol axis of coastal towns.

Their arrival and their wealth were welcomed and celebrated until 2022 when Russia invaded Ukraine but then their wealth and quiet enjoyment of their properties in the West were frozen and they were no longer welcome.

According to Karl Marx, come the revolution the expropriators shall be expropriated but neither he nor the leader of the Russian revolution, Vladimir Lenin, could have imagined that the grandchildren of the Russian revolution would become super-rich oligarchs and have their properties expropriated by the bourgeoisie of Europe and America.

The West’s answer to Russia’s invasion of Ukraine has various strands one of which has been the imposition of a rigorous sanctions system on a select few Russians with multimillion assets in the West. The idea behind the policy is to make Russia less able to finance its war effort as well as to sting Russian President Putin and his close associates personally in the hope they would relent.

Sanctions were first imposed on Russia after it annexed Crimea in 2014 and full-blown sanctions were imposed again after Russia invaded Ukraine proper in February 2022 with the addition of more significant players to the list of sanctioned persons.

The legal structure of the sanctions regime derives from a UN Security Council resolution of 1999 that was passed to combat terrorism and another resolution in 2006 that imposed sanctions on Iranian entities to prevent Iran from developing nuclear weapons.

For a time after the 2016 Brexit referendum the sanctions on Russian persons in the UK was done under a 2014 EU regulation that is still in force in member states. The scheme of the regulation is that it freezes funds and economic resources held or controlled by persons designated on a list; prohibits funds and economic resources being made available to such persons; and makes it a criminal offence to breach the regulation. The term ‘persons’ is given a wide meaning and includes natural and legal persons and those associated with them.

There are a few exceptions to cater for pre-designation obligations to pay into funds; but any such payments would also be frozen. Under UK law it is possible to license payments out to pay for legal fees and other similar disbursements; there is provision to the same effect under EU law but it is done by derogations and exceptions rather than licensing.

It was during the Brexit transition period that the UK passed its own sanctions law of 2018 which enabled the relevant minister to make regulations to impose sanctions. The important point, however, is that the English version of the regulations is to the same overall effect as the EU regulation.

The only avenue of challenge of a designation in the UK is judicial review of a decision not to remove a person from the designated list which means that one can’t challenge the original designation. One needs to request removal from the list first and seek a judicial review if refused.

The sanctions system against Russian persons is not part of international law because it was not authorised by the UN Security Council for the obvious reason that Russia would veto any such resolution against itself if it were ever tabled. The fact that only the US, EU and UK adopted sanctions against Russian interests, means that the rest of the world is free to engage with Russia as it pleases.

A number of cases involving the legal effects of sanctions are going through the system in litigation centres like the High Court in England in London. One of the advantages of having a high-quality judiciary such as the one in England is that irrespective of bad relations between the UK and Russia, relations between Russian litigants and the English courts are excellent. Russians love to litigate in England and the legal profession in London loves Russian litigation as it is extremely lucrative.

The sanctions system is complex, but fortunately at the end of January 2023 a High Court Judge handed down a judgment, which explains sanctions law in detail and sets its legislative context with care and concern about the draconian powers the government arrogated to itself in this area. I am afraid I cannot recommend it as a good read.  It is long and technical but it is also a sound judgment.

The facts of the case were simple. Before the invasion of Ukraine in February 2022 the claimants, two Russian banks in London, were apparently given worthless bonds by the defendants to replace loans the banks made and expected to be paid back in the normal way. The banks made a claim for their loss of nearly a £1billion some time before Russia invaded Ukraine in February 2022.

The UK government imposed sanctions on the two Russian banks immediately after Russia invaded. Opportunistically, the defendants applied for the proceedings against them to be stayed on the ground that the sanctions precluded the court from entering judgment. They argued that the court would be making an economic resource available to the banks in breach of the sanctions regulation if it processed their claim. It was an ingenious argument but it failed because the result would obviously be unjust.

The judge could not just say that granting a stay would be unjust because the case turned on the interpretation of the text of the 2018 regulations. What she said, which was more sound in law, was that she was not persuaded because the legislative context did not show a clear intention by Parliament to deny the banks’ fundamental right of access to the court to determine their rights and enter judgment in their favour if they made their claim good.

Alper Ali Riza is a king’s counsel in the UK and a retired part-time judge

Follow the Cyprus Mail on Google News

Related Posts

Prisoners ‘scared for their safety’ anti-torture report finds

Andria Kades

Our View: State-backed Cyta could threaten free market competition

CM: Our View

Row over Vasiliko terminal deepens

Jean Christou

UK aid reaches Gaza via Cyprus maritime corridor

Jonathan Shkurko

Cyprus ‘not alone’ over migration

Tom Cleaver

‘Inhuman and degrading treatment of migrants in Cyprus’

Andria Kades