The Latest From M/Y Phi

The case of Phi, detained by the UK since 28 March 2022, will be well known to many readers. In the most recent development, the UK Supreme Court was asked to rule that the detention should be set aside, on the basis that it disproportionately interfered with the property rights of the yacht’s owner.

At its heart, the case was about the need to balance the rights of the individual (in this case the owner of Phi) against the general interest of the community.

In its considerations, the Supreme Court identified the following four main questions:

• Is the aim sufficiently important to justify interference with a fundamental right?
• Is there a rational connection between the means chosen and the aim in view?
• Was there a less intrusive measure which could have been used without compromising the achievement of that aim?
• Has a fair balance been struck between the rights of the individual and the general interest of the community?

As has been made clear by the judgment of the Supreme Court, it will be very difficult for a person impacted by UK sanctions to challenge them on the basis that there is disproportionate interference with their property rights.

Perhaps the most striking aspect of the judgment was the court’s rejection of the owner’s argument that the likelihood of the detention of Phi having any effect whatever on the prosecution of the war in Ukraine is so vanishingly small that it cannot justify the interference with their rights.

The Supreme Court concluded that there was no need to show that the particular sanctions which were imposed would by themselves achieve the purposes for which they were imposed. Instead, there was only a need to show a rational connection between the detention of the Phi and the aim of putting pressure on Russia.

The Supreme Court was prepared to find that there was both an economic and a political connection, even in the event that no money earned from Phi was repatriated to Russia and even in circumstances where the owner of Phi had no political role in Russia (and has not been sanctioned by the UK).

Ultimately, the Supreme Court accepted the view of government officials that “the Phi Direction will contribute to pressure on the regime in Russia, even if that pressure is exerted in subtle and invisible ways“. The Supreme Court found that “given the nature of the regime and the support on which it relies, that is a plausible assessment” and was not prepared to substitute its own view.

As a result, it appears that UK sanctions measures will not be set aside, provided that they can be shown to incentivise behaviour change in ways that may impact the Russian state and/or they can help to constrain or coerce, either directly or indirectly, the Russian government’s actions.