A key feature of the UK’s financial sanctions framework is that not only designated persons (listed on the UK’s Consolidated List) are subject to sanctions, but also entities that are ‘owned or controlled’ by designated persons, even if not themselves listed.
This alert memorandum discusses recent developments relating to the ‘control’ test and its application, including the Court of Appeal judgment in Mints & Ors v PJSC National Bank Trust & Anor (“Mints”, considered in detail in our firm’s dedicated alert memorandum, accessible here), the recent High Court judgment in Litasco SA v Der Mond Oil and Gas Africa SA & Anor (“Litasco”), and the “Ownership and Control: Public Officials and Control guidance” (the “Control Guidance”) issued jointly by HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) and the Foreign, Commonwealth and Development Office (the “FCDO”).
Key takeaways are:
- OFSI/the FCDO do not automatically deem public sector entities controlled by public officials holding a leadership position in relation to that entity. As a matter of case law, however, where litigants can point towards evidence showing strong links between a public sector entity and sanctioned public officials, courts may find that sufficient control exists.
- There is no presumption on the part of the UK government that a private entity is subject to the control of a designated public official simply because that entity is based or incorporated in a jurisdiction in which that official has a leading role in economic policy or decision-making. Whether a court would adopt the same position is somewhat uncertain, although, following Litasco, it may be that that is the case.
Ultimately, whether an entity is under the control of another person is subject to a case-by-case assessment, and it is advisable for counterparties of such entities to conduct appropriate due diligence. What levels of due diligence will be sufficient is, again, case specific, depending on the sanctions risk arising from the specific circumstances.
Please click here to read the full alert memorandum.