What will it take to de-designate? A landmark sanctions challenge fails

Judgment was handed down on 14 March 2023 in LLC Synesis v Secretary of State for Foreign, Commonwealth and Development Affairs [2023] EWHC 541(Admin), the first case of its kind to consider a designation challenge under section 38 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).

The court rejected LLC Synesis’ (Synesis) challenge to its listing under The Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 (Belarus Regulations) and upheld the Foreign, Commonwealth and Development Office’s (FCDO) decision not to strike Synesis off the list of designated persons following a Ministerial review. In accordance with section 38(4) of SAMLA, the court applied judicial review principles when deciding the case and, in its own words, “was not being asked to reinvent the wheel”, meaning it was not analysing the evidence on which the designation was made, but rather the process by which the decision was reached.

Synesis is a Belarusian technology company which provided the “Kipod” software for use by the Belarusian government and state agencies in tracking, amongst others, civil activists and those involved in the anti-presidential protests. Importantly, the software is not a simple mass-recognition software, but rather operates on a “person card” basis, where photos of specifically targeted persons are uploaded to the platform and the algorithm goes on a “hunt” for hits of those persons across the surveillance footage collected as part of the Republican System for Monitoring Public Safety (RSMPS). This fact supported Justice Jay’s finding that the software “could contribute” to one of the activities which the Belarus Regulations seek to deter, specifically the “repression of civil society and democratic opposition in Belarus”.

Synesis was first designated under EU sanctions legislation in December 2020 and the FCDO continued this designation following Brexit under the Belarus Regulations. Synesis is also designated in the US. In January 2022, Synesis applied for a Ministerial review submitting three grounds for review: (i) the RSMPS’s use of the Kipod software did not contribute to any relevant activity under Regulation 6 of the Belarus Regulations; (ii) the FCDO’s evidence did not refer to Synesis in any way, and was irrelevant to the designation criteria; (iii) the legislative purpose had not been met and the designation was unjustified. In July 2022 the FCDO notified Synesis of its decision to uphold the designation and Synesis applied to have the decision judicially reviewed by a court.

The judgment offers key insights into the exercise courts will undertake when considering a challenge to designation. According to Justice Jay.

• The court will not “stand in the shoes” of the decision-maker when reviewing a designation under section 38 of SAMLA. Instead, its role is to examine whether the FCDO’s decision was “either based on no evidence” or fell foul of the core principles of judicial review; in this instance that the decision was “irrational”. Justice Jay stated that the statutory threshold for “reasonable grounds to suspect” which must be applied by the FCDO when making designations is distinct from standard of review applied by courts when considering a designation in hindsight.
• In terms of the statutory threshold to be applied by the FCDO when making designations, the “net goes far wider” in terms of the information open to consideration, and in any event beyond what would be deemed admissible in a court of law. This could include (i) hearsay, (ii) multiple hearsay, (iii) allegations, and (iv) intelligence.
• There is no standard of proof imported into the statutory threshold for “reasonable grounds to suspect”. The FCDO is not required to make a finding of fact, but rather to assess or evaluate the information and material available, draw inferences, and adopt a “good faith of a state of mind” in respect of that exercise. It must have been a deliberate choice on behalf of Parliament not to introduce a standard of proof into sanctions designations – such as the “balance of probabilities” standard found in civil cases, or the “beyond all reasonable doubt” standard for criminal cases - so as to avoid inhibiting the UK Government’s ability to act in the public interest in the area of national security, and apply measures even if a civil court would not be satisfied on the basis of the same material.
• By reference to the EU case of Al-Ghabra v European Commission (Case T-248/13), “the requirement for “sufficiently solid evidence” […] should not be understood as demanding nothing less than evidence or hard facts, nor as suggesting that it is for the reviewing court to decide for itself whether this basis exists”. Mr Justice Jay made clear that the court was not looking at the quality of the FCDO’s evidence, but rather at its exercise of assessing the evidence.
• The threshold in Regulation 6(3)(d) of the Belarus Regulations for “reasonable grounds to suspect” is something that “could contribute” to the activities which the Belarus Regulations seek to deter, not that they “did in fact” contribute, which is a low threshold to satisfy, even in the absence of a direct evidential link to e.g. an activist suffering harm as a result of Kipod.

On this basis, Justice Jay rejected Synesis’ challenge to its designation.

As part of its application of judicial review principles, Justice Jay also looked at the evidence which was available to the FCDO and its analysis of it, offering some practical guidance as to what the Ministers and the challenging party are expected to submit.

• As part of its application for Ministerial review under section 23(1) of SAMLA, Synesis had the right to request the FCDO’s supporting evidence for its designation. This evidence was provided by the FCDO in the form of (i) the Sanctions Designation Form; (ii) the Sanctions Designations Form Evidence Pack, and (iii) annexes containing exhibits. Synesis also submitted substantive evidence of its own, containing expert reports and witness statements.
• For the purposes of the Ministerial review, the FCDO also considered the EU’s evidence pack for designation.
• In upholding the designation, the FCDO submitting an updated Sanctions Designation Form and Sanctions Designations Form Evidence Pack, along with a revised Statement of Reasons for the designation.

Despite not ruling on the merits on the evidence, Justice Jay referred extensively to both the FCDO’s evidence pack which included information from Synesis’ website, examples of news articles in relation to activist Nikolai Dedok who was detained and tortured as a result of the software and a Belarusian presidential decree, and Synesis’ evidence which contained statements from Belarusian lawyers and an expert report on the software. The judgment offered an interesting narrative on the type of evidence the FCDO will take into account when making a designation, and the nature of rebuttal evidence a challenging party will seek to bring.

While the decision (as a first instance decision of the High Court) is not strictly precedent, the Synesis case stands as a unique reference point for sanctions designation challenges in the UK and will inform sanctioned parties of the approach the judiciary is expected to take going forward. Although each case will be heavily dependent on both its specific facts and the relevant jurisdictional regime – the first challenges under the Russia Regulations are imminent – the case is a reminder that the FCDO is likely to be granted significant leeway in making designations by the English courts. The bar for designations is low, and the bar for challenges appears to be high.