The owners of M/Y Phi claim that the UK government’s decision to detain their yacht was unlawful. The High Court is exercising its limited but important supervisory powers to review the lawfulness of government’s detention decision.
On 28 March 2022 M/Y Phi, a 58.5m superyacht built by Royal Huisman, launched in 2021, was detained by British police upon the instruction by the Rt Hon. Grant Shapps MP, the UK’s then Secretary of State for Transport.
The superyacht was in London for the World Superyacht Awards and was due to depart later that same day.
Notably it was, and is, not the government’s case that the superyacht is owned by a sanctioned individual. Rather the detention was authorised on the basis of the Secretary of State exercising powers conferred by (Russia (Sanctions) (EU Exit) Regulations 2019 SI 2019/855 to detain ‘a ship owned, controlled, chartered or operated by persons connected with Russia’.
Mr Shapps appeared on TV and social media channels in front of the newly detained superyacht, declaring that the detention was “a clear and stark warning to Putin and his cronies” and that “we’ve detained the yacht indefinitely.”
M/Y Phi remains in Canary Wharf but the legality of the original detention decision and ongoing detention (confirmed by formal government decisions made on 11 April 2022 and 3 January 2023) is now subject to challenge in the High Court.
The Claimants, namely the documented Ultimate Beneficial Owner, Mr Sergei Georgievich Naumenko, and the corporate structure through which the yacht is owned, have issued proceedings under Section 38 of the Sanctions and Anti-Money Laundering Act 2018 to apply for a Court review of the government’s decision to detain the yacht.
The High Court will determine whether the government’s decision to detain the yacht should be set aside by applying the principles applicable in an application for judicial review. This means that the Court will not look into the merits of the decision but will conduct a review of the process by which it was reached.
The Court may set aside the decision if it was reached on the basis of being either illegal, or irrational/so unreasonable no reasonable authority could have come to the decision, or if there was procedural unfairness, or if there has been a breach of legitimate expectation. Judicial review has been described as the judges’ remedy ‘to restrain the excess or abuse of power’.
At the forthcoming hearing the High Court will also hear the two parties’ submissions on whether, if the decision was unlawful and is set aside, the Claimants are also in principle entitled to recover damages either under the Human Rights Act 1998 (unlawful interference with an owner’s right to protection of property and enjoyment of the same) and/or under the common law tort of conversion (unlawful interference with another person’s property).
This High Court hearing to determine whether or not the government’s decision should be set aside and if so whether in principle damages are recoverable, will take place in July 2023 and we will analyse the decision once it is published.
Only if the decision is set aside and the Court is persuaded in principle that damages are recoverable under one or the other legal basis will the parties then move on to make submissions on the issue of quantum. How and at what level should the owners of M/Y Phi be compensated for having been deprived of their ability to use the EUR 38M superyacht since its detention in March 2022?
If the level of damages is not agreed or settled between the parties then the High Court will determine that matter in another public judgement.
We can readily expect that the level of any damages to be paid by the UK government to the owners of M/Y Phi would be widely scrutinised in the ‘court of public opinion’.
For further information, please get in touch with our Yachts team.
For further information, please contact:
Francesca Conn, Hill Dickinson
francesca.conn@hilldickinson.com
