Hot topics in the midst of crisis: surviving sanctions, litigation enforcement and reputational management

Louise Azmi
Skrine, Kuala Lumpur
louise.azmi@skrine.com

The ‘Hot topics in the midst of a crisis’ session took place at the IBA Litigation Forum in Amsterdam on 19 April 2024. The session began at 0900 with a Q&A with Simon Davison, Director of Investigations at AnotherDay, moderated by Keith Oliver, Head of International at Peters & Peters, and Vice Chair of the IBA Asset Recovery Committee.

Simon Davison is a former detective of the elite Flying Squad in London, involved in the investigation into the infamous Hatton Garden safe deposit burglary (among others). He subsequently left the police force to found AnotherDay, a London-based investigations team with clients across the globe. It focuses on increasing the security and resilience of businesses, as well as responding to crisis and crime.

Davison informed the room that in the UK, the police force is increasingly overstretched. It is often the case that there are insufficient resources to investigate corporate fraud. AnotherDay works with clients through their lawyers to pursue private prosecutions or civil claims.

The Q&A was short, lively and engaging as we learnt about some of the techniques criminals use to evade the law, including the use of ‘burner’ phones and cryptocurrency.

Burner phones, or pre-paid mobile phones, are used by criminals for a short time before being discarded and the purchaser is not required to provide any personal details. They are low cost and thrown away quickly in case they are intercepted by law enforcement agencies.

Recent years have seen cryptocurrency used increasingly as part of criminal activities and to launder criminal proceeds. Criminals have become more sophisticated in their use of cryptocurrencies. In addition to using cryptocurrencies to obfuscate money flows as part of complex money laundering schemes, cryptocurrencies are increasingly used by criminals as a means of payment or as an investment fraud currency.

We also learned of the techniques AnotherDay employ to secure evidence and ensure a successful outcome for their clients. These include but are not limited to:

• covert surveillance;
• asset tracing;
• overt and covert desktop and on the ground research;
• interviews; and
• taking witness statements.

Hot topics in the midst of crisis

The main session began at 0930, with the following speakers:

Session Chair:

• Jane Colston, Brown Rudnick, London; Co-Vice Chair, IBA Litigation Committee

Speakers:

• Dayo Adu, Famsville Solicitors, Lagos
• John Doherty, Penningtons Manches Cooper, London
• Marina Hadjisoteriou, Michael Kyprianou and Co, Limassol
• Clara Mara-Marhuenda, Arendt and Medemach, Luxembourg
• Felix Neri, Schifferli and Associes, Geneva

Sanctions and recent case law

Since the outbreak of war in Ukraine in 2022, there have been an unprecedented number of sanctions. Courts across the world are grappling with applications from individuals who are the subject of sanctions, as well as commercial parties whose operations have been affected.  

The discussion began with Colston asking Doherty to give his views on the 10 April 2024 decision of the General Court of the European Union (the ‘General Court’) which annulled the inclusion of Russian businessmen Petr Aven and Mikhail Fridman on the European Union sanctions list for the period 22 February 2022 to 13 March 2023. When the EU announced the sanctions in February 2022, the European Council called Aven, ‘one of Vladimir Putin’s closest oligarchs’ and stated that Fridman ‘has managed to cultivate strong ties to the administration of Vladimir Putin, and he has been referred to as a top Russian financier and enabler of Putin’s inner circle’.

Aven and Fridman challenged the sanctions on the basis that they were spurious and unfounded. The General Court ruled that the European Council had not presented enough evidence to establish that the men were involved in efforts to undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.

The General Court determined that the press clippings relied upon to prove the connection with the Kremlin were insufficient to establish that the two men backed Putin’s invasion. The fear is that this will open the door to hundreds of other Kremlin–linked oligarchs to challenge the European sanctions regime.

The decision is sufficiently recent that it is yet unclear what the next steps will be, but John Doherty said that he anticipated an appeal to the Court of Justice of the European Union in Luxembourg.

Sanctions and running a litigation

Following on from this, the panel explained that the fact that sanctions are in place does not mean that litigation cannot be commenced or continued. Law firms may be approached to represent individuals who are challenging sanctions. In the United Kingdom, sanctioned individuals can obtain judgment, but the sum will be paid into a frozen bank account. They will not therefore immediately obtain the fruits of any successful claim.

Hadjisoteriou spoke about the impact on law firms who represent sanctioned individuals. These include risk to the law firm’s reputation, loss of existing clients who object on moral grounds and whether the firm will ultimately be paid. If the law firm is willing to represent the sanctioned individual, they may find that there are no insurers willing to cover them. This must be weighed in the balance with professional ethics and the right to representation.

The related topic of brand management was then discussed by Mara-Marhuenda and Neri. They said that when a brand becomes embroiled in a politically-motivated crisis, it is important not to rush in to remedy the problem. This seems counterintuitive, but when explained made perfect sense:

1. It may blow over.
2. By acting in haste, you risk making matters worse.

Sometimes the best advice is to do nothing.

Those facing reputational damage, whether associated with sanctions or not, were advised to protect information by instructing lawyers so that any advice is privileged and to ensure that information is only distributed where necessary to a trusted few.

Questions from the audience

At the end of the talk the session was opened for questions from delegates. Keith Oliver asked the panel a pointed question: ‘Are sanctions working? Do they make us feel as though we are doing something when, in reality, they are ineffective?’

Adu shared a welcome response from his experience of sanctions in Nigeria. His view is that sanctions are in the process of evolving and that regimes require time to develop. His conclusion was that they are better than nothing and that their effectiveness would improve over time.

Poignantly and appropriately, the final word on this was from Dmytro Marchukov, a delegate from Integrites, Ukraine. His view is that nothing is perfect. Sanctions are evolving in response to something new in humanity and in law. He said that the sanctions regime needs fine-tuning, and that some sanctions may be seen as half measures. However, he stressed the symbolic effect of sanction and that scrapping sanctions looks like tacitly condoning bad behaviour. Sanctions send a message: we do not tolerate what you are doing.