Federal Court decisions on the Autonomous Sanctions Regulations prompt legislative changes

Autonomous Sanctions Amendment Bill 2024

On 24 February 2024, the Australian Parliament tabled the Autonomous Sanctions Amendment Bill 2024 (the Bill) to amend the Autonomous Sanctions Act 2011 (Cth) (the Act).[1] The purpose of the Bill was to clarify:

• “that individuals and / or entities can be validly sanctioned based on past conduct or status”;[2]
• the validity of sanctions imposed on the basis of past conduct or status, or with respect to past circumstances; and
• the validity of sanctions where the Minister did not exercise discretion in imposing sanctions.

The Bill was passed by both Houses on 27 March 2024 and given royal assent on 8 April 2024. The amendments proposed by the Bill have therefore been introduced to the Act.

The key amendment as a result of the Bill is the insertion of a new section 10A into the Act which states:

10A Proscription of persons or entities relating to past circumstances, actions or positions

Without limiting subsection 10(1), regulations made for the purposes of paragraph 10(1)(a) may make provision relating to the proscription of persons or entities (for specified purposes or more generally) on the basis of:

(a)  specified circumstances; or

(b)  the actions of, or position held by, those persons or entities;

regardless of the period of time that has elapsed since the circumstances existed, the actions were so taken or position was so held.

This amendment follows two recent decisions of the Federal Court of Australia, which considered the legality of designations under the current autonomous sanctions regime in Australia: Alexander Abramov v Minister for Foreign Affairs (No. 2) [2023] FCA 1099 and Deripaska v Minister for Foreign Affairs [2024] FCA 62. Each case is considered separately below.

For our further updates on other recent decisions and developments, see Tigers Realm Coal Limited and Alumina and Bauxite Company v Queensland Alumina Ltd.

Alexander Abramov v Minister for Foreign Affairs (No. 2) [2023] FCA 1099

Background

Alexander Abramov, a Russian national, was first designated on 8 April 2022 by the then Foreign Minister, Marise Payne.[3] Regulation 6 of the Autonomous Sanctions Regulations 2011 (Cth) (Regulations), enables the Minister to designate a person or entity for targeted financial sanctions, and/or declare a person for a travel ban if:

• the Minister is satisfied that the person or entity is, or has been, engaging in an activity or performing a function that is of economic or strategic significance to Russia;
• the person is a current or former Minister or senior official of the Russian Government; or
• the person is an immediate family member of a person mentioned in paragraphs (a) or (b) of the Russia criteria.

Following his designation, Mr Abramov commenced proceedings in the Federal Court of Australia for a judicial review of the decision to list him as a designated person. In response, the Minister revoked his designation on 16 September 2022.[4] On the same day, the Minister immediately relisted Mr Abramov as a designated person based on new information and submissions.[5] The reasons for the decision included:[6]

“Mr Abramov has played a key role in Evraz plc, a UK-based holding company that owns or controls several Russian entities with operations and interests in the steel and coal sectors in Russia and provides support to the Russian Government in furtherance of its economic and strategic priorities.”

Mr Abramov subsequently amended his application to challenge both designations and raised the following grounds of review:

• the Minister failed lawfully to form the requisite state of satisfaction on the basis of the evidence and other material placed before her in relation to Mr Abramov;
• the Minister’s failure to consider whether to exercise her discretion to designate or declare Mr Abramov was an error of law and constituted a constructive failure to exercise jurisdiction; and
• the Minister failed to accord Mr Abramov procedural fairness.

Decision

Mr Abramov was successful in challenging the first designation, with the Court finding that there was “jurisdictional error because there was a constructive failure to exercise jurisdiction.”[7] However, he was unsuccessful in challenging the second designation.

In relation to the second designation, the Court held that the Minister may designate an entity or person:

“… even though the person has ceased the activity or function, providing the Minister is satisfied that that activity or function is (still) of economic or strategic significance to Russia. The use of the verb form “has been ... engaging ... or performing” indicates that the activity or function to which these words relate began in the past and has continued for some time thereafter without a clear endpoint.”[8]

Notably, the Court also stated that:

“…there is nothing in reg 6 to limit the activities and functions mentioned in item 6A(a) of the table to activities and functions of “importance” let alone “momentous” economic or strategic significance to Russia

…

[i]t is a matter for the Minister whether to form the requisite satisfaction, subject to the requirement to do so in conformity with the standard of legal reasonableness.”[9]

Deripaska v Minister for Foreign Affairs [2024] FCA 62

Background

Oleg Deripaska, a Russian National, was designated on 17 March 2022 by the then Foreign Minister Marise Payne.[10] Following his designation, Mr Deripaska commenced proceedings in the Federal Court of Australia for judicial review of the decision to list him as a designated person. Mr Deripaska raised a number of grounds of review, including that the “the Minister misunderstood the nature of the power that she purported to exercise”.[11]

Decision

The Court dismissed Mr Deripaska’s application. In response to the argument that the Minister misunderstood the power, the Court stated that:

“It is true that the Explanatory Statement does not include any explanation of why the Minister decided to designate and declare the applicant, other than recording the Minister’s satisfaction that the relevant criterion in item 6A was met. That, however, does not take matters very far. The Explanatory Statement does not purport to be a statement of reasons. Its role is to explain the legal basis for, and intended effect of, the legislative instrument to which it relates.

Inferences about a decision-maker’s reasoning process may properly be drawn from the briefing material that the decision-maker was given.”

The Court considered that the Minister had an understanding of the Regulations due to her involvement in making the Autonomous Sanctions Amendment (Russia) Regulations 2022 with the Governor General in February 2022, and concluded that “[t]he evidence in this case does not establish that the Minister, in making the decision under review, failed to understand that she had a discretion.”[12]

In the judgment, Kennett J recognised that this finding was the opposite of that made by Kenny J in Abramov v Minister for Foreign Affairs (considered above), however stated that (citations omitted):[13]

“…the question what inference should be drawn from evidence is a factual one. Findings of fact in one case do not bind a court in a subsequent case. The Court in each case must consider for itself the evidence adduced in the particular case. There is therefore no need to consider whether the findings made by Kenny J on the evidence in Abramov were “clearly wrong” and it would be inappropriate to express any view on that question. It will be apparent that I have come to a different conclusion, in the context of this case, about what the somewhat convoluted language of the Recommendation would have conveyed to the Minister (cf Abramov at [112]) and the significance of the Ministerial Submission having included discussion of matters that were irrelevant to whether the applicant met the criteria in item 6A.”

Takeaways

Arising from these decisions of the Federal Court, the Bill confirms that persons can be validly designated by the Minister based on past conduct or status, or with respect to past circumstances. The Bill also retrospectively validates designations that have been made on such a basis and confirms the validity of a designation decision even where the Minister has failed to consider their discretion as to whether they should designate a person.

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[1] Autonomous Sanctions Amendment Bill 2024

[2] Explanatory Memoranda to the Autonomous Sanctions Amendment Bill 2024.

[3] Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Russia and Ukraine) Amendment (No. 11) Instrument 2022

[4] Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Russia and Ukraine) Amendment (No. 19) Instrument 2022

[5] Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Russia and Ukraine) Amendment (No. 20) Instrument 2022

[6] Explanatory Memorandum to Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Russia and Ukraine) Amendment (No. 20) Instrument 2022

[7] [2023] FCA 1099, [111].

[8] [2023] FCA 1099, [70].

[9] [2023] FCA 1099, [74].

[10] Autonomous Sanctions (Designated Persons and Entities and Declared Persons — Russia and Ukraine) Amendment (No 7) Instrument 2022

[11] [2024] FCA 62, [4].

[12] [2024] FCA 62, [141] – [142].

[13] [2024] FCA 62, [143].