District Judge Avent, sitting in the County Court at Central London, has denied a claimant's application for summary judgment in a dispute where the Russia (Sanctions) (EU Exit) Regulations 2019 (the 2019 Regulations) are described as being front and centre to the issues in the case.
XTX Markets Technologies Ltd (XTX) issued a claim against Mazers LLP alleging discrimination under the Equality Act 2010. XTX is a company within the XTX Group (the Group). The Group is a financial technology trading business and has 200 employees across the globe. It was founded by Dr Alexander Gerko (Dr Gerko) who is XTX’s co-CEO and Ultimate Beneficial Owner (UBO). Dr Gerko has permanently resided and worked in the UK since 2006 and has held British citizenship since 2016. He also held Russian citizenship but is believed to have renounced that last year.
Mazars provides international tax, advisory and accountancy services. XTX contacted Mazars in April 2022 with a view to them undertaking payroll services for all the Groups employees globally. As part of its due diligence, Mazars requested information regarding the ownership of XTX which included details of Dr Gerko as the UBO. In addition to needing to comply with "know your client" and ensure it was in compliance with its anti-money laundering obligations, Mazars had to comply with the 2019 Regulations, specifically Regulation 11 which is of main relevance for professionals such as Mazars.
Dr Gerko was not, and never was, a designated person under the 2019 Regulations. The dispute started to grow legs on 10 May 2022 when XTX was informed that Mazars would not provide their services because of Dr Gerko's nationality. Mazars, as a group, had taken the decision to not accept any new clients with Russian ownership. It is alleged that the decision was discriminatory and XTX issued proceedings. Mazars denies any discrimination and asserted that XTX was not treated less favourably than a real or hypothetical comparator and relied on section 44 of the Sanctions & Anti-Money Laundering Act 2018 (SAMLA), which offers protection to those who may be subject to civil proceedings where there is a reasonable belief that they are acting in compliance with sanctions regulations.
The County Court decision
The Judge held that there were compelling reasons why this matter should proceed to trial and that the sanctions regime created a unique set of circumstances. It was acknowledged that in discrimination claims context is everything and that, in this instance, Dr Gerko's nationality was only a factor because it engaged a consideration of the sanctions regime under the 2019 Regulations.
Some further comments made by the Judge in dismissing the summary judgment application were:
- XTX is a multi-national firm with 200 employees spread across three continents, each having their own jurisdictional requirements, including sanction regimes. This would have given rise to numerous considerations which would not necessarily have been relevant had Mazars only been contracting with Dr Gerko. It was said that it is of crucial importance that this distinction is made
- Dr Gerko's nationality became relevant because of his association with the 2019 Regulations, through having Russian nationality and Mazars were obligated to comply with the 2019 Regulations. It was arguable, the Judge said, that Mazars did not single out Dr Gerko, but could not view him without looking through the lens of the 2019 Regulations at the same time
- The decision taken by Mazars was much broader – Mazars had a global policy to not accept any new clients with Russian ownership. This was an across-the-board generic decision that sought to treat all Russian owned clients, not just XTX, in the same way
- It was likely that there were a range of reasons as to why Mazars reached the decision but, in order to determine whether Dr Gerko’s nationality per se (as opposed to the relevance of his nationality by reference to the 2019 Regulations) was a significant influence in that decision can only be determined after the Court has heard all the relevant evidence
- The 2019 Regulations are themselves discriminatory because they apply sanctions by reference to Russian nationality or race. However, this is not discrimination arising from anything that Mazars have done but because such discrimination, in the context of the 2019 Regulations, has been sanctioned by statute. Mazars have to operate within that discriminatory framework and, therefore, the 2019 Regulations and Dr Gerko’s nationality are a relevant circumstance to be taken into account when considering the comparator.
This dispute is one to watch. Should it go all the way to trial, the judgment has potential to be useful in providing businesses with guidance on how to balance obligations under the 2019 Regulations with obligations under the Equality Act 2010. This could help to better inform businesses on how to navigate due diligence and when reliance can be placed on section 44 of SAMLA.
The whole judgment can be read here.