Vladimir Potanin v The Charity Commission for England & Wales

1. This is an appeal brought under section 319(1) of the Charities Act 2011 by Vladimir Potanin (“the appellant”) against a decision of the Charity Commission for England and Wales dated 16 June 2023 by which the appellant was removed from his position as an officer of the Potanin Foundation (“the Charity”) pursuant to section 79(4) of the Act . The Commission also made a related order under section 83(4) terminating the appellant’s membership of the Charity.

2. The appeal was heard last year and our decision reserved. Judge Rintoul, who had intended and reserved time to draft the panel’s detailed reasons, then fell seriously ill. He remains absent from judicial duties. Applying the principles collated in R (SS (Sri Lanka)) v Secretary of State for the Home Department [2018] EWCA Civ 1391 , we are confident that the delay has not undermined the safety of our decision or its reasoning, and that the correct course is to still decide the appeal. The panel was able to reconvene shortly after the hearing, before Judge Rintoul’s absence, and reach unanimous reasoned conclusions on all the relevant issues. We have taken care to ensure that these reasons accurately reflect our decision. Judge Rintoul has also been able to see and approve this decision in draft notwithstanding his illness.

3. Nonetheless, we recognise that the above will be small comfort to the parties, and we provide the Tribunal’s full apologies for the uncertainty and difficulties that delay will doubtless have caused. Summary of our conclusions

4. For the reasons given below, we have decided that: a. The appellant’s UK designation as a sanctioned person meant the Charity was deemed “owned or controlled” by him for the purposes of the Russia (Sanctions) (EU Exit) Regulations 2019. As a result, dealings with the Charity’s assets became prohibited without an OFSI licence, rendering the Charity unable to function unless protective measures were imposed. b. As Founder of the Charity, the appellant was an “officer” within the meaning of section 79(4) of the Act 2011. His constitutional powers as Founder, including appointing and removing trustees and altering the articles, were sufficient to constitute an “office” from which he could be removed. c. The appellant’s failure to resign as Founder and member, both when designation was foreseeable and then afterwards, amounted to misconduct or mismanagement within the meaning of the Act . His fiduciary duty of single ‑ minded loyalty required proactive steps to protect the Charity from the foreseeable paralysis that designation would cause. d. The appellant was responsible for the misconduct or mismanagement, knew of the risks, and failed to take reasonable steps to oppose them. His inaction facilitated the situation that jeopardised the Charity’s ability to operate, meeting all three limbs of section 79(4) (a)–(c). e. Removal was necessary or desirable to protect the Charity’s property and its proper application. Alternatives such as indefinite interim management or inaction pending a review of designation were either unviable or not in the Charity’s best interests. f. Removal was proportionate. While the appellant’s contribution in establishing, funding, guiding and promoting the Charity fell to be considered, it was outweighed by the effect of his continued involvement and the requirement for the Commission to exercise its regulatory function.

5. The statutory criteria for removal were satisfied, and the appeal is dismissed. Findings of fact

6. We have considered a large volume of evidence, both documentary and given orally, but consider the following factual summary to be sufficient to explain our decision on the appeal. Each fact stated is uncontroversial between the parties save where indicated.

7. The appellant is a citizen of Russia who owns or controls international businesses, investments and assets. He is also a former politician, having served as a Deputy Prime Minister of Russia during the presidency of Boris Yeltsin, and has remained active in public life. In 1999, he established the Vladimir Potanin Foundation (“the Russian Foundation”), which has funded numerous philanthropic initiatives and provided grants to museums and universities internationally . The appellant’s financial worth and that of the Russian Foundation is illustrated by him having endowed it with 100 billion roubles (around £1.1 billion) between October 2021 and October 2022. https://www.guggenheim.org/press-release/guggenheim-establishes-conservation-fellowship-with-support-from-trustee-vladimir-potanin as referenced in the appellant’s application to the UK government for revocation of designation.

8. The appellant decided to incorporate a charitable foundation outside Russia, so the Charity was incorporated in England & Wales as a company limited by guarantee on 21 July 2005. Its objects (as subsequently amended) are “to advance any purpose which is recognised as being exclusively charitable under English law and, without prejudice to the foregoing, in particular, to advance the education of the public in Russia and elsewhere.” It was registered with the Commission in 2006. The limited company’s Articles of Association name the appellant as its “Founder” and provide that the company’s only members are the Founder and those he appoints. He was also the Charity’s sole funder, having donated approximately US $100 million to it over the course of its existence. The Charity invested those funds and made charitable grants from the income.

9. For many years after incorporation the administration of the Charity was entrusted to CAF Global Trustees Limited (“CAF”), a well-established corporate trustee, supported by its Chair, Sir John Low, who in 2013 was also appointed as an individual trustee in his own right. The evidence given on behalf of the appellant is that he would provide input into the Charity’s activity concerning matters of philanthropic strategy, international positioning, investment perspectives, and alignment with the appellant’s broader charitable aspirations. This was usually done through his representatives rather than personally, most prominently by Ms Larisa Zelkova. The trustees’ evidence is that the appellant and his representatives never acted as trustees, never exercised nor sought to exercise any managerial authority over the Charity’s day ‑ to ‑ day affairs, and held no direct control over bank accounts or investment structures. Sir John’s evidence was that the appellant’s engagement accorded with usual governance practice in cases of large, single-donor philanthropic foundations: the appellant could and did make suggestions, but the actual responsibility for decision-making concerning investment of funds, their distribution and the Charity’s administration rested solely with the trustees.

10. The honesty of Sir John’s evidence on the above point was undisputed, and it does reflect the way in which the Charity was run overall, on a day-to-day basis. The Commission has nonetheless cited specific instances on which the appellant’s involvement is said to have gone further. To the extent necessary to decide the appeal, and insofar as they were controversial, we find on the evidence that there were two occasions on which the appellant made proposals that would, if implemented, have significantly altered the location and governance of the Charity’s assets. The first arose in 2015 when the appellant expressed a wish to consolidate his philanthropic endeavours in Russia. Consequently, in June 2016 the trustees applied to the Commission for permission to make a substantial grant of US $110 million to a Russian endowed foundation associated with the appellant with a view thereafter to winding up the Charity. The application prompted careful scrutiny from the Commission, and ultimately the trustees informed the Commission in February 2018 that they no longer intended to proceed with the proposal. The second proposal was in April 2020, when Ms Zelkova wrote to the trustees reporting that the appellant now wished to transfer the Charity’s assets to a Liechtenstein charitable entity known as the Seraphim Charity Foundation. This prompted extensive cross ‑ border legal work in the United Kingdom, Switzerland and Liechtenstein. The trustees actively considered the implications, and correspondence from 2020 and 2021 shows that the trustees regarded the proposal as potentially beneficial under appropriate conditions, although by the time of CAF’s resignation on 31 December 2021, and indeed into 2022, no final decision had been taken.

11. The Charity’s governance underwent a significant structural change on 13 October 2021. Following amendments to its Articles of Association initiated by the appellant, he appointed three new individual trustees, Mr David Greene, Mr Michael Fullerlove, and Mr Demetris Pisiaras. These individuals have respectable professional standing in their fields. Their appointment was effected directly by the appellant pursuant to the newly amended Articles, and occurred somewhat earlier than the existing trustees had anticipated. CAF retired as corporate trustee on 31 December 2021. Sir John, however, remained as an individual trustee and continued to chair the trustee body, intending originally to assist the transition for a short period but, as the events of 2022 unfolded, he stayed in post to try to resolve the problems facing the Charity.

12. Russian troops entered Ukraine on 24 February 2022. The consequences of this event to Russian-connected organisations and individuals operating outside Russia are well known, and the Charity was no exception. The Charity’s longstanding professional advisers began to withdraw. On 4 March 2022 the Charity’s solicitors, Edwin Coe LLP, withdrew their services and their partner Mr David Goepel resigned as company secretary. On 25 March 2022 JP Morgan terminated the discretionary investment management services provided to the Charity (communicating this to the trustees on 4 April). On 1 April 2022 Deloitte LLP resigned as auditor. These developments occurred before any foreign government had imposed sanctions on the appellant, but they reflected a readily-apparent tightening compliance environment for entities connected with Russia.

13. The trustees considered these matters at a board meeting on 8 April 2022. They concluded that each withdrawal was individually manageable. The auditor could be replaced in time for the next audit, and while the loss of a company secretary or legal advisers had the potential to be more disruptive, this was not irretrievably so in this case. The cumulative impact of the withdrawals and the escalation of restrictions internationally nonetheless led the trustees to agree that the situation, unusually, warranted engagement with the Commission to ascertain the regulatory position. Sir John was asked to seek an early discussion with the Commission.

14. On 5 April 2022 the Government of Canada designated the appellant under its sanctions regime, and the Government of Australia designated him on 6 April 2022. We shall set out the nature and consequences of designation shortly. On 13 April 2022 Sir John attended a virtual meeting with the Commission’s Chief Executive and its Assistant Director of Investigations. He outlined the withdrawal of professional advisers, the foreign sanctions designations, and the possibility, considered by the trustees, that further designations, including by the UK, might follow.

15. The Commission advised that a Serious Incident Report should be submitted. Sir John did so the following week, on 21 and 22 April 2022, providing a full written account of the matters discussed. The Report noted the trustees’ assessment that the Charity could not influence whether sanctions were imposed, nor meaningfully protect its assets in advance of any such decision, and that professional advice would be required should the regulatory environment change. No one suggested at this stage that the structure of the Charity, or the appellant’s position within it, called for alteration.

16. In late May 2022, the Foreign, Commonwealth and Development Office notified the Commission in confidence that a UK designation of the appellant was under active consideration. Between 24 May and 23 June the two bodies exchanged information about the potential designation and the timing of any announcement. The Commission prepared internally for the regulatory consequences that might follow.

17. On 29 June 2022 the appellant was designated by the United Kingdom under the Russia (Sanctions) (EU Exit) Regulations 2019. The consequence of designation is that dealing with property owned or controlled by the appellant would be, in the absence of an appropriate licence, a criminal offence. As the appellant held 100% of the Charity’s voting rights and the constitutional authority to appoint or remove trustees, his designation raised the concern that this prohibition extended to the Charity. This would mean that no trustee, bank or investment manager could deal with the Charity’s funds without potential criminal liability, unless and until a licence was obtained. Such a licence was subsequently put into force permitting an Interim Manager appointed by the Commission to operate the Charity, but the trustees themselves could not act without Commission approval.

18. On the same day as designation, the Commission opened a statutory inquiry into the Charity and issued an order under section 76(3)(f) prohibiting the trustees from entering into any transaction in the administration of the Charity without prior written consent, and a further parallel order preventing the appellant from exercising any powers of the Founder without the Commission’s approval. These orders had the effect of placing the administration of the Charity under direct regulatory control pending further consideration.

19. On 13 September 2022 the Commission notified the appellant of its proposal to remove him as Founder and to terminate his membership. The appellant, through solicitors, submitted detailed written representations on 4 November 2022. During the same period additional foreign sanctions were imposed: New Zealand designated the appellant on 12 October 2022, and the United States did so on 15 December 2022. On 16 June 2023 the Commission issued its order removing the appellant as an officer of the Charity and, by a separate order, terminating his membership.

20. The Commission’s decision to remove the appellant as an officer was based on findings that his continued involvement with the Charity, in the context of his designation, amounted to misconduct or mismanagement in its administration, and that his removal was necessary or desirable for the protection of the Charity’s property. The Commission further concluded that the appellant had failed to take reasonable steps to mitigate the risks arising from his designation, and that his removal was proportionate in all the circumstances.

21. The Notice of Appeal was filed on 25 July 2023. Following delay attributable to the appellant’s designation restricting his ability to fund representations, the appeal was heard on 10, 11 February and 7 March 2025. A range of further matters, including judicial ill-health, have contributed to regrettable further delay. Legal framework

22. The Charity Commission’s power to remove a person from office in a charity is governed by sections 76 and 79 of the Charities Act 2011 (“ the Act ”). Section 79(4) provides that the Commission may, of its own motion, remove any trustee, charity trustee, officer, agent or employee of a charity who: (a) has been responsible for misconduct or mismanagement in the administration of the charity; (b) knew of such misconduct or mismanagement and failed to take any reasonable step to oppose it; or (c) whose conduct contributed to or facilitated it. The Act provides no express definition of the terms “officer”, “agent” or “employee”.

23. The power under section 79(4) is only exercisable where the Commission is satisfied both as to the existence of misconduct or mismanagement ( section 76(1) (a)) and that it is necessary or desirable to act for the purpose of protecting the property of the charity or securing its proper application ( section 76(1) (b)). These are cumulative conditions, as made clear by section 79(3) .

24. The terms “misconduct” and “mismanagement” are not defined in the Act . The Commission’s published guidance states the Commission’s policy position as being that: https://www.gov.uk/government/publications/statutory-inquiries-into-charities-guidance-for-charities-cc46/statutory-inquiries-into-charities-guidance-for-charities Misconduct includes any act (or failure to act) that the person committing it knew (or ought to have known) was criminal, unlawful or improper. Mismanagement includes any act (or failure to act) that may cause charitable resources to be misused or the people who benefit from the charity to be put at risk. A charity’s reputation may be regarded as the property or resources of the charity.

25. Section 76 A of the Act permits the Commission, when considering whether to exercise its powers under section 79(4) , to take into account the conduct of the person concerned in relation to any other charity, or any other conduct that appears to be damaging or likely to be damaging to public trust and confidence in charities generally or in particular charities.

26. Section 83(4) of the Act provides that where a person is removed from office under section 79(4) and is also a member of the charity, the Commission may also make an order terminating that person’s membership and prohibiting them from resuming membership without the Commission’s consent.

27. In exercising its functions under the Act , the Commission is subject to the general duties set out in the Act , including the duty to act in a way that is compatible with its statutory objectives and with the principles of best regulatory practice, including proportionality, accountability, consistency, transparency, and targeting only cases in which action is needed.

28. The Commission’s decision is subject to appeal to the First-tier Tribunal under section 319(1) and Schedule 6. By section 319(4) , the Tribunal must consider the decision afresh and may take into account evidence that was not available to the Commission at the time of its decision. There was argument, at our invitation, as to whether the Tribunal should consider the facts as they stood at the date of decision or at the date of hearing. In the event this would make no difference to our final decision, so we leave determination of that issue to an appeal where it is material.

29. The Tribunal is not bound by the Commission’s reasoning but must reach its own conclusion on the merits, applying the statutory criteria. Nonetheless, the Commission’s “assessment should be accorded appropriate respect, for reasons both of institutional capacity […] and democratic accountability”: Begum v Secretary of State for the Home Department [2021] UKSC 7 . As held in R (Hope & Glory Public House Ltd) v City of Westminster Magistrates' Court [2011] EWCA Civ 31 at [45] and Hesham Ali v Secretary of State for the Home Department [2016] UKSC 60 at [45]-[46], the Tribunal pays careful attention to the reasons given by (here) the Commission, bearing in mind that the legislative scheme gives it primary decision-making responsibility, in an area where it is required to exercise its judgement according to its particular expertise and for which it bears democratic accountability. The weight to attach to the Commission’s reasoning is for the Tribunal to decide in light of its fullness and clarity, the nature of the issues and the facts as it finds them to be.

30. While the Commission’s order under section 83(4) terminating the appellant’s membership of the Charity is not appealable, its ongoing validity depends on whether the section 79(4) removal order is sustained. Issues

31. The parties agreed that the Tribunal’s task is to determine, on the basis of the evidence before it, whether the statutory conditions for the exercise of the power under section 79(4) are met, and if so, whether the discretion to remove the appellant should be exercised. This depends on the answer to an agreed list of issues, but as more than one concerns the consequences of designation we will first consider that as a discrete, preliminary issue. After that, the issues are: (preserving the parties’ numbering) (1) Whether the appellant was an “officer” of the Charity for the purposes of section 79(4) of the Charities Act 2011 . If not, there was no power to remove him and the appeal must be allowed. (2) Whether there was misconduct or mismanagement in the administration of the Charity within the meaning of section 76(1) (a) of the Act . (3) If so, whether the appellant: (a) was responsible for that misconduct or mismanagement; (b) knew of it and failed to take any reasonable step to oppose it; or (c) contributed to or facilitated it, within the meaning of section 79(4) (a)–(c). (4) Whether the Charity Commission was entitled to be satisfied that it was necessary or desirable to act for the purpose of: (a) protecting the property of the Charity; or (b) securing a proper application of that property, within the meaning of section 76(1) (b). (5) Whether the decision to remove the appellant as an officer was proportionate in all the circumstances, having regard to the Commission’s statutory objectives and duties under the Act . (6) Whether the Commission’s decision was flawed by reason of any procedural unfairness or failure to take into account relevant considerations.

32. Finally, we mean no disrespect to the parties’ well-compiled evidence and detailed arguments, together extending over thousands of pages, by setting out only what is necessary to explain our conclusions. Issue 0: What was the effect of designation? The legislative regime

33. A history of the UK sanctions regime is given by Flaux LJ in Mints & Ors v PJSC National Bank Trust & Anor [2023] EWCA Civ 1132 at [4]-[19], which we need not reproduce. A relevant summary of the regime for present purposes is as follows.

34. Following the UK’s exit from the EU, domestic legislation was enacted in the form of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”). Section 1(5) (a) empowers a Minister to make regulations that impose “financial sanctions”. The definition of financial sanctions at section 3(1) defines financial sanctions by reference to various purposes which includes “freezing funds or economic resources owned, held by or controlled by designated persons”.

35. The 2019 regulations made under SAMLA accordingly provide that, at regulation 5, the Secretary of State may designate persons by name for any of a number of listed purposes. They include: (a) regulations 11 to 15 (asset-freeze etc.);

36. The consequences of designation for that purpose is then provided by regulation 11: 11 – Asset-freeze in relation to designated persons (1) A person (“P”) must not deal with funds or economic resources owned, held or controlled by a designated person if P knows, or has reasonable cause to suspect, that P is dealing with such funds or economic resources. (2) Paragraph (1) is subject to Part 7 (Exceptions and licences). (3) A person who contravenes the prohibition in paragraph (1) commits an offence. (4) For the purposes of paragraph (1) a person “deals with” funds if the person— (a) uses, alters, moves, transfers or allows access to the funds, (b) deals with the funds in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination, or (c) makes any other change, including portfolio management, that would enable use of the funds. (5) For the purposes of paragraph (1) a person “deals with” economic resources if the person— (a) exchanges the economic resources for funds, goods or services, or (b) uses the economic resources in exchange for funds, goods or services (whether by pledging them as security or otherwise). (6) The reference in paragraph (1) to funds or economic resources that are “owned, held or controlled” by a person includes, in particular, a reference to— (a) funds or economic resources in which the person has any legal or equitable interest, regardless of whether the interest is held jointly with any other person and regardless of whether any other person holds an interest in the funds or economic resources; (b) any tangible property (other than real property), or bearer security, that is comprised in funds or economic resources and is in the possession of the person. (7) For the purposes of paragraph (1) funds or economic resources are to be treated as owned, held or controlled by a designated person if they are owned, held or controlled by a person who is owned or controlled directly or indirectly (within the meaning of regulation 7) by the designated person. (8) For the avoidance of doubt, the reference in paragraph (1) to a designated person includes P if P is a designated person.

37. The regulation 7 definition of funds “owned, held or controlled by a person who is owned or controlled directly indirectly” by the designated person is: 7 – Meaning of “owned or controlled directly or indirectly” (1) A person who is not an individual (“C”) is “owned or controlled directly or indirectly” by another person (“P”) if either of the following two conditions is met (or both are met). (2) The first condition is that P— (a) holds directly or indirectly more than 50% of the shares in C, (b) holds directly or indirectly more than 50% of the voting rights in C, or (c) holds the right directly or indirectly to appoint or remove a majority of the board of directors of C. (3) Schedule 1 contains provision applying for the purpose of interpreting paragraph (2). (4) The second condition is that it is reasonable, having regard to all the circumstances, to expect that P would (if P chose to) be able, in most cases or in significant respects, by whatever means and whether directly or indirectly, to achieve the result that affairs of C are conducted in accordance with P's wishes.

38. On the first condition, we consider the relevant interpretive provisions of Schedule 1 to be:

5. — Voting rights (1) A reference to the voting rights in a person is to the rights conferred on shareholders in respect of their shares (or, in the case of a person not having a share capital, on members) to vote at general meetings of the person on all or substantially all matters. (2) In relation to a person that does not have general meetings at which matters are decided by the exercise of voting rights— (a) a reference to holding voting rights in the person is to be read as a reference to holding rights in relation to the person that are equivalent to those of a person entitled to exercise voting rights in a company; (b) a reference to holding “more than 50% of the voting rights” in the person is to be read as a reference to holding the right under the constitution of the person to block changes to the overall policy of the person or to the terms of its constitution. […] Rights to appoint or remove members of the board

7. A reference to the right to appoint or remove a majority of the board of directors of a person is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all or substantially all matters. […]

13. — Rights exercisable only in certain circumstances etc. (4) Rights that are normally exercisable but are temporarily incapable of exercise are to continue to be taken into account.

39. It was held in Mints at [228] that the first condition is concerned with either ownership or control, or both, and “it is not the case that the first condition is concerned with ownership and the second with control.”

40. Regulation 64 enables dealing with funds if done in accordance with a licence. Such licences are issued by the Office of Financial Sanctions Implementation (“OFSI”), part of HM Treasury. Application to the facts

41. For the purposes of this appeal, it is not in dispute that the appellant is a designated person subject to the asset-freeze provisions described above. The Commission and the Attorney General join in arguing that at all material times the Charity was “ a person who is owned or controlled directly or indirectly” by the appellant for the purposes of regulation 11(7), by reference to Condition 1 at regulation 7(2). The appellant has not expressly conceded or resisted the point.

42. The Commission and the Attorney General are clearly correct to consider the Charity caught by regulation 11(7). On the first condition, it is common ground that the appellant was the Founder and sole member. Under its Articles of Association the quorum for a general meeting is one (article 27), meaning that the appellant could pass resolutions under company law on his own. He additionally held: a. The power to replace himself as Founder by his chosen nominee (article 4.3); b. The power to admit other members of the Charity (article 3.1). c. The power to appoint the trustees of the Charity (article 6) who had the power to manage the Charity’s business and exercise all its powers, regulating their procedure as they saw fit (articles 10,14). d. The power to determine the term of office of the trustees (article 7.3). e. The power to remove a trustee or trustees (article 8.2). f. The power to appoint an Advisory Board (including the power to nominate 50% of that Board) for the purpose of advising the trustees on grant ‑ making, the Founder having additional power to appoint the chair and exercise a casting vote (article 40).

43. Simply holding 100% of the voting rights at a general meeting is sufficient to meet regulation 7(2)(b), and if not then he had ability to block the changes described at Sch.1 para 5(2)(b). The appellant also had the right to appoint or remove a majority of the board of trustees (considered the board of directors by Sch.1, para 7).

44. While only Condition 1 had to be met, the appellant’s ability to alter the Charity’s constitution at his sole resolution, as well as his unfettered ability to appoint and remove trustees, clearly satisfies Condition 2.

45. The appellant continued to meet both Conditions following the Commission’s order restraining him from exercising any functions as Founder, and during the appointment of the Interim Manager, by virtue of Sch.1 para 13(4). By their nature, both are temporary measures. Consequences

46. As the asset-freeze thereby extended to the funds and economic resources of the Charity just as it did those of the appellant, regulation 11(1) prohibited any person from dealing with them. That in turn has an expansive definition under regulation 11(4), and includes use, alteration, transfer, allowing of access, and specifically portfolio management. It also includes exchanging those resources for funds, goods or services, which was exemplified by the initial delay in these proceedings while a licence was obtained to enable the appellant to pay for his representation.

47. While regulation 58 provides that asset-freeze does not prevent crediting a frozen account with interest, or receiving a payment that is credited to the frozen account, designation does prevent the Charity from accessing its funds, paying for professional services, managing its investments, or conducting its charitable activities.

48. Regulation 80 provides that the offence at regulation 11(2) is punishable by a maximum sentence of imprisonment of 7 years. Regulation 81 then extends criminal liability as follows: (1) Where an offence under these Regulations , committed by a body corporate— (a) is committed with the consent or connivance of any director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, or (b) is attributable to any neglect on the part of any such person, that person as well as the body corporate is guilty of the offence and is liable to be proceeded against and punished accordingly.

49. It is perhaps to state the obvious that few professional services providers or financial institutions would risk committing such an offence, and would be likely to take a precautionary approach.

50. Upon appointment of an Interim Manager, the Charity was able to benefit from a general licence issued by OFSI. This allowed for interim managers and trustees appointed by the Commission to act as receivers and managers in respect of the property and affairs of a charity, including receipt and disbursement of charitable funds.

51. We therefore find that in the absence of the orders made by the Commission on 29 June 2022, the Charity would have had its assets frozen and been entirely unable to function. Issue 1: Was the appellant an “officer” of the Charity? The meaning of “officer” in the Act

52. As noted above, there is no express definition of this term contained in the Act , and nor is the term defined by reference to the Commission’s policy position. The parties agree that it is a matter of statutory construction, and have made competing submissions. In deciding the meaning of the term we apply the principles set out in R (Quintavalle) v Secretary of State for Health [2003] UKHL 13 , endorsed in R (Fylde Coast Farms Ltd) v Fylde BC [2021] UKSC 18 as follows: …it is always necessary to resolve differences of interpretation by setting the particular provision in its context as part of the relevant statutory framework, by having due regard to the historical context in which the relevant enactment came to be made and, to the extent that its purpose can be identified (which may require examination of admissible travaux preparatoires), to arrive at an interpretation which serves, rather than frustrates, that purpose.

53. Section 79 provides as follows: 79 Removal of trustee or officer etc for protective etc purposes (1) Subsection (2) applies where, at any time after it has instituted an inquiry under section 46 with respect to any charity, the Commission is satisfied either as mentioned in section 76(1) (a) (misconduct or mismanagement) or as mentioned in section 76(1) (b) (need to protect property etc ). (2) The Commission may of its own motion by order establish a scheme for the administration of the charity. (3) Subsection (4) applies where, at any time after it has instituted an inquiry under section 46 with respect to any charity, the Commission is satisfied both as mentioned in section 76(1) (a) (misconduct or mismanagement) and as mentioned in section 76(1) (b) (need to protect property etc ). (4) Whether or not it acts under subsection (2), the Commission may of its own motion by order remove any trustee, charity trustee, officer, agent or employee of the charity— (a) who has been responsible for the misconduct or mismanagement, (b) who knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it, or (c) whose conduct contributed to it or facilitated it. (5) Where the Commission has given notice under section 82 of its intention to make an order under subsection (4) removing a person from an office or employment, the Commission may proceed to make the order even though the person has ceased to hold the office or employment. (6) Where an order is made relying on subsection (5)— (a) section 81(1) (power to make supplementary provision) and Case D in section 178(1) (disqualification) apply as if the person was removed by the order, but (b) the order does not affect the time when the person ceased to hold the office or employment.

54. The statutory context is regulatory protection. The removal power at section 79 is only engaged after the Commission has opened a statutory inquiry pursuant to section 46. That section provides no pre-requisite to open an inquiry, but the purpose of doing so can be seen in two aspects of the overall statutory scheme. First, the Commission’s objectives and functions are provided by sections 14 and 15, the latter including the function of:

3. Identifying and investigating apparent misconduct or mismanagement in the administration of charities and taking remedial or protective action in connection with misconduct or mismanagement in the administration of charities.

55. Second, it is only after the opening of an inquiry that the Commission can exercise many of the investigative, remedial and protective powers provided by Parts 5 and 6 of the Act . The guidance states: Through its work, the Commission identifies and investigates apparent misconduct and/or mismanagement in the administration of charities, and works to resolve issues of concern. In serious cases of abuse and regulatory concern, the Commission may open a statutory inquiry. The Commission’s decision to open an inquiry is not taken lightly, and depends on a careful assessment of a set of factors. Before taking the decision to open a statutory inquiry, it will take the approach set out in its Regulatory and Risk framework, and will make sure that an inquiry is carried out in line with the principles of best regulatory practice. The purpose of an inquiry is to examine the issues of regulatory concern in greater detail. It will investigate and establish the facts of the case so that the Commission can determine the extent of any misconduct and/or mismanagement; the extent of the risk to the charity, its work, property, beneficiaries, employees or volunteers; and decide what action is needed to resolve the concerns. An inquiry should not in itself be seen as a determination by the regulator of wrong-doing in a charity. The exception to this is those cases where wrong-doing is clear at the point of opening the inquiry and, for example, the Commission has exercised temporary and protective or other remedial powers at the same time, where it must be satisfied that it has sufficient evidence to act. If the allegations made or causes for concern are not substantiated, the inquiry will say so. The ultimate aim is to stop abuse, ensure compliance and put a charity back on a secure footing. Where this is possible, it may include restoring its reputation, protecting beneficiaries, employees, volunteers or assets and upholding public confidence in the charitable sector generally.

56. We agree that this accurately captures the purpose of an inquiry. The Act anticipates that in some cases, following the opening of an inquiry, the Commission will wish to take the “remedial or protective action” described at section 15, and provides it with powers to do so. We first turn to those in section 76 , which are available in the circumstances specified at sub section (1 ): (1) Subsection (3) applies where, at any time after it has instituted an inquiry under section 46 with respect to any charity, the Commission is satisfied— (a) that there is or has been a failure to comply with an order or direction of the Commission, a failure to remedy any breach specified in a warning under section 75A, or any other misconduct or mismanagement in the administration of the charity, or (b) that it is necessary or desirable to act for the purpose of— (i) protecting the property of the charity, or (ii) securing a proper application for the purposes of the charity of that property or of property coming to the charity.

57. Subsection (3) then provides a wide range of powers to safeguard a charity’s property and alter its governance, relevantly including the power to: (a) by order suspend any person who is a trustee, charity trustee, officer, agent or employee of the charity from office or employment pending consideration being given to the person's removal (whether under section 79 or 80 or otherwise);

58. Suspension is made subject to various procedural safeguards at subsections (4)-(7).

59. The next relevant set of remedial or protective powers are those at section 79 . The first, at section 79(1) -(2), is to establish a scheme for the administration of the charity. We need not embark upon a general discussion of what this may entail, but it is relevant that a scheme often has a very significant effect upon the charity, for example by entirely superseding its governing documents. The power at section 79(1) to establish a scheme may only be exercised in the same circumstances as those required for the powers at section 76(3) , being either “misconduct or mismanagement” or the “need to protect property etc.”

60. The requirements for removal at section 79(3) are more stringent than those required to establish a scheme, as the Commission must be satisfied (our emphasis) “ both as mentioned in section 76(1) (a) (misconduct or mismanagement) and as mentioned in section 76(1) (b) (need to protect property etc)”. Likewise, the person to be removed must, under section 76(4) , be someone: (a) who has been responsible for the misconduct or mismanagement, (b) who knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it, or (c) whose conduct contributed to it or facilitated it.

61. It can be seen that Parliament has put in place several express pre-requisites that must be satisfied before the Commission may exercise the power of removal. An inquiry must have been opened, the Commission must be satisfied of both misconduct or mismanagement and the need to protect property, and may only remove someone who by act or knowing omission was responsible for, or contributed to, that misconduct or mismanagement. This supports the appellant’s case that removal is a matter of some gravity; we agree that it can in principle be seen as a penalty such as to engage the rule against doubtful penalisation, helpfully described in R (The Good Law Project) v Electoral Commission [2018] EWHC 2414 (Admin) at [34].

62. A striking comparison can nonetheless be drawn between the definitive expression of the pre-requisites for an order and the very broad description of the class of persons against whom an order may be made. That breadth is apparent from the face of the language used: “any trustee, charity trustee, officer, agent or employee of the charity” at sections 76(3) (a) and 79(4) and “from an office or employment” at sections 76(4) and 79(5).

63. We do not accept that the meaning of “officer” in section 79(4) is confined to those whom the governing document expresses hold a formal office. The purpose of section 79(4) is to enable the Commission to remove individuals whose position within a charity gives rise to a risk of harm to its property or administration. The practical context is that it must do so in respect of charities that come in all shapes and sizes, and which have widely differing constitutional and operational arrangements. Just as some charities happily continue with comptrollers, treasurers, bursars and the like, others have moved to modern titles, such as finance director and chief executive, despite those terms still being entirely absent in their governing document. Some charities’ governing documents may expressly provide offices that are held ex officio , for example as a historic connection between a school and its local diocese, or an NHS charity affording a role in governance to the nominee of the Department of Health & Social Care. Some may create offices with grand titles that are nonetheless wholly ceremonial, whereas some charities are entirely run by an individual who does not formally occupy any office prescribed by the governing document. Therefore, while in many cases the governing document will be highly relevant, and perhaps conclusive, the legislation cannot be read as treating it as definitive. A feature of charity regulation is the infinite variety of organisations that fall within it. Very clear language would be required before Parliament could be taken as intending that the scope of the Commission’s regulatory powers could be limited by the constitutive and operational choices made by a charity.

64. We did not find the definitions contained in the Companies Act 2006 to be of assistance. It remains the longest single piece of legislation ever enacted, and provides a detailed statutory code by which companies must begin and cease existence, organise themselves and conduct their affairs. It defines particular terms for a huge variety of purposes; none of those to which we were taken has any relevance to the present statutory context or to the underlying regulatory purpose of making a removal order. Contrary to the appellant’s arguments, that relevance is not provided by this particular charity being incorporated under the 2006 Act ; we are asked to interpret a provision that applies to all charities. The variety of legal personalities regulated by the 2011 Act supports a broad definition that can be individually applied in all cases, rather than imposing a definition intended for just one type of corporate vehicle.

65. Nor is there any justification for restricting the meaning of officer to someone who exercises day to day responsibility for managing the charity or, to take the appellant’s other suggested interpretation, manages the charity’s affairs. Those with only constitutional or occasional control are plainly capable of action or inaction that engages section 79(4) (a)-(c), so Parliament likely intended that they fall within those against whom orders can be made to protect the charity’s property.

66. That last point, in our view, is important. Section 79(4) refers to an order under section 79(3) as removing an individual from (emphasising the singular) “ an office or employment”. Its shorthand plainly refers back to the earlier, expansive description of “any trustee, charity trustee, officer, agent or employee”. For the power to make sense, a removal order must identify what it is the person is being removed from : the specific trusteeship or office from which they are removed, or the specific relationship of agency or employment that is terminated. That specific removal is what the Commission must, under sections 76(1) (b) and 79(3), consider necessary or desirable to do for protecting or properly applying the charity’s property. This is supported by it being common for a person to have multiple relationships with a charity. Only one of those might meet the section 76(1) (b) protection of property requirement, for example their continued employment as a support worker may be unobjectionable even while their removal as Treasurer is essential.

67. Finally, we record that the statutory scheme and its context are wholly distinct from the others to which we were referred, none concerning measures by a regulator to safeguard property. They also turn on the specific legislation under consideration. R v Boal [1992] QB 591 concerned whether the appellant was criminally liable as a “manager”, the Court of Appeal holding Parliament only intended for the statute in question to fix liability upon those with both the power and responsibility to decide corporate policy. This provides no assistance with section 79 , in which the word manager does not appear and which fixes liability to removal on even the most junior employee, provided the other tests are met. If it applies to all levels of employee, as it unquestionably does, we cannot see why meeting the definition of officer should require some minimum level of seniority.

68. In Registrar of Restrictive Trading Agreements v WH Smith & Son Ltd [1969] 1 WLR 1460 , CA, the Court of Appeal was concerned with the power to make an order for attendance and examination on oath of “any director, manager, secretary or other officer of that body corporate”. At 1467D-E, Lord Denning’s rejection of an “extended” meaning of either “manager” or “officer” is prefaced with “in this section”, so should not be taken as automatically having purchase in charity legislation. It also heavily relied on the traditional legal objection to a person being compelled to testify against himself, the overriding of which required Parliament to state its intention in clear terms. The actual term considered was “officer of that body corporate” rather than of any institution, so it is unsurprising that at 1466H the analysis is premised upon it bearing the same meaning as in the Companies Acts. While Lord Denning does hold that “officer” connotes managing the affairs of the company as a whole, this is within the same company law context that we have held at paragraph 64 above not to determine construction of the 2011 Act . The subsequent consideration of the word “manager” is likewise irrelevant to section 79 for the reasons already given.

69. Our conclusion is therefore as follows. Properly understood, sections 76 and 79 together provide the Commission with the ability to suspend or remove someone from a particular relationship with a charity. As the structure of the Act makes clear, removal is one of the remedial and protective tools available to the Commission to enable it to fulfil its regulatory function by intervening to protect a charity’s property and its proper application. The likely intention behind enumerating the relationships at section 79(4) is to ensure that the power remains effective and available notwithstanding the wide variety of terminology, governance, arrangement and administration that inevitably arise. Taking the meaning of the word “officer” as more technical or constrained than the wide, ordinary English meaning of the word would undermine the Commission’s protective function by potentially enabling the holder of an atypical position to escape an order. Nor do the reasons put forward for a constrained definition create any likelihood that this was Parliament’s intention. We likewise see no basis upon which a person being both a member and an officer bears on the ability to remove them from the latter relationship.

70. The term “officer” only requires that the Commission is able to identify the office actually held, whether formally or functionally, from which removal is proposed. The appellant’s concern at the consequent scope for penalisation is answered by it nonetheless being consistent with the principal purpose of the scheme being protective, and that the Commissioner must still go on to find that there has been misconduct or mismanagement and that removal is necessary or desirable to protect the charity’s property or its application. Applying those principles to the facts

71. The Commission, supported by the Attorney General, argued that the appellant’s role as Founder and sole member of the Charity, coupled with the extensive powers conferred on him by the Charity’s governing document, including the power to appoint and remove trustees, to determine their terms of office, and to amend the articles, placed him in a position of constitutional authority sufficient to bring him within the scope of section 79(4) . The Commission emphasised that the appellant’s powers were not merely theoretical but had been exercised in practice, and that he retained the ability to influence the Charity’s governance and strategic direction even after the appointment of new trustees in 2021.

72. We agree. The appellant’s position as Founder conferred on him a suite of powers which, in our judgment, went well beyond those of an ordinary member. These included the power to appoint and remove trustees (article 6), to determine their terms of office (article 7.3), to remove them (article 8.2), to appoint members of the advisory board (article 40), and to amend the Charity’s articles of association (subject to certain restrictions). He also had the power to choose his successor as Founder (article 3.1). These powers were not contingent on his status as sole member and were exercisable in his capacity as Founder. Nor were they purely theoretical, examples of such powers being exercised can be found in the appointment of new trustees and the proposed transfer of assets to Liechtenstein. The appellant was clearly in a position to exercise constitutional authority over the Charity, and either did so or sought to do so. We hold that the appellant was an officer within the meaning of section 79(4) . Issue 2: Was there misconduct or mismanagement in the administration of the Charity?

73. While we considered extensive evidence of the management and nature of the Charity’s affairs over the years preceding designation, we consider the Commission’s principal case to be that the appellant’s failure to resign as Founder and member of the Charity, in the context of his designation under the Russia (Sanctions) (EU Exit) Regulations 2019, constituted misconduct and/or mismanagement. The appellant’s continued involvement was put forward as having a “chaotic impact” on the Charity, including the withdrawal of professional advisers and the freezing of its assets. The Commission contended that the appellant’s conduct fell within the ordinary meaning of “misconduct” or “mismanagement”, and that the appellant had failed to act in accordance with his duties to the Charity generally, and in particular his fiduciary duty.

74. The appellant rejected that his conduct amounted to misconduct or mismanagement, arguing that that he had no operational role in the Charity, that he had acted throughout in the Charity’s best interests, and that he had not been made aware of the difficulties facing the Charity until September 2022. He further submitted that the Commission’s case was based on flawed factual assumptions and retrospective reasoning. On that latter point, we have been mindful throughout our analysis that this is not a judicial review that decides if the Commission’s decision should be quashed by reason of legal error; flaws in the Commission’s decision-making may instead be relevant considerations in deciding the issues for ourselves, and may affect the weight that we place on the Commission’s views in that regard.

75. The Attorney General supported the Commission’s position, submitting that the appellant’s failure to resign, both before and after his designation by the UK on 29 June 2022, placed the Charity’s assets at risk by reason of the consequences of designation, and undermined public confidence in the Charity and the charitable sector more broadly.

76. The Tribunal heard evidence from the following witnesses: a. Sir John Low, who had been involved with the Charity since 2007 and served as Chair of the trustees, gave evidence that the Charity had been well run and that the trustees had acted independently. He described the appellant as having influence, but not control, and said that the trustees had never acted under instruction from him. Sir John stated that he had not considered the appellant’s continued role as Founder to be problematic, and that he had not advised the appellant to resign. He also confirmed that the Commission had not suggested, at a meeting on 13 April 2022 with the Commission’s CEO and Assistant Director of Investigations, that the appellant should step down. We have no hesitation in finding Sir John’s evidence to be honest and candid. Nonetheless, we find that very limited weight can be put on his view of the appropriateness of the appellant remaining in office. It was clear from Sir John’s evidence that he did not see himself as having any ability to influence the appellant, nor any ready direct access to the appellant to persuade him. While Sir John would have taken appropriate formal steps if he saw the appellant’s continued involvement as in conflict with his own legal duties, it is difficult to see that he would have made any direct approach to the appellant to avoid that situation arising. b. Larisa Zelkova, a long-standing associate of the appellant and a trustee of the Russian Potanin Foundation, gave evidence that she had not discussed the Charity’s difficulties with the appellant until September 2022. She said that the appellant had never expressed an intention to resign, but that she thought he would have done so if advised that it was in the Charity’s best interests. c. Stephen Roake, the Commission’s Assistant Director, accepted in cross-examination that the Commission’s reasoning in its statement of reasons contained errors, including the mistaken assertion that the withdrawal of professional advisers had followed the Canadian and Australian designations. He also accepted that the Commission had not raised with the trustees or the appellant, prior to 13 September 2022, any concern that the appellant’s continued role might amount to misconduct or mismanagement.

77. We should also record that the appellant previously made an application for permission to give evidence by video link from Russia on the basis that designation and other circumstances prevent travel to the UK. Permission was refused on the basis that consent had not been obtained from Russia for evidence to be taken from its territory, in accordance with the principles set out in Agbabiaka (evidence from abroad, Nare guidance) Nigeria [2021] UKUT 286 (IAC) and the (then applicable) Presidential Guidance Note on taking oral evidence from overseas. It was suggested in case management directions that the appellant might wish to explore the option of a suitable third country, but we were not told whether this was explored or whether it was ultimately practicable. We agree with the Commission and the Attorney General that this has limited their opportunity to test the appellant’s evidence, and that this must be taken into account when affording it weight, but we make clear that there is no basis upon which to draw any adverse inference from the appellant not giving oral evidence and nor were we asked to do so. We have duly considered the contents of his witness statement.

78. The appellant’s case was that he had not been made aware of the Charity’s difficulties until September 2022, and that he had acted throughout in good faith. He relied on the evidence of Sir John and Ms Zelkova, and on the absence of any suggestion from the Commission, prior to September 2022, that he should resign. He submitted that the Commission’s case was based on hindsight and flawed factual assumptions.

79. The Commission submitted that the appellant ought to have appreciated, particularly after his designation by Canada and Australia in April 2022, that his continued involvement posed a risk to the Charity. It argued that his failure to resign, even after his designation by the UK, was a breach of his fiduciary duty and amounted to misconduct or mismanagement.

80. The Attorney General submitted that the Tribunal should focus on the present, and that the appellant’s continued refusal to resign, even now, justified his removal. Findings and consideration

81. We begin by rejecting the appellant’s argument that the Commission must, in its decision, divide its allegations between those said to be mismanagement and those said to be misconduct. The statutory language is deliberately broad and recognises that a particular act or omission might rationally be described as either. Requiring the Commission to undertake that exercise serves no apparent purpose. The statutory test is the existence of conduct that amounts to either or both, and over-refinement of the test would undermine its statutory purpose. What matters is whether the conduct in question, taken in its real world context, meets the composite threshold. Beyond that, we agree with the analysis in Mountstar (PCT) Limited v Charity Commission CA/2013/0001):

136. There is no statutory guidance as to what is meant by “mismanagement” or "misconduct". Both are ordinary English words which should be given their ordinary meaning: Scargill v Charity Commissioner (unreported) 4th September 1998 (which was confined to the meaning of "mismanagement"). The Commission has issued guidance: "Misconduct includes any act (or failure to act) in the administration of the charity which the person committing it knew (or ought to have known) was criminal, unlawful or improper. "Mismanagement includes any act (or failure to act) in the administration of a charity that may result in significant charitable resources being misused or the people who benefit from the charity being put at risk."

137. Mr Smith submitted that both take their colour from the serious consequences which follow from the appointment of an interim manager, namely the powers it opens up as well as the reputational implications for the Charity, Mountstar and all those involved. Only serious mismanagement and even more serious misconduct will suffice to satisfy the statutory threshold, albeit that this argument shades into whether the decision to appoint a manager is proportionate to the acts of mismanagement or misconduct complained of by the Commission.

138. We do not think it necessary to so qualify “mismanagement” and “misconduct”. We do however accept that it or the several acts or omissions complained of in their totality must be of some substance to justify the appointment of an interim manager rather than the alternative which would involve the use of some or all of the other statutory tools within the Commission’s armoury. The Commission's guidance may provide illustrations of what might constitute mismanagement and misconduct, but cannot restrict their ordinary meaning.

139. It is a question of fact and degree to be viewed in the overall context of each case whether the act(s) or omission(s) complained of constitute “mismanagement” or “misconduct”. In our view it would encompass a failure by the charity trustee to act as an ordinary prudent man of business both in terms of process (how decisions are made, including declaring and managing conflicts of interest) and substance (what decisions are reached and why they have been reached). If the process is adequate and the decision reasoned it may be rare for the Commission to challenge the decision per se."

82. The starting point is the governance of the Charity and the place of the appellant within it. By design and by choice, he established the charity in this jurisdiction and subject to its charity regulation. His role was neither ceremonial nor restricted to providing a figurehead. As Founder and sole member, holding 100% of the voting rights, he possessed the sole power to appoint and remove trustees, to set the term of their office, to amend the governing provisions, and to constitute and chair (through nomination) the Advisory Board. That suite of powers constituted the ultimate corporate levers by which the composition of the trustee body and the architecture of the Charity could be altered.

83. From 13 October 2021 the Articles were amended so as to codify the Founder’s “common law duty”. The definition of that term expressly refers to the authority of Children’s Investment Fund Foundation (UK) v Attorney General [2020] UKSC 33 (sub nom Lehtimäki & Ors v Cooper ). Considering that authority, we derive particular assistance from the description of the duty by Lady Arden:

44. There has been considerable debate as to how to define a fiduciary, but it is generally accepted today that the key principle is that a fiduciary acts for and only for another. He owes essentially the duty of single-minded loyalty to his beneficiary, meaning that he cannot exercise any power so as to benefit himself. In Bristol and West Building Society v Mothew [1998] Ch 1 , 18 Millett LJ described the duties of a fiduciary as follows: “A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.”

45. So “the distinguishing obligation” of a fiduciary is that he must act only for the benefit of another in matters covered by his fiduciary duty. That means that he cannot at the same time act for himself.

46. If a person is a fiduciary then, as part of his core responsibility, he must not put himself into a position where his interest and that of the beneficiary conflict (“the no-conflict principle”) and he must not make a profit out of his trust (“the no-profit principle”). The fiduciary is likely to owe other fiduciary duties as well, such as the duty to act in the best interests of the person to whom the duty is owed. Section 178(2) of the 2006 Act expressly makes this a fiduciary duty in the case of company directors. It is not necessary to consider whether these duties are fiduciary duties in all cases. It is not enough that a person has agreed to perform certain duties by agreement. As the Privy Council held in In re Goldcorp Exchange Ltd [1995] 1 AC 74 , 98 “The essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself”.

47. The Court of Appeal adopted the following test put forward by Finn J, sitting in the Federal Court of Australia, in Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22, para 177: “… a person will be in a fiduciary relationship with another when and in so far as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other’s interest to the exclusion of his or her own or a third party’s interest …”

48. This formulation introduces the additional concept of reasonable expectation of abnegation of self-interest. Reasonable expectation may not be appropriate in every case, but it is, with that qualification, consistent with the duty of single-minded loyalty. There was a suggestion in this case that a member would not expect to find that he was a fiduciary. However, there was no evidence about that, and Mr Robert Pearce QC, for Her Majesty’s Attorney General, pointed to a publication of the Charity Commission available since 2004 and entitled RS7-Membership Charities. This makes it clear that the Charity Commission takes the view that members of a charitable company have an obligation to use their rights and exercise their vote in the best interests of the charity of which they are a member (p 18), and that “the rights that exist in relation to the administration of a charitable institution are fiduciary” (p 33). (There are similarities here with the duty imposed on members of a CIO by section 220 and indeed RS7-Membership Charities contemplates that members of a CIO would be placed under that duty.)

84. Lady Arden also held at [50] that the duty is not owed to the company, which is to say the Charity itself, but to its charitable purposes or objects. The relevance to this appeal is that if the perpetuation of the Charity conflicts with its charitable objects, the latter must prevail.

85. Clause 4.5 of the Articles provides that: 4.5 For so long as the Founder is also a member of the Charity, he shall exercise the powers he has under the Memorandum and these Articles in a manner that is consistent with the common law duty. We agree with the Commission that the Founder’s powers under the Memorandum and Articles include the power to resign, the amendment in 2021 introducing a mechanism for that purpose.

86. Having identified the duty owed by the Founder, we turn to the events that followed the entry of Russian forces into Ukraine. As is a matter of record, reaction by Western governments and institutions by way of measures against Russian individuals and organisations was swift. By early March 2022 professional advisers were disengaging or signalling disengagement from the Charity. Whatever nuance there may be about precise causation, the practical effect was both obvious and predictable: the legal, financial and regulatory ecosystem required by the Charity to effectively operate was rapidly destabilising. This was only likely to get worse if the UK designated the appellant, which soon became a real and developing possibility. The Commission was engaged. Serious Incident reporting followed. The trustees themselves identified the prospect and implications of a UK designation and recorded that steps might then be needed to secure lawful operation of the Charity’s assets.

87. The appellant was designated by Canada on 5 April 2022 and by Australia on 6 April 2022. Those developments meant the risk of UK designation was proximate and foreseeable. The appellant must have known this better than anyone – he is, to be blunt, one of the richest businessmen in the world for whom designation had the potential for consequences in any organisation in which he was involved that had a connection to the UK. There is no evidence capable of establishing that the appellant, as opposed to the Charity, did not still have access to the best professional representation, advice and professional services, or that this was materially restricted by the developing situation. He had chosen to incorporate his philanthropy in this jurisdiction and endow it with a nine-figure sum; he was on notice that the UK had in force since 2019 a sanctions regime under which a designated person’s ownership or control of a body corporate could have direct consequences for dealings in that body’s property. He either knew, or was at least under a duty to proactively consider, that others might consider designation of the Charity’s Founder, who held all voting rights and had the power to appoint and remove trustees, to criminalise further dealing with the Charity’s funds.

88. The appellant’s duties were engaged by that developing situation. His office was fiduciary in nature; the duty was to act with single minded loyalty to the Charity’s interests. That duty was personal and non-delegable. When a foreseeable regulatory event threatens to paralyse a charity’s ability to deal with its assets or to interact with financial institutions, a person with the appellant’s constitutional powers is obliged to proactively address that risk. Passive reliance on advisors or the regulator to alert him to the consequences of his continued involvement was insufficient to meet his duties in these circumstances. Even if the worsening outlook was less clear than we have found it to be, the risk that continued involvement would paralyse the Charity was sufficiently clear that his duty towards its continued charitable operation required resignation as a precaution. His duty was not towards preserving the Charity as a vehicle for his philanthropy but to act in the best interests of its charitable objectives.

89. Misconduct or mismanagement is therefore established by the failure to resign, the step that would have immediately done most to mitigate the consequences of international and potential UK designation upon the Charity and to safeguard its operation. It is no answer to say that others did not tell him to do so, or that the response of the Commission was unsatisfactory. His duties towards the Charity were not dependent on the action taken by the Commission. That is not lessened by the novelty of the developing situation. The appellant had, by his own amendments, provided himself with a mechanism to resign the office that created the risk; and he had the capacity, before 29 June 2022, to exercise it. His omission in doing so left the Charity exposed to the precise consequences that, foreseeably, transpired. That omission was “misconduct or mismanagement in the administration of the charity” within the meaning of section 76(1) (a) and section 79(4) (a).

90. The designation decision on 29 June 2022 and the Commission’s protective orders of the same date, first prohibiting the trustees from entering into any transaction in the administration of the Charity without written consent, and secondly prohibiting the appellant from exercising any functions as Founder without consent, ought to have made it even more plain to the appellant that his position was untenable. The consequences of concerns by third parties as to the lawfulness of dealing with the Charity, and what we find was a justified precautionary regulatory response, showed beyond doubt that designation had a severe effect on the Charity. While we have determined that a third party would be correct to consider that dealing with the Charity was unlawful, even if we are wrong then their predictable, risk-averse decision to act on the basis that it could be unlawful formed the actual obstacle to the Charity’s continued effective management.

91. It was submitted that resignation would not have resolved the problems faced by the Charity as it would remain “tainted” by association or by the provenance of its endowment. We disagree. The Founder’s duty was to remove, so far as it lay within his power, the impediments to the Charity’s ability to operate lawfully and to protect its property. Resignation would not have cured every difficulty; but resignation at any stage following designation becoming a real possibility would have removed, or at least greatly mitigated, the prospect of third parties considering themselves legally (as opposed to reputationally) unable to support the Charity. As noted in Children’s Investment Fund Foundation , the Founder’s duty was towards the Charity’s objectives; not the continuation of the Charity as a vehicle for his own philanthropic objectives.

92. It was further suggested that following UK designation the appellant could not resign because of the Commission’s order under section 76(3) (f). We cannot see that this prevents a finding of misconduct or mismanagement. First, the critical omission lies in the pre-designation period, when the appellant could have resigned unilaterally but did not. Secondly, even post-designation, the appellant could have sought the Commission’s consent to exercise the very resignation power he had introduced; his choice instead was to remain in office, notwithstanding the known consequences for the Charity’s ability to operate.

93. In relation to resignation after the section 76(3) (f) order, we should mention the ‘without prejudice’ letter sent on the appellant’s behalf to the Commission on 29 July 2024. This was not initially provided to the Tribunal, but following the Commission’s closing submissions the appellant wished to rely upon the letter in reply. The Commission agreed to any applicable privilege being waived and do not take anything in the letter as a formal concession. After referring to the removal of the appellant from the Charity and the pending appeal, the letter states:

3. The purpose of this letter, which is written on a without prejudice basis, is to request that the Commission engage in discussions with us, as representatives of Mr Potanin, to see whether there is scope to reach agreement on the long-term future of the Charity which would meet both the Commission’s regulatory objectives and Mr Potanin’s overriding interest, which is to secure the Charity’s long-term future. The removal of Mr Potanin as Founder and member of the Charity means that the legal basis on which the Charity was regarded as being under his ownership and control (so as to bring the Charity and its assets within the scope of the asset-freezing provisions in the Russia (Sanctions) (EU Exit) Regulations 2019 - “the Russia Regulations”) no longer applies. If the Appeal is not pursued, this fundamentally alters the landscape for the future of the Charity.

4. Having established the Charity and being its sole benefactor in a very significant amount, Mr Potanin’s principal interest is in seeing that the Charity can continue to operate into the future despite the present difficulties it is facing. In this sense Mr Potanin’s goals align with those of the Commission in seeking to protect the Charity and its property. Given this common interest, we are hopeful that a mutually acceptable solution could be found which would provide Mr Potanin with sufficient assurance about the future of the Charity that he could then withdraw the appeal. This would obviously entail an acceptance on his part that he would no longer be the Founder or member of the Charity.

94. The letter then set out how this could be accomplished. We agree that the intention of the letter was to open a dialogue whereby the appellant would agree to his involvement with the Charity ending if a way were found for it to continue as a going concern. We do not doubt that it was sent in good faith, but we cannot see that the letter alters our conclusion that the failure to resign, or to seek consent for resignation, prior to the making of the removal order was a breach of duty. The opening of a negotiation was likewise insufficient; the appellant’s duty required him to seek the Commission’s consent to unconditional retirement.

95. Dealing with the other points raised, we record that it has not been necessary to resolve any difference between the parties on the extent to which, in the years prior to designation, the appellant actually sought to exercise day to day control of the Charity’s activities or to direct the trustees in their decisions. Our decision rests upon the structural control he retained, the ongoing personal role in the Charity’s governance, and the duty to resign them in the circumstances which arose. Nor has it been necessary to decide whether the Commission ought to have done more to communicate its decisions and concerns to the appellant (as opposed to the Charity); his duties were proactive in nature and did not depend on action in response to notice of concerns.

96. Continuing with knowledge and timing, even taking the appellant’s account at its highest, the fiduciary obligation of single-minded loyalty did not depend upon his receipt of particular communications from trustees or the regulator. The duty was engaged by the objective circumstances: a Founder who had chosen this jurisdiction for what, even on his reckoning, was a major philanthropic endeavour, who held all voting rights and the appointment/removal power, and who was already the subject of non-UK designations while a UK designation was proximate and foreseeable. The relevant period is accordingly not confined to a narrower “notice” window; it includes the pre-designation phase when resignation was fully within his unilateral control, and the post-designation phase when consent to resign could have been sought. The omission to act is conduct “in the administration of the charity” for the purposes of section 76(1) (a).

97. In relation to the trustees’ note of Goldman Sachs’ internal view recorded on 15 June 2022, that assessment, expressly caveated as subject to regulatory action, could not displace the legal consequences that flow from UK designation, nor could it absolve the Founder of his fiduciary obligation to avert foreseeable paralysis in the Charity’s ability to deal with its property.

98. The point that contemporaneous Commission documents (for example, the appointment of the Interim Manager) did not themselves describe the appellant’s continued involvement as “misconduct or mismanagement” may be relevant to subsequent issues, but not the Tribunal’s present task of deciding afresh whether misconduct or mismanagement occurred.

99. Finally, causation of professional withdrawals is not determinative. Whether some withdrawals pre-dated particular foreign designations, or whether advisers were correct on their view that subsequent designation legally required withdrawal, does not unsettle the composite picture of escalating, foreseeable regulatory and other risk culminating in a UK designation which, given the Founder’s voting control and power to appoint/remove trustees, placed a direct duty on him to resign.

100. In our judgment the appellant’s conduct satisfies section 76(1) (a). Prior to UK designation, when the risk was obvious and proximate, and the mechanism to address it was in his hands, he failed to act. After designation, when the consequences for dealings with the Charity’s property were live, he remained in office. The result was to place the Charity at substantial risk that it would not be able to apply its property to its charitable giving, either by growing it through investment or in grant-making, in circumstances where the administration of the Charity could proceed only through regulatory intervention, the imposition of protective orders, and the appointment of an Interim Manager operating under licence. That is conduct properly characterised as misconduct or mismanagement. The statutory threshold is met.

101. That finding should not be misunderstood or taken out of context. While we have found misconduct or mismanagement in the administration of the affairs of the Charity, this is only by reference to the appellant’s own continued involvement in its governance and administration. There is no suggestion that he ever sought to misuse or misappropriate the Charity’s funds, or had in mind applying them for anything other than the Charity’s objects. Issue 3 – Was the appellant responsible for that misconduct or mismanagement, knew of it and failed to take any reasonable step to oppose it; or contributed to or facilitated it?

102. This issue is answered by our above analysis. To briefly repeat it under the present heading, the appellant knew that he had placed substantial funds into a Charity in the UK, he knew of the developing situation, that sanctions were a real possibility and that they were then imposed, what the consequences were of designation, that the Charity was named after him and that he had the constitutional role and powers we have described. It being obvious, he must be taken as knowing that the Charity faced risk to its continued operation from designation. Being on notice of that risk, he knew he had taken no advice to satisfy himself that no action was required. Someone in the appellant’s position necessarily relies on assistance and advice from others; he was described in submissions as “a busy man”. His personal attention and resources must have been stretched further still at the relevant time, but having assumed the powers and duties of Founder he remained under an obligation to proactively exercise them in its best interests and to have arranged his affairs so he could do so: the “ordinary prudent man” described in Mountstar . If he had concluded at the time that the worsening environment meant that he did not have the personal resources to properly undertake the role of Founder, then this is simply another reason to step down. It is not suggested on his behalf that he did take appropriate action but was misled or mis-served by his advisors. The failure to protect the Charity’s effective operation by resigning falls within all three limbs of section 79(4) . Issue 4 – Was the Charity Commission entitled to be satisfied that it was necessary or desirable to act for the purpose of protecting the property of the Charity or securing a proper application of that property?

103. The parties’ wording of this issue risks inviting a review of the Commission’s conclusion. As already noted, we are tasked by Parliament with deciding the decision afresh rather than undertaking a formal review of the sustainability of the Commission’s reasoning at the time of the decision. We accept that property in the present context includes reputation.

104. The Commission’s arguments can be briefly summarised as relying on the Charity holding very significant assets, historically derived from the Founder, and that while interim orders and licensing can enable temporary continuity, indefinite reliance upon them is neither practicable nor the purpose of such measures. The Founder ’ s continuing constitutional control rights created an ongoing, obvious risk to dealings with the Charity’s funds (including de facto inhibition of relations with third parties), and his continued association has already produced practical consequences: withdrawal of professional services, frozen or restricted investment management, and reputational impairment that itself formed part of the Charity’s “property”. Removal was presented as the least intrusive effective measure to extinguish that risk at source, thereby protecting the Charity’s property and enabling proper application in future.

105. Dealing with the appellant’s arguments, we first reject that resignation (and, accordingly, removal) was futile because the charity would remain “tainted” by name or by provenance of funds. That goes to perceived reputation; it does not answer the legal and practical impediment that flows specifically from office ‑ holding by a designated person and the consequent precautionary stance of financial institutions and professional advisers. The statutory question is not whether action is required to eliminate every residual difficulty, but whether it is necessary or desirable to protect the charity’s property and its application. Removing the Founder from office removed the very feature that gave rise to a principal obstacle to that protection and application.

106. Nor does the appellant derive assistance from the contention that he was pursuing a statutory right to seek review of designation. That right is undisturbed; but its exercise did not bind a third party regulator to refrain from taking action it considered necessary to protect the Charity’s property and its application. That protection could not be deferred to the outcome of that separate process, and nor were we referred to any part of the Act or the 2018 Regulations that purports to require it.

107. The appellant argued that the existence of an Interim Manager and a general licence from OFSI meant there was no protective need to remove him, on the basis that at the time of the order there were two things that could happen next. First, designation could be revoked, which would remove the need for any intervention at all, and it was unnecessary for the Commission to remove the appellant now rather than maintain the interim measures until such time as designation was revoked. In the alternative, the charity could be wound up by the Interim Manager without removing the appellant as Founder, making removal unnecessary to protect the charity’s property.

108. In the view of the Attorney General, it would be unlikely (although perhaps not impossible) for it to be in a charity’s best interests for an Interim Manager to be retained for indefinitely, not least because of the ongoing cost, and that such a course would require strong arguments in support. We agree.

109. On cost, the appellant argues that the cost of the Interim Manager was de minimis when set against the Charity’s funds. That takes the wrong comparator. Instead, the ongoing cost must be set against the benefit of retaining the appellant and Founder and leaving it open for him to return in the future and continue to support the Charity with donations and patronage. There is no basis upon which the Commission should have concluded, or we should decide, that this is remotely likely to happen within a reasonable time. It provides no justification for the Charity’s funds being spent on indefinite interim measures instead of its objects.

110. The second possible outcome is best introduced by setting out the conclusions and recommendations of the Interim Manager, Guy Hollander of Mazars, in providing his Phase 1 report on 18 August 2022: Conclusions Following my appointment as IM on 12 July 2022, I have had the opportunity to discuss the position of the Charity with the Trustees and the three Investment Managers. It would appear that the operational viability of the Charity was becoming problematic in FY20 when the Charity was no longer able to make grants to VPF, as a result of both regulatory compliance and difficulties for Russian organisations to receive funds from overseas. Notwithstanding the Charity holding investments in excess of $100m in FY21, it made no grants or donations and the position deteriorated further with the Russian invasion of Ukraine in February 2022. Given the Charity’s connection with Vladimir Potanin, a Russian resident and close associate to the Kremlin, advisers took steps to distance themselves from the Charity with both Edwin & Coe and Deloitte resigning as administrators/company secretary and auditors respectively. Furthermore, at around the time of the sanctions on 29 June 2022, both JPM and GS had given notice of their intention to resign. Therefore, despite significant asset holdings, the Charity without the Commission’s intervention, had become operationally impotent following the sanctioning of Mr Potanin. My appointment has enabled me to take control of the Charity’s assets, assess its viability and to consider the options available to the Charity in the event that it was able to exit from the IM appointment. I have considered whether the management of the Charity could be handed back to the Trustees, who are currently excluded, or, alternatively, considered a restructure of the Charity, such as the appointment of new Trustees, a change of name of the Charity and/or a widening of the Charity’s objectives. However, with the sanctions in place and the likelihood of no relaxation of sanctions in the short to medium term, I do not consider that the Charity is operationally viable outside of the protection of the IM appointment. The IM appointment, in conjunction with the OFSI licence, has enabled the Charity to free itself, to some extent, from the shackles of the sanctions, as professional advisers are able to act for the Charity. GS have now confirmed their willingness to provide discretionary investment management services but JPM have terminated their engagement, notwithstanding my appointment. However, they are willing to act in a limited capacity, being the realisation of the investments they hold. It may be possible for the JPM asset realisations to be transferred to GS for them to manage the whole fund. As IM, I could adopt a holding position and mothball the Charity until an appropriate exit could be implemented. However, “sitting” on the investments/funds overseas may not be acceptable to the Charity’s purpose. Furthermore, I do not consider that it would be appropriate for an IM to continue operating the Charity on a going concern basis as the grants and donations and outreach of the Charity’s income, particularly given that the OFSI licence expires on 30 May 2023. Unless this was extended or modified, as IM, I would no longer have the current legal protection afforded to me and the Charity’s assets could be seen at risk. Recommendations Consequently, a continuation of the Charity beyond the short term is not a realistic option and, therefore, my recommendation would be, subject to the Commission’s agreement, to wind-down the Charity by realising its investments, settling any expenses and creditor claims, if any, and to donate the funds to like-minded charities as provided for in the Charity’s constitution. How this would be implemented would be part of the Phase 2 work that the Commission would need to progress or revert back to the Commission with an “Implementation Plan/Strategy” once you have had the opportunity to fully consider my report, and if appropriate, for us to have a meeting to discuss.

111. The appellant disagrees with the charity being wound up, but in the alternative disagrees that his removal was necessary to effect it; by the time of the removal order, all the Charity’s funds had been repatriated to the UK and the Interim Manager faced no impediment to the proposed winding up. We note that the legislation does not require absolute necessity. The phrase “necessary or desirable” plainly encompasses action taken in the best interests of the Charity even if it is not strictly required. The Commission’s view is that the orderly winding up of the Charity would be more securely achieved if its formal links with the appellant are entirely severed and the reputational and legal barriers to dealing with its funds mitigated. We agree.

112. We further repeat our findings on whether the 2019 Regulations were engaged by the Founder continuing to hold 100% voting rights and a right to appoint/remove a majority of directors, as the Attorney General argued her corresponding case under the present heading. We also repeat our alternative finding that our conclusion is capable of resting simply on the material practical risk and consequent paralysis in dealings with the Charity’s property, which amply justified protective action under s.76(1) (b) and removal under s.79(4) .

113. Finally, our conclusions are not altered by the without prejudice letter of 29 July 2024. The offer to cease involvement is plainly contingent upon the Charity continuing as a going concern. While this Tribunal is tasked with deciding whether it is necessary or desirable for the appellant to be removed as Founder, we are in no position to decide whether it should be wound up. That is a matter for the Commission to decide in light of all the relevant circumstances and in accordance with its expertise. Issue 5 – Proportionality

114. The requirement for proportionality derives from section 16, which includes the following general duty: 4 In performing its functions the Commission must, so far as relevant, have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed).

115. The issues in this appeal had previously included the compatibility of the removal decision with Article 8 of the European Convention on Human Rights, as well as article 1 of the First Protocol. That is no longer pursued, but the parties still made their arguments on proportionality according to the approach in Bank Mellat v Her Majesty's Treasury (No. 2) [2013] UKSC 39 at [20]. We doubt that this is strictly correct when engaged with broad, regulatory proportionality; a classic human rights analysis is concerned with the particular rights protected by the Convention and we have not been addressed on the extent to which the removal order is said to interfere with the exercise of those rights.

116. We do, nonetheless, consider all the circumstances to determine whether a less intrusive measure could have been adopted and whether the right balance was struck between the regulatory objective and the consequences of removal for the appellant, those issues being taken together in the parties’ submissions according to the balance sheet exercise described in Hesham Ali .

117. We repeat our assessment of the previous issues. Even if the Commission’s reasoning is entirely disregarded, we independently find that there was a high level of justification for making a removal order. Misconduct or mismanagement was established, in the form of failing to act in accordance with the duty of single-minded loyalty to the Charity’s objects. Removal of the appellant removed the impediment imposed by designation, and the alternatives said to be available to the Commission are rejected at paragraphs 104 to 113 above. More generally, there is a high public interest in the Commission securing charitable property and its proper application and the effectiveness of the regulatory powers by which it does so.

118. On the other side of the scale, the nature of the appellant’s duties towards the Charity are inconsistent with him having any formal proprietary claim on the Charity, its activity, or even its name; it was his choice to postpone his own interests behind the Charity’s objects, so they accordingly carry less weight in favour of his continued involvement. Nonetheless, the large donations to the Charity, and the reason for its existence, was the appellant’s own desire to begin and to continue philanthropic endeavours funded by his personal wealth. Such giving is itself in the public interest, and retaining the donor in the Charity can lead to further donations and increase the Charity’s ability to engage with others. No doubt the Charity did a great deal of good in pursuit of its Charitable objects, and this was aided by the appellant’s continued involvement and patronage. Such matters are capable, in principle, of carrying weight against removal. But the reality is that the decision by Russia to send troops into Ukraine precipitated a series of events that ended the ability of someone in the appellant’s position to undertake such philanthropic work, or assist it on an ongoing basis with his expertise and patronage.

119. For the reasons we have given, association with the appellant instead had a severe and detrimental effect on the Charity’s ability to pursue its objects, to the extent that the present order was necessary and justified in order to secure its property and its proper application. Removal was proportionate. Conclusion

120. The agreed issues are determined against the appellant and the appeal is dismissed. Signed Date: UTJ Neville 24 February 2026