Recent Developments in Sanctions Case Law (England and Wales)

Over the first half of 2024, a number of significant cases involving sanctions have come before the English courts.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

This blog is co-written by James Bowen, Managing Associate, Litigation, Arbitration and Investigations, Satindar Dogra, Litigation, Arbitration and Investigations Partner and Casey Kwok, Multilingual Paralegal, Linklaters.

Some of these have given useful insights into the operation of the UK’s sanctions regime, while others have addressed broader principles. 

We note that a few key cases remain outstanding – particularly, the appeal in UniCredit Bank GmbH, London Branch v Celestial Aviation Services and another and the Supreme Court’s detailed judgment in RusChemAlliance LLC v UniCredit Bank GmbH

Case Law – Operation of Sanctions Regime

An interesting case assisting with the interpretation of the UK asset freeze regime is the interim decision in Vneshprombank v Bedzhamov. In the context of a dispute over litigation funding by a potentially sanctioned person, the High Court determined that the basis for an asset freeze to apply is that the relevant person is owned / controlled by a designated person, rather than it merely being suspected that this is the case. In the course of considering this point, the High Court went through a detailed analysis of the ownership and control test, which may be of broader application, particularly in the context of disposals of controlling interests by designated persons just prior to designation.

Another significant case, Khan v Secretary of State, demonstrated the formidable challenges encountered when challenging an asset freeze designation, even in scenarios burdened with personal and familial consequences. This illustrates the difficulty of contesting a designation under these laws (consistent with the Court of Appeal’s position in Dalston Projects Limited v Secretary of State and the joined Shvidler v Secretary of State appeal) but more broadly demonstrates the human rights and rule of law impacts of asset freeze designations, particularly where the designated person is habitually resident in the UK.

Case Law - Anti-Suit Injunctions and Litigation in Russia

Cross-border disputes involving sanctions give rise to unique issues of public policy and fairness, as demonstrated by the English courts' handling of anti-suit injunctions and litigation in Russia. These cases underscored the complex interplay between arbitration agreements, international jurisdiction and economic sanctions.

In RusChemAlliance LLC v UniCredit Bank GmbH, the Supreme Court upheld the decision of the Court of Appeal that the English courts had jurisdiction to make an anti-suit injunction in support of an arbitration agreement providing for arbitration in France (on the basis that the proper law of the arbitration clause was English law and England was the appropriate forum given the lack of a meaningful remedy available in France) and made a final anti-suit injunction against RCA's Russian proceedings. Interestingly, given the parallel Russian proceedings taking place in breach of the mandatory final injunction, the Supreme Court considered that it was appropriate to give an oral decision summary on the appeal in advance of the judgment being handed down. This emphasises the importance that the English courts place on giving effect to parties’ agreement as to jurisdiction – although see Zephyrus Capital below for a different view on this.

Barclays Bank PLC v VEB.RF continued the English courts’ approach to anti-suit injunctions, with the High Court emphasising that arbitration clauses must be respected and being willing to take action to give effect to them, despite geopolitical complications. This case involved an interesting argument on the part of VEB.RF that the arbitration clause was frustrated due to VEB.RF being designated and having an issue with access to counsel in the UK, but this was given short shrift.

In Zephyrus Capital Aviation Partners 1D Limited v Fidelis Underwriting Limited, and somewhat contrary to the position adopted around the grant of anti-suit injunctions in support of arbitration and jurisdiction clauses providing for dispute resolution outside Russia, the Commercial Court was willing to accept it had jurisdiction to determine a dispute despite an exclusive Russian jurisdiction clause. The decision was influenced by the broader context and fairness of the trial location (noting that the Russian state had an interest in the outcome of the litigation and the claimants were in “Unfriendly Foreign States”), pivoting away from traditional “forum non conveniens” considerations. This case will be of interest to any parties facing proceedings in Russia, and wishing to obtain a remedy elsewhere – although enforcing an English court judgment obtained in this way in Russia is likely to be its own challenge.

Case Law - Force Majeure

In RTI Ltd v MUR Shipping BV the Supreme Court confirmed that “reasonable endeavours” provisions in force majeure clauses will not (absent clear wording) require a party to accept non-contractual performance. The Supreme Court considered the issue as a matter of principle, rather than looking at the specific wording of the force majeure clause, observing that reasonable endeavours provisions are commonly featured in such clauses (and if not expressly included, will be implied to the same effect). As such, the court’s decision – while made in the context of sanctions - is of general relevance, and emphasises the English courts’ usual approach to commercial certainty.

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