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Sanctions and Court Access

Author: Dr. Angelika Hellweger  6 February 2023
2 min read

Angelika Hellweger of Rahman Ravelli details a case that considered whether Russian parties still have right of access to the courts.

Judgement in PJSC National Bank Trust and another v. Boris Mints and others [2023] EWHC 118 (Comm) is significant in terms of sanctions and access to the courts.

The High Court (Commercial Court) case can be viewed as a test of whether Russian parties still have a right of access to the courts as a fundamental right - and how far they can use UK sanctions legislation, and in particular the Office of Financial Sanctions Implementation’s (OFSI’s) licensing regime, in their favour.

The importance of these questions of law – and their major implications for litigation involving sanctioned entities – is reflected in the fact that the judge gave permission to appeal against the decision.

Case Background

In 2019, Russian lender PJSC National Bank Trust & Bank Otkritie (owned by the Russian Central Bank) claimed US $850 million from a number of defendants - Boris Mints and his sons.

The defendants were accused of conspiring with representatives of Bank Otkritie to enter into uncommercial transactions by which loans were replaced with near-worthless bonds. It was alleged that Mints (a co-founder of Otkritie) and his fellow defendants defrauded Bank Otkritie before it collapsed and was bailed out by the government, with its toxic assets moved to PJSC National Bank. A summary judgment application brought by the two banks was dismissed in early 2022.

The defendants applied for a stay on the grounds that the claimants could not lawfully satisfy adverse costs orders, provide security for costs or pay any damages that might be awarded on their cross-undertaking. The defendants emphasised that Bank Otkritie is sanctioned by the UK and that PJSC National Bank is owned or controlled by Russia’s President Putin and Ms Nabiullina, Governor of the Russian Central Bank. The defendants further asked for a release from the undertakings which they had given to the Court in connection with the freezing orders obtained against them.

At a hearing last December, lawyers for Dmitry and Alexander Mints had argued that the banks' claims were worthless until sanctions were lifted. They claimed it would be illegal to enter judgment in favour of the lenders because it would infringe the UK sanctions regime.

The Judgment

Judge Sara Cockerill ruled at the court that litigation could be pursued against Mints and his sons.

Although it was stated there were serious arguments both ways on a number of these points, the judge noted that:

  • The PJSC National Bank Trust is not controlled by Vladimir Putin or Ms Nabiullina due solely to their political office and / or employment. Bank Otkritie is a designated person in UK sanctions. The sanctions issues arise, therefore, in relation to Bank Otkritie. But not PJSC National Bank Trust.
  • A sanctioned claimant can sue for damages. The entry of a money judgement in favour of a designated person (post-designation) is not unlawful, is not a licensable activity and is not prohibited by the asset freeze prohibitions in place. A cause of action is an “economic resource” as it can be used to obtain funds or financial assets.  A judgment debt is “funds”. The entry of judgment is not a prohibited “dealing” with funds.
  • The payment of costs orders to a sanctioned party and security for costs to meet such adverse costs orders can all be licensed by OFSI. A post-judgment interest on costs cannot be licensed.

Conclusion

The case is one of the first since Russia’s invasion of Ukraine to determine whether Russian parties are able to use the English legal system to bring litigation. The judge stated in her judgment that sanctions regulations do not prevent courts entering judgments for designated entities and that lawmakers had no intention to deviate from "the fundamental right of access to the court".

The judge referred to OFSI having granted a licence for PJSC National to pay legal fees and court orders, which demonstrated its belief that the trial could continue. She also ruled that PJSC National Bank Trust was not controlled by either Putin or the governor of Russia's central bank.

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Dr. Angelika Hellweger

Legal Director

angelika.hellweger@rahmanravelli.co.uk
+44 (0)203 597 9783 vCard

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Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.

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