Author: Syedur Rahman
17 November 2023
2 min read
Syed Rahman details how the case has restricted the definition of a designated person’s control of an entity.
The case of Litasco SA -v- (1) Der Mond Oil and Gas Africa Sa (2) Locafrique Holding SA  EWHC 2866 (Comm) has brought further clarity to what constitutes a designated person’s control of an entity.
Litasco - a Swiss oil marketing and trading company that is wholly owned by the Russian oil company, Lukoil PJSC - applied for a summary judgement against the defendants, which were two Senegalese companies.
The parties had entered into a contract in 2021, according to which Litasco agreed to supply Der Mond with Nigerian crude oil. Der Mond failed to fulfil certain payment obligations, and Litasco sued for the outstanding amount.
The defendants advanced a number of defences. One of these was that even though neither Litasco nor Lukoil are designated under the UK sanctions regime, no payments could be made to Litasco under Regulation 12 of the Russia Regulations (Russia (Sanctions) (EU Exit) (Amendment) Regulations 2019) - as that would constitute ‘making funds available directly or indirectly to a designated person’.
The defendants argued that Litasco should be treated as a designated person because it was controlled by Russian-Azerbaijani businessman Vagit Alekperov – who has had sanctions imposed on him by the UK, as well as Canada, Australia and New Zealand, after Russia’s invasion of Ukraine – and Russian President Vladimir Putin.
In reaching a decision, Justice Foxton addressed the recent Court of Appeal case of Mints PJSC National Bank Trust & Anr  EWCA Civ 1132.
In the Mints case, the Court of Appeal, albeit strictly obiter, made a statement that PJSC National Bank Trust is 99% owned by the Central Bank of Russia and is controlled by Vladimir Putin and/or the governor of the Central Bank of Russia, Elvira Nabiullina, who are both designated persons. The Court of Appeal stated that the control test was to be interpreted broadly and subjects any entity to UK sanctions if a designated person was able to exert influence over it.
This prompted the UK government to state it was carefully considering the impact of the Court of Appeal’s judgment in the Mints case - particularly the court’s views that PJSC National Bank Trust was controlled by designated persons by virtue of their political office. It added that there was no presumption on the part of the government that a private entity being based in or incorporated in Russia - or any jurisdiction in which a public official is designated - is in itself sufficient evidence to demonstrate that the relevant official exercises control over that entity.
In the Litasco case, Justice Foxton restricted the interpretation of the definition of control that had been seen in the Mints case.
Justice Foxton clarified that interpretation of Regulation 7 (relating to control) should be read and applied with a focus on existing influence - not on potential control, as was stated in obiter in Mints.
The two defendants in the Litasco case offered no evidence of control. As there was no arguable evidence that the Russia Regulations applied in this case, Justice Foxton ruled that Litasco should not be deprived of the summary judgment.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.