In her recent judgment in PJSC National Bank Trust v Mints, Cockerill J has considered a number of important questions of law concerning the sanctions regime.
In the underlying proceedings, the claimants (both Russian entities) seek damages of c.$850 million, contending that some of the defendants caused them to enter into a disadvantageous transaction, which was a fraud on the banks, and that the other defendants were implicated in this fraud. A summary judgment application brought by the banks was dismissed by Foxton J in early 2022: see here.
Following Russia’s invasion of Ukraine, C2 was sanctioned by the Secretary of State and C1 is (on D2-D3’s case) ‘owned or controlled’ by at least one designated person, namely President Putin or Elvira Nabiullina (the Governor of the Central Bank of Russia, of which C1 is in effect a wholly owned subsidiary). D2-D3 issued an application in August 2022 seeking a stay of the proceedings on the ground that it would be unlawful for the Court to enter judgment in favour of designated persons and that designated persons cannot lawfully provide security for costs, satisfy adverse costs orders or pay damages awarded on a cross-undertaking (and that OFSI, the regulator, has no power to license any of these things). The application was heard over 4 days in December 2022.
Under the Sanctions and Anti-Money Laundering Act 2018 and the Russia (Sanctions) (EU Exit) Regulations 2019, it is unlawful to deal in the ‘funds and economic resources’ of designated persons or to ‘make available’ funds or economic resources to designated persons. D2-D3’s case was that a judgment debt constitutes ‘funds’ and that obtaining a judgment debt is therefore both an infringement of the ‘making available’ prohibition in Regulation 12 and of the ‘dealing’ prohibition in Regulation 11 as it amounts to a dealing in the underlying cause of action.
Cockerill J accepted D2-D3’s contention that a judgment debt constitutes ‘funds’ for the purposes of the Regulations and that a cause of action constitutes ‘economic resources’. However, she nonetheless dismissed the stay application, finding that the common law principle of legality dictates that any interference with fundamental common law rights (such as access to justice) must be so clearly authorised in primary legislation that it is ‘inescapable’. Although it is ‘plainly arguable that it would be unlawful to enter judgment’ in favour of designated persons, ‘the contrary is also arguable’ and ‘the requisite level of clarity in intent to derogate from the fundamental right of access to the court…is not demonstrated’: [134]. Cockerill J also held that OFSI does have power to license the payment of adverse costs, security for costs and damages.
Cockerill J gave D2-D3 permission to appeal on all of these points, recognising that they raise important questions of law with wide implications for litigation involving sanctioned entities.
Laurence Rabinowitz KC and Niranjan Venkatesan acted for the Second and Third Defendants (with Simon Paul of Fountain Court). They were instructed by Enyo Law LLP.
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