The High Court has dismissed an application for a stay of proceedings based upon the imposition of sanctions against a claimant in English proceedings. The Judge found that judgment could be lawfully entered on a designated person’s claim, despite arguments that funds recovered might potentially, or indirectly, be used to fund the war in Ukraine.
The application and decision in PJSC National Bank Trust & anor v Mints & ors [2023] EWHC 118 (Comm) poses questions about the effects of the invasion, and subsequent sanctions, on litigation.
The claimants claimed US$850 million from defendants in the proceedings. The claimants alleged that the defendants conspired with representatives of the claimant banks to enter into uncommercial transactions with companies connected with them by which loans were replaced by worthless or near worthless bonds. The claimants obtained freezing orders against some of the defendants.
Following the UK Government's introduction of sanctions, the Secretary of State sanctioned the second claimant in the proceedings, Bank Otkritie, pursuant to the Russia (Sanctions) (EU Exit) Regulations 2019 ("Regulations"). It did so on the basis that it was satisfied that Bank Otkritie is “supporting and obtaining a benefit from the Government of Russia”. As such, Bank Otkritie is a “designated person”, its assets are frozen and dealings in them are prohibited.
The first to fourth defendants applied for a stay of the proceedings on the basis that:
1. The court could not lawfully enter judgment on a designated person’s claim;
2. A designated person was unable to pay an adverse costs order, satisfy an order for security for costs, or pay damages that might be awarded in respect of the cross-undertakings in damages, and
3. It was not possible to license the payment of costs orders in favour of a designated person for similar reasons.
On the one hand it is an attractive argument that the proceedings be stayed in order to prevent any money which might be recovered by the claimants being used to, even indirectly, fund the war in Ukraine. However, the court had to consider whether Parliament's intention under the Regulations would have been to limit the right of access to the courts.
Ultimately, the application was dismissed. It was found that judgment can lawfully be entered on a designated person’s claim. Further, it was decided that the activities listed at (2) and (3) above are licensable by the Office of Financial Sanctions Implementation.
Permission to Appeal has been granted.
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