On 6 October 2023, the Court of Appeal handed down judgment in Boris Mints & Ors v PJSC National Bank Trust & Anor  EWCA Civ 1132, a significant judgment concerning the interaction between the UK Russia sanctions regime and ongoing litigation involving designated persons.
The claimants in these proceedings are two state-owned Russian banks, who have quantified their claims at US$850 million. The Second Claimant, Bank Otkritie, is a designated person under the Regulations. The First Claimant, NBT, has not been designated, but the First to Fourth Defendants contended that it is nonetheless caught by the sanctions because it is owned or controlled by one or more designated persons within the meaning of Regulation 7, namely Vladimir Putin, the President of the Russian Federation, and Elvira Nabiullina, the Governor of the Central Bank of Russia. It was common ground that NBT is 99% owned by the Central Bank of Russia, which in turn is required by Russian law to pass 75% of its profits to the Russian Federal Budget.
The First to Fourth Defendants applied for a stay of the proceedings and discharge of return date undertakings, on grounds that (1) the entry of a money judgment in favour of a sanctioned person is unlawful under the Regulations, (2) other litigation steps such as payment of adverse and favourable costs orders, payment of security for costs and payment of damages pursuant to a cross-undertaking are also unlawful, (3) there is no licensing ground under the Regulations by which such acts can be authorised by the Office of Sanctions Implementation (“OFSI”), and (4) this would result in substantial prejudice to the First to Fourth Defendants if the litigation were to continue or if the undertakings were to remain in force.
At first instance, Mrs Justice Cockerill dismissed the application finding in favour of the Claimants, but granted the First to Fourth Defendants permission to appeal. In addressing the control issue, Mrs Justice Cockerill concluded that NBT was not owned or controlled by a designated person within the meaning of Regulation 7, because control is not established under Regulation 7 where a designated person controls an entity in virtue of a political office that they hold.
The Court of Appeal (per Sir Julian Flaux C, with whom Newey and Popplewell LJJ agreed) dismissed the appeal, upholding Mrs Justice Cockerill’s conclusion that the entry of a money judgment in favour of a designated person was not prohibited by the UK Russia sanctions regime, and that the various litigation steps could be authorised by the licensing grounds. In those circumstances, the issue of control did not strictly arise, however as the issue had been fully argued the Court of Appeal considered the issue and decided it in favour of the Appellants, concluding that control can be established under Regulation 7 by whatever means, including political and corporate office, and accordingly the appellants were correct to contend that NBT is owned or controlled by one or both of President Putin or Governor Elvira Nabiullina such that it too is subject to the sanctions.
Simon Paul (with Laurence Rabinowitz KC and Niranjan Venkatesan) acted for the Appellants, the First to Fourth Defendants, instructed by Jonathan Brook of Enyo Law.
The judgment ( EWCA Civ 1132) is available here.