Peters & Peters

Don’t let an armed conflict get in the way of London litigation

The full-scale invasion of Ukraine in February 2022 was a calamitous event which has given rise to extraordinary hardship and global repercussions that continue to reverberate. Away from the battlefield itself, many have been displaced and businesses disrupted globally.

One self-interested concern that arose in the legal community, inevitably, was how this would impact on the business of major law firms, particularly those dealing with international disputes. Nowhere was this concern felt more acutely than in London, a leading centre for CIS disputes for a quarter of a century. How would the court system approach the plethora of disputes, extant and potential, that involved sanctioned parties? The risk of the system grounding to a halt in the face of a major ramping up of the EU, UK and US sanctions regimes from the status quo post-Crimea was significant.

The last year or so has given a definitive answer in so far as the English Court is concerned: there will be no ‘deep freeze’, the sanctions complications arising in litigation unrelated to the war are to be managed, at times robustly, to ensure that such disputes proceed and are not put on ice. This has been seen in a variety of different contexts.

Sanctioned parties face the risk of proceeding without lawyers

Early in the fallout of the Russian invasion, the BVI Commercial Court made global headlines when it refused the application made by a major offshore firm to come off the record in representing the Russian state bank VTB. Even ‘pariahs’ have rights, wrote Justice Jack.

They may have rights, but their ability to keep lawyers may vary. Notwithstanding, the English Court will not necessarily yield to the excuse of a lack of legal representation when it comes to participating in litigation. This was seen in Justice Foxton’s November 2022 judgment in VTB Commodities Trading v JSC Antipinsky [2022] EWHC 2795 (Comm). Although VTB Commodities Trading did not have English solicitors or counsel, they were still expected to respond to Requests for Further Information as to their position on foreign law issues relating to jurisdictions where they did have lawyers. Further, it could make no assumptions that if it did not receive licenses sufficient to permit lawyers to be instructed that there would be any further adjournment of the trial: ‘More generally, VTB need to understand that if no licence is granted, or there is delay in providing it of an order which would threaten the new trial date, then there is every likelihood of that hearing proceeding, whether VTB is able to instruct lawyers or not. VTB needs to prepare on the assumption that it may not be able to instruct lawyers, and that it needs to take the steps which will enable it to do the best it can in November 2023, however unsatisfactory that might be.’

Foxton J’s focus on driving the litigation forward was clear and in line with the approach the Commercial Court would take more generally.

State-to-state disputes involving the belligerents continue

In complex civil claims, the English Court aims to give judgment within three months where possible. The wait in Law Debenture Trust v Ukraine [2023] UKSC 11 was over three years. Admittedly, this was partly caused by an extremely unusual further hearing with respect to some of the issues, but the geopolitical landscape changed unrecognisably in the time the court deliberated.

At its heart, the Law Debenture Trust case is a state dispute between Ukraine (as issuer of the relevant loan notes) and the Russian Federation, which purchased the notes. The judgment of the Supreme Court dealt with a myriad of complex issues which are central to the issues of authority and capacity so often engaged in sovereign litigation. Most notable, however, given the political context, was the decision to deny the Russian Federation (acting by the notes’ trustee) summary judgment on the basis that Ukraine’s defence was subject to duress in the form of both economic pressure and threats to its territorial integrity and independence by Russia’s use of force.

Claims before the English Court are not sanctioned themselves

The imposition of sanctions on so many litigants raised a novel and important question with enormous potential consequences for both parties and their lawyers: would entering a judgment in favour of a sanctioned entity constitute either making funds available to it, dealing with an economic resource or otherwise be prohibited by the UK sanctions regime?

This ingenuous argument raised by the defendants to a claim in a major bank fraud case, Mints and Others v National Bank and Trust and Another [2023] EWCA Civ 1132, in support of a general stay of the proceedings, was rejected both at first instance and in the Court of Appeal. The English Court, in entering judgment in favour of a sanctioned party, could not properly be described as engaging in such sanctioned activity. Even if it could, the Court could give declaratory relief pending appropriate sanctions licensing being obtained. Performance of the consequences of such judgments may well require licensing, but this was to be expected and did not militate in favour of a stay in advance of the dispute being determined. Interestingly, the Supreme Court recently announced that it will hear the case on appeal, so the issue is not yet settled as a matter of English law.

Sanctions make existing commercial contracts more difficult to perform, not impossible

The imposition of sanctions, of course, presented a potential opportunity to some counterparties of Russian entities for whom existing commercial terms were onerous, unachievable or simply undesirable. This was on show in Litasco SA v Der Mond Oil and Another [2023] EWHC 2866 (Comm), a West African dispute about payment for certain oil cargoes.

The defendants in the case, having obtained the nearly one million barrels of Nigerian crude oil marketed by the trading subsidiary of the Russian Lukoil, invoked a series of arguments parasitic on the impact of sanctions to resist payment. Ranging from the imposition of sanctions being an event of force majeure, to the alleged risk of the defendants facing enforcement action for complying with the payment duties, the arguments were complex and, it seems in the view of the judge, a series of excuses that did not merit going to full trial.

The reality was that the defendants’ excuses arose from currency challenges and commercial motivations, rather than sustainable legal arguments. The English Court’s strong disposition towards holding parties to their bargain and maintaining a practical approach meant that the sanctions impacting on the claimant were not in and of themselves a defence.

A purposeful interpretation of sanctions will keep the show on the road
One of the complications flowing from the sanctions imposed following Russia’s invasion was the impact on the aircraft and engine leasing industry, along with that industry’s insurers. The complications arising from stranded hardware and (re-)insurance contracts engaging the interests of Russian entities has given rise to a huge amount of litigation in the English Court.

The recent decision of Aercap Ireland v AIG and Others [2024] EWHC 144 (Comm) involved the issue of certain (re-)insurers being unwilling to give disclosure of underlying insurance documents absent a court order permitting the same, less doing so (given the involvement of Russian entities) be seen as contravening the sanctions prohibition on providing financial services or funds relating to restricted goods or technology, alternatively brokering services or insurance/reinsurance services relating to the same in circumstances where aviation assets are restricted goods. Having failed to get sufficient clarity from OFSI or the UK’s Export Control Joint Unit, an application was made to the Commercial Court.

Justice Butcher provided important analysis of considerably wider application than the aircraft leasing debates. His finding that compliance with a court order would not be caught by the sanctions regime, as it was simply obedience to the Court, could have very wide application. So too his conclusion that Christopher Hancock KC, sitting as a Judge of the High Court, had been correct in the Celestial Aviation litigation, in holding that what was required from the Court was a purposive interpretation of sanctions legislation, rather than an overly textualist one. Butcher J’s judgment seems to capture the robust attitude the High Court has taken about how much OFSI regulations can be permitted to interfere with such matters. Given that Celestial Aviation is on appeal, this purposive approach to sanctions analysis, not always subscribed to by expert practitioners, will soon be the subject of higher authority.


The world has changed irretrievably in the years since Russia’s full-scale invasion of Ukraine. Efforts to disrupt the Russian government’s activities, most notably through sanctions, are likely to increase, including given domestic Russian developments such as the death of the anti-corruption campaigner Alexei Navalny. Notwithstanding this backdrop of armed conflict and government repression, the English Court continues to facilitate the resolution of Russian-connected disputes. In some ways, this captures a quintessential element to the English legal system: it would be wrong to allow Russian aggression to prevent those with claims against Russian-connected entities from proceeding. Given the importance of equality of arms and natural justice, including in commercial disputes, the English Court therefore has to allow Russian claims to proceed as well and to use the broad and flexible case management powers that it has, to facilitate the just resolution of all such disputes.

This article first appeared on the website of the Litigation Committee of the Legal Practice Division of the International Bar Association, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association.