When sanctions touch one part of a chain of transactions, participants in the chain can rightly be concerned about drawing the card from the deck that sends them straight to prison without passing Go and without collecting any money. In practice, at least in the UK, this means an application for a licence from the Office for Financial Sanctions Implementation (OFSI) (and a long wait), seeking clarification from the court, or relying on legal advice that neither the former nor the latter are necessary. In Denali Corp – FZCO v Manson & Ors [2026] EWHC 2287 (Ch), Denali applied for a direction requiring liquidators to consent to the assignment of rights against the company in liquidation, such rights having previously been held by a designated person. The court concluded that the liquidators could provide their consent without falling foul of the relevant sanctions legislation and no licence from OFSI was required.
Summary
In April 2025, Denali, a Dubai company, entered into settlement, assignment and termination agreements with Atlas, a Russian company. As consideration for Denali agreeing to terminate a heavily loss-making gold supply contract and release Atlas from its obligations, Atlas agreed to assign its rights to receive certain proceeds in the liquidation of Petropavlovsk plc (Petro), a company in England and Wales. The relevant agreement between Petro and Atlas enabled Atlas to assign its rights with the consent of Petro, such consent not to be unreasonably withheld or delayed. The assignment would be effective upon consent being given, but neither Atlas nor Denali would be liable if consent was not given.
In June 2025, Atlas became a designated person for the purposes of the sanctions legislation contained in the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) and the regulations made thereunder, being the Russia (Sanctions) (EU Exit) Regulations 2019 (the Regulations).
The Law
First, HHJ Johns KC noted the distinction between an economic resource and a fund in s.60 SAMLA, which states:
“60(1) In this Act ‘funds’ means financial assets and benefits of every kind, including (but not limited to) (a) cash, cheques, claims on money, drafts, money orders and other payment instruments; (b) deposits, balances on accounts, debts and debt obligations; (c) publicly and privately traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivative products; (d) interest, dividends and other income on or value accruing from or generated by assets; (e) credit, rights of set-off, guarantees, performance bonds and other financial commitments; (f) letters of credit, bills of lading and bills of sale; (g) documents providing evidence of an interest in funds or financial resources; (h) any other instrument of export financing.
(2) In this Act ‘economic resources’ means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but can be used to obtain funds, goods or services.”
Regulation 11(1) requires a person (P) not to deal with funds or economic resources owned, held or controlled by a designated person if P knows, or has reasonable cause to suspect, that P is dealing with such funds or economic resources. What amounts to a “dealing” differs according to whether it is with funds or economic resources. Here, by Regulation 11(4), P deals with funds if he: “(a) uses, alters, moves, transfers or allows access to the funds; (b) deals with the funds in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination; or (c) makes any other change, including portfolio management, that would enable use of the funds.” By contrast, P deals with economic resources if, contrary to Regulation 11(5), he: “(a) exchanges the economic resources for funds, goods or services, or (b) uses the economic resources in exchange for funds, goods or services (whether by pledging them as security or otherwise).”
HHJ Johns then referred to PJSC National Bank Trust v Mints [2023] EWCA Civ 1132, in which the Chancellor confirmed that the claim or cause of action before it was an economic resource. This was not least because there was uncertainty as to whether that claim or cause of action would succeed, whereas a common feature of the definition of a “fund” was that it pointed to something that was valid, with an intrinsic financial value and usually for a liquidated sum.
Application of the law to the facts
The starting point for HHJ Johns KC was what was being assigned under the assignment agreement between Denali and Atlas. The Judge agreed with Denali’s contention that this was a collection of contractual rights in the contract between Petro and Atlas. These rights comprised: (i) a contractual right to a payment reflecting any eventual surplus in the liquidation, enforceable in practice by proving for an uncertain sum; and (ii) contingent or reversionary rights to certain (if any) residual amounts. Having arrived at that conclusion, it was apparent to HHJ Johns that those contractual rights represented an economic resource: the contractual rights were not to a liquidated or definite sum. Rather, they were a right only to a payment in a sum equal to any surplus in the liquidation. The extent of any surplus depended not only on the claims of other creditors but also on the level of recovery out of assets, as well as on the level of fees and expenses, all of which were uncertain.
HHJ Johns then moved to considering whether the giving of consent by the liquidators would constitute a “dealing” with the rights assigned. Here, he noted that Petro was not a party to the transaction between Atlas and Denali and the giving of consent would not involve any exchange by the liquidators or Petro of those rights for funds, or the use by the liquidators or Petro of the rights in exchange for funds. As a result, consent could be given by the liquidators.
Finally, HHJ Johns KC considered whether the liquidators needed to apply for a licence. Having concluded that consent would not breach Regulation 11, the Judge held that there was no occasion for the liquidators to seek a licence.
Conclusion
The liquidators will be comforted by this judgment and, having taken a neutral stance in relation to the underlying application, are unlikely to appeal. Similarly, Denali is unlikely to appeal as it succeeded in the application. This is, perhaps, unfortunate.
First, as HHJ Johns noted, the facts of this case were not as clear as Mints. There are distinctions that may be drawn, in particular, in this case, Denali and Atlas must have anticipated a transfer of value to Denali by way of the relevant agreements, not least because the arrangements plainly contemplated a transfer of value to Denali in consideration for Denali terminating the loss-making gold contract and releasing Atlas from its obligations.
Second, in his concluding remarks, HHJ Johns KC said that he arrived at his judgment “with no real reluctance” because all the benefits that Atlas was to receive had already passed. The giving of consent now would put no assets in the hands of the designated person. Whilst this is correct, had the relevant agreements concluded after Atlas was designated, one could readily see why there would be cause for reluctance.
Practical points
Although in theory the liquidators and Denali could have proceeded on the basis of legal advice that consent was lawful, the potential ramifications of being found on the wrong side of the sanctions regime make a cautious approach entirely understandable. At the very least, this judgment is another reminder that, if designation touches upon any part of a transaction, obtaining legal advice is a necessity.
Disclaimer: This article is provided for general information only and is accurate as of 8 September 2026. It may not be updated to reflect subsequent legal or other developments. It does not constitute legal advice and should not be relied on as such. Specific legal advice should be obtained in relation to particular circumstances.
