Cockerill: Not clear intention was to curtail access to the courts
The UK sanctions regime does not block the courts from entering judgments in favour of a party on the sanctions list, the High Court has ruled.
Mrs Justice Cockerill said applications to stay a $850m fraud claim brought by two Russian banks and for a release from undertakings “call into question the effects” of the war in Ukraine on litigation in the Commercial Court.
She said that barring the entry of judgments would “take the UK (a major international legal centre, on any analysis) fundamentally out of step with the EU in a way which would make the UK a less competent jurisdiction for dispute resolution than the EU”.
The judge said it would also “be a change from the situation which reaches back further – for 30 years of sanctions-related litigation”.
The claimants were the PJSC National Bank Trust (NBT) – a subsidiary of the Central Bank of Russia – and the sanctioned PJSC Bank Otkritie Financial Corporation.
They launched the litigation in June 2019, claiming around $850m from a group of individual and corporate defendants on the grounds that they “conspired with representatives of the claimant banks to enter into uncommercial transactions with companies connected with the defendants by which loans were replaced by worthless or near worthless bonds”.
Cockerill J said the banks obtained freezing orders against some of the defendants, and the “complex and hard fought” litigation was “progressing towards trial” at the time of the invasion of Ukraine in February last year.
The defendants applied for a stay in the proceedings and release from the undertakings they gave the court in connection with the freezing orders against them.
Cockerill J said the applications “call into question the effects” of the war in Ukraine on litigation in the Commercial Court.
“While the issues are raised in the context of this case, there are implications for a number of other pieces of litigation.”
Post-Brexit, the sanctions regime is governed by the Sanctions and Anti-Money Laundering Act 2018 and accompanying regulations, which followed on from the previous EU regime and in turn UN rules.
The judge said that, looked at in isolation, it was “plainly arguable that it would be unlawful to enter judgment on the causes of action advanced by the claimants” under the 2018 Act.
“But the contrary is also arguable; and the more so when one ‘pans out’ from a narrow concentration on the individual words in individual regulations, which regulations are long and manifestly derive from a complex genesis, and bring into play the broader backdrop and intent of the regulations as a whole.”
She concluded that, although Parliament had intended to curtail some fundamental rights to a certain degree – particularly the peaceful enjoyment of property – “the requisite level of clarity in intent to derogate from the fundamental right of access to the court for determination of rights outside designation is not demonstrated”.
Cockerill J also held that the Office of Financial Sanctions Implementation (OFSI) could license a sanctioned claimant to pay an adverse costs order, satisfy an order for security for costs – with the claimants having put up £5.4m in security – and pay damages awarded in respect of a cross-undertaking in damages.
“It would make no sense to allow some parts of litigation to progress (so for example that innocent defendants wrongly sued by claimants who are designated persons can escape the toils and stigma of litigation) only for the overall progression to be stymied by a bar on other parts.
There was no power for OFSI to licence the entry of judgment “because it is not necessary”.
Cockerill J added that payment of costs orders in favour of the sanctioned claimant was also licensable.
The defendants’ applications were dismissed but in light of the important issues raised, the court granted permission to appeal.
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