Boris Mints & Ors v PJSC National Bank Trust & Anor
[2023] EWCA Civ 1132
Celestial Aviation Services Limited v UniCredit Bank GmbH, London Branch
11 June 2024
[2024] EWCA Civ 628
Court of Appeal
A bank (UniCredit) argued it couldn't pay money owed because of sanctions. The court said the sanctions *did* apply, so the bank should have paid. However, the court also said the bank had to try harder to get permission to pay from the US before claiming it couldn't pay due to US sanctions. The court also said the bank still had to pay interest and costs on the money.
Key Facts
- •UniCredit appealed decisions that its obligations under standby letters of credit (LCs) issued by Sberbank were not affected by UK and US sanctions.
- •The LCs were issued between 2017 and 2020, securing aircraft leases to Russian airlines (AAL and Aurora) between 2005 and 2014.
- •After the Ukraine invasion, UniCredit initially refused payment due to sanctions, but later obtained licenses and paid the principal amounts.
- •The appeal focused on interest and costs owing to the delay in payment, caused by UniCredit's interpretation of the sanctions.
- •Twelve LCs were involved, seven for Celestial and five for Constitution, totaling approximately US$69.3m.
Legal Principles
Purposive interpretation of legislation, focusing on identifying the purpose of the legislation and reading words in their statutory context.
Rossendale Borough Council v Hurstwood Properties [2021] UKSC 16, Bloomsbury International Ltd v Department for Environment, Food and Rural Affairs [2011] 1WLR 1546, R (O) v Secretary of State for the Home Department [2022] UKSC 3
Autonomy principle in letters of credit: a credit is a separate transaction from the underlying contract, and banks are not bound by claims or defences arising from the applicant's relationship with the issuing bank or beneficiary (Article 4(a) UCP).
Uniform Customs and Practice for Documentary Credits, 2007 Revision, International Chamber of Commerce Publication no. 600 (UCP)
Section 44 SAMLA provides protection for acts done in the reasonable belief of compliance with sanctions regulations.
Sanctions and Anti-Money Laundering Act 2018 (SAMLA)
Ralli Bros principle: A contract governed by English law may not be enforceable if performance necessitates an illegal act in another jurisdiction.
Ralli Bros v Compañia Naviera Sota y Aznar [1920] 2 KB 287
Strict compliance with the terms of letters of credit is required for payment.
Uniform Customs and Practice for Documentary Credits (UCP), Brindle & Cox, Law of Bank Payments
A party cannot rely on a supervening prohibition if reasonable efforts to obtain a licence were not made.
Banco San Juan Internacional Inc v Petróleos De Venezuela S.A. [2020] EWHC 2937 (Comm), Dalmia Dairy Industries Ltd v National Bank of Pakistan [1978] 2 Lloyd's Rep. 223, J W Taylor & Co v Landauer & Co [1940] 4 All ER 335, Libyan Investment Authority v Maud [2016] EWCA Civ 788
Outcomes
Appeal allowed in part.
Regulation 28(3) of the UK Regulations did prevent payment under the LCs. UniCredit did not make reasonable efforts to obtain a US licence.
Judge's conclusion that reg. 28(3) did not apply was reversed.
The court held that the payments under the LCs were 'in connection with' an arrangement to make restricted goods available for use in Russia, despite the leases being established before the sanctions.
UniCredit's reliance on US sanctions was rejected.
UniCredit failed to demonstrate reasonable efforts to secure a US licence, despite the potential relevance of the Ralli Bros principle.
Section 44 SAMLA did not protect UniCredit from interest and costs.
The court found that s.44 SAMLA protects against new liabilities arising from actions taken in the reasonable belief of complying with sanctions, not pre-existing debts like the interest and costs in this case.
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