PJSC National Bank Trust & Anor v Boris Mints & Ors
[2023] EWHC 118 (Comm)
Fortenova Grupa D.D. v LLC Shushary Holding & Ors
12 May 2023
[2023] EWHC 1165 (Ch)
High Court
A company couldn't pay back a loan because of sanctions on the borrower's parent company. The judge said the company could pay the money into a court account until the sanctions are removed, and they don't owe extra penalty interest for the delay because it wasn't their fault.
Key Facts
- •Fortenova Grupa d.d. (the Company) sought to redeem loan notes held by LLC Shushary Holding (Shushary), a subsidiary of sanctioned Russian bank VTB.
- •Sanctions prevented the Company from paying Shushary directly.
- •The Company sought a court order to pay the redemption amount into court, pending sanctions lift.
- •The Company also sought a declaration that it was not liable for default interest due to the sanctions.
- •Other defendants included Kroll Group companies (acting as agents) and other noteholders.
- •The Company's refinancing efforts were hampered by the sanctions.
Legal Principles
Equity's policy is to ensure nothing prevents redemption of security; a right to redeem exists even after the contractual time has passed; and there is a right to relief from forfeiture.
Lysaght v Westmacott [1864] 33 B417; St. Vincent European General Partner Limited v Robinson [2018] EWHC 1230 (Comm)
An English law contract to mortgage or charge foreign land takes effect in England as an English mortgage or charge, even if foreign law doesn't recognize the equity of redemption or validity of the security interest.
Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC [2013] EWHC 3186 (Comm)
Modern approach to contract construction (Rainy Sky, Arnold v Britton etc.)
Rainy Sky v Kookmin Bank [2011] UKSC 50; Re Sigma Finance Corp [2009] UKSC 2; Napier Park European Credit Opportunities Fund Ltd v Harbourmaster Pro-Rata CLO 2 BV [2014] EWCA (Civ) 984; Arnold v Britton [2015] AC 1619
A debtor is not in default if performance of an obligation is unlawful due to sanctions; the obligation is suspended until performance becomes lawful.
Hugh Stevenson and Sons Limited v Aktiengesellschaftfur Cartonnagen-Industrie [1918] A.C. 239; Biedermann v Allhausen & Co [1921] 37 TLR 662; NV Ledeboter and Van der Held's Textielhandel v Hibbert [1947] KB 964
Outcomes
Order granted allowing the Company to pay the redemption amount into court.
This allows the Company to comply with sanctions while preserving its right to redeem the notes. Alternative solutions were not viable under English law or sanctions regulations.
Declaration that the Company is not liable for default interest.
The court found that the Company's inability to pay was due to unlawful sanctions, not a failure to pay. The default interest clause did not apply in these circumstances.
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