Court Examines Applicability of Interim Remedies in Dispute Over Payment Legality Due to Sanctions: LLC Eurochem North-West-2 v Société Générale SA & Ors

Citation: [2023] EWHC 2720 (Comm)
Judgment on

Introduction

In the recent judgment of LLC Eurochem North-West-2 v Société Générale SA & Ors [2023] EWHC 2720 (Comm), the High Court of Justice in the King’s Bench Division, Commercial Court, provided an instructive examination of the applicability of interim remedies under the Civil Procedure Rules (CPR) and the inherent jurisdiction of the court. The case provides practitioners with guidance on the court’s approach to ordering defendants to secure claimed sums by payment into court or into a frozen account when a dispute over the payment’s legality due to sanctions exists.

Key Facts

LLC Eurochem North-West-2 (the Claimant) sought an order for payment into court or into a frozen account from Société Générale SA and others (the Defendants), arguing under several rules within the CPR. The Defendants disputed the court’s jurisdiction to make such an order, citing defenses related to international sanctions and public policy which, they contended, should excuse them from paying under the bonds at issue. Notably, the case involved substantial sums due under on-demand bonds related to contracts for the construction of a fertilizer plant in Russia, where the ultimate payment was contentious due to associations with sanctioned individuals.

The judgment comprehensively navigates through various provisions of the CPR, crystallizing the following legal principles:

CPR 25.1(1)(k) - Interim Payment

Interim payment may only be ordered where the court is satisfied that the claimant would obtain judgment for a substantial sum of money at trial. The judge, MR JUSTICE BUTCHER, highlighted the significance of substantive defenses raised by the Defendants, considering international sanctions as an obstruction to payment.

Sports Network Ltd v Calzaghe Principle

Referring to ‘relevant property’ under CPR 25.1(1)(c), the Court discussed the principle from Sports Network Ltd v Calzaghe, stating that ‘relevant property’ does not generally mean any money in issue in the litigation unless there’s a serious issue to be tried as to whether the money in question was held on trust.

UTB LLC v Sheffield United Ltd Principle

The judge also referenced Fancourt J’s views in UTB LLC v Sheffield United Ltd, suggesting that ‘property’ under CPR 25.1(1)(c) need not be physical and could include intangible assets. However, MR JUSTICE BUTCHER clarified that CPR 25.1(1)(c) does not extend to sums simply claimed via debt or damages without a proprietary claim.

CPR 25.1(1)(l) - Securing a Specified Fund

Under Lightman J in Myers v Design Inc (International) Ltd, the court identified the prerequisites for triggering this rule, notably the existence of a specified fund controlled by the defendant. The judge deemed that there was no specified fund involved in the current matter.

Inherent Jurisdiction & CPR r. 3.1(2)(m)

Finally, the judge examined the applicability of inherent jurisdiction and discretionary powers under CPR 3.1(2)(m), concluding that the order sought was neither appropriate nor necessary as the prerequisites for other interim remedies, such as freezing orders or interim payments, were unmet.

Outcomes

The court declined to grant the orders sought by the Claimant, offering insight into:

  • The narrow interpretation of ‘relevant property’ which does not encompass generic monetary claims.
  • The significance of an identifiable fund and a proprietary claim for securing funds under dispute.
  • The utility and necessity of an order as scrutinized by the inherent jurisdiction of the court.
  • Considerations of potential harm to Defendants and the effective enforcement of judgments.

Conclusion

The judgment of LLC Eurochem North-West-2 v Société Générale SA & Ors serves as an intricate guide on the application of interim remedies. MR JUSTICE BUTCHER’s analysis stresses the importance of established legal thresholds and the appropriateness of interim orders, particularly when faced with complex arguments centered around sanctions and public policy. The case underscores the court’s prudent exercise of discretion, emphasizing the preservation of procedural safeguards to ensure equity and justice are served.