Boris Mints & Ors v PJSC National Bank Trust & Anor

The UK sanctions regime does not prevent a designated person from pursuing a civil claim or obtaining a money judgment. A cause of action is an economic resource rather than a fund. Entering judgment neither makes funds available nor deals with that economic resource.

The licensing power for reasonable professional fees extends to adverse and favourable costs orders and security for costs. Damages exceeding security given for a cross-undertaking may constitute an extraordinary expense.

Regulation 7 control is not limited to ownership or personal control. It includes the ability, by any means and including political or corporate office, to ensure that an entity’s affairs are conducted according to the designated person’s wishes.

The claimant banks brought Commercial Court proceedings seeking about US$850 million for alleged conspiracy and uncommercial transactions. After the second claimant became a designated person under the UK sanctions regime, the defendant appellants sought a stay and discharge of undertakings replacing freezing orders.

Cockerill J dismissed the applications in [2023] EWHC 118 (Comm). She held that judgment could lawfully be entered, that specified litigation payments were licensable, and that control under regulation 7 did not extend to control exercised through political office.

The appeal concerned three central questions: whether judgment could be entered for a designated person; whether OFSI could license costs, security and cross-undertaking payments; and whether political office could constitute control of an entity under regulation 7.

1. Appeal dismissed. Regulations 11 and 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 did not prohibit the court from entering a money judgment for a designated person. The right of access to the court includes the right to have a civil claim adjudicated and, if successful, to obtain judgment. Under the principle of legality, primary legislation must authorise any curtailment of that right clearly and unambiguously. The Sanctions and Anti-Money Laundering Act 2018 contained no such authorisation.

2. A cause of action was not a “fund” within section 60(1). Unlike the listed financial assets, an arguable claim might fail and lacked an established intrinsic financial value. It was instead an “economic resource”. Entry of judgment did not involve exchanging or using that resource in exchange for funds under regulation 11(5). Nor did it “make funds available” under regulation 12: the judgment debt came into existence only when judgment was entered, and the statutory language was inapt to describe the court’s core judicial function.

3. Regulation 58(5) permitted payment into a frozen account of a money judgment representing a pre-designation obligation. The judgment did not deprive the payment of its character as discharge of that earlier obligation. Any further dealing remained frozen. This construction was consistent with the intended continuity between the EU and post-Brexit regimes.

4. Paragraph 3 of Schedule 5 authorised OFSI to license reasonable professional fees without limiting the provision to the designated person’s own lawyers. It therefore covered adverse costs orders, security for costs and favourable costs orders reimbursing legal expenditure. The separate licensing grounds were cumulative. A possible future liability exceeding the US$2 million security for the cross-undertaking could qualify as an extraordinary expense under paragraph 5.

5. The control issue did not affect the disposition, but the court held that regulation 7 contained no political-office or corporate-office exception. Its broad language included control without ownership. A person controls an entity where, by whatever means, that person can ensure that its affairs are conducted according to his or her wishes. On the conceded facts, the first claimant was controlled by Mr Putin and/or Ms Nabiullina. Any excessive consequences required legislative amendment, not a judicial gloss.

1. Court of Appeal (Civil Division): The appeal was dismissed in [2023] EWCA Civ 1132. The court upheld the dismissal of the stay and discharge applications, although it disagreed with the High Court on the construction of control under regulation 7.
2. High Court, Commercial Court: Cockerill J dismissed the defendants’ applications in [2023] EWHC 118 (Comm). She held that judgment could lawfully be entered and that the relevant litigation payments were licensable, but held that political-office control fell outside regulation 7.