PJSC VTB Bank v HM Treasury

A Treasury licensing power under the Russia sanctions regime is ancillary to the sanctions themselves and must be exercised consistently with the statutory purposes of the regime. Those purposes include encouraging Russia to cease its conduct in relation to Ukraine and protecting unsanctioned creditors from unintended collateral consequences.

OFSI may vary a licence to impose conditions which prevent an authorised insolvency process from undermining those purposes. A detrimental effect on a sanctioned creditor does not establish an improper purpose. Judicial review does not permit the court to substitute its view for the Treasury’s decision in this field.

Procedural fairness and the Tameside duty are context-dependent. Consultation may be unnecessary where the affected person was already informed of the proposed arrangements and further consultation would cause delay or frustrate the sanctions objectives. The claim was dismissed.

PJSC VTB Bank challenged OFSI’s decision of 8 January 2025 to amend a general licence governing the administration of its sanctioned UK subsidiary, VTB Capital plc.

The amendment imposed deductions for assets recovered by the Bank and debts owed to VTB Capital by Bank-controlled entities. It also restricted statutory interest and prevented provisions being made for later payments without applying the deductions. The Bank alleged improper purpose, interference with its right to a fair hearing under Article 6, irrationality, procedural unfairness and breach of the Tameside duty.

The central issue was whether OFSI had lawfully used its licensing powers to protect unsanctioned creditors and prevent the administration from being used to circumvent the sanctions regime.

1. Claim dismissed. The decision to amend the licence was lawful.
2. The power to vary a licence under regulation 66(5) of the Russia (Sanctions) (EU Exit) Regulations 2019 was ancillary to the power to issue a licence under regulation 64. It was not at large. It had to be exercised consistently with the purposes of SAMLA and the Regulations.
3. The relevant purposes included encouraging Russia to cease actions destabilising Ukraine, promoting compensation for Ukraine, maintaining the effectiveness of sanctions, enabling an orderly insolvency, and protecting unsanctioned creditors. OFSI could impose conditions where an existing licence risked producing unintended consequences contrary to those purposes.
4. The Bank’s adverse consequences did not establish an improper purpose. The Padfield principle concerns the purpose for which a power is exercised, not the success or consequences of the decision. The Amended Licence was directed to preventing delay, disorder and depletion of the assets available to unsanctioned creditors.
5. Article 6 was not engaged in the manner alleged. The Amended Licence did not directly determine the Bank’s civil rights. It merely decriminalised limited participation in the administration, subject to conditions. Section 38 of SAMLA provided the required access to an independent court and judicial review.
6. The exchange-rate and provisioning provisions were rational. They were ancillary drafting measures designed to prevent loopholes in the deductions mechanism and to ensure that the limited decriminalisation operated as intended.
7. Fairness did not require a further consultation with the Bank. It had been extensively involved in the earlier scheme process, was on notice of the proposed licence review, and further consultation would have caused delay while the administration’s assets were at risk. OFSI’s published policy did not create a broader entitlement.
8. The Tameside duty was satisfied. OFSI could rationally rely on the administrators’ evidence and professional duties without independently resolving every disputed factual issue. The claim was dismissed in full.