UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another

A prohibition on providing funds “in connection with” an arrangement for making restricted goods available to a person connected with Russia requires a factual connection with the arrangement. It does not require the payment to cause the prohibited supply. The prohibition can therefore cover payments connected with arrangements made before the sanctions took effect or terminated before payment.

Section 44 of the Sanctions and Anti-Money Laundering Act 2018 provides a defence where a person reasonably believes that an omission complies with sanctions regulations. The protection extends to debt proceedings, interest and associated costs arising from the omission.

Twelve irrevocable standby letters of credit secured obligations under leases of civilian aircraft to Russian airlines. After regulation 28(3)(c) of the Russia (Sanctions) (EU Exit) Regulations 2019 was amended to cover aircraft, the lessors terminated the leases and made compliant demands. The confirming bank withheld payment while seeking licences. It paid the principal sums after licences were granted, leaving interest and costs in dispute.

The High Court held that regulation 28(3)(c) did not prohibit payment and that the bank's belief to the contrary was unreasonable: [2023] EWHC 663 (Comm); [2023] EWHC 1071 (Comm). The Court of Appeal allowed the bank's appeal, holding that payment was prohibited until licensed: [2024] EWCA Civ 628; [2025] 1 WLR 196. It held, obiter, that section 44 of the Sanctions and Anti-Money Laundering Act 2018 would not protect the bank against debt, interest or costs.

The issues were whether regulation 28(3)(c) prohibited payment and whether section 44 protected the bank against proceedings for the debt, interest and associated costs while it reasonably believed that payment was prohibited.

1. The lessors' appeals were dismissed and the bank's cross-appeals were allowed. Lord Stephens gave the judgment, with which Lord Hodge, Lord Sales, Lord Burrows and Lady Simler agreed.

2. Regulation 28(3)(c) of the Russia (Sanctions) (EU Exit) Regulations 2019 did not require a causal connection between the provision of funds and the prohibited supply of aircraft. Its language required a connection between the funds and an arrangement whose object or effect was to make restricted goods or technology available to a person connected with Russia or for use in Russia. The distinct expressions “in pursuance of” and “in connection with” had different meanings. The latter was broader and encompassed anything factually connecting the funds with the arrangement.

3. This construction served the sanctions regime's broad purpose of putting pressure on Russia. The regime cast a wide net and used licensing to mitigate unintended consequences. Public licensing authorities, possessing institutional competence and ministerial accountability, were the appropriate bodies to evaluate whether payments should be permitted.

4. The aircraft leases were relevant arrangements although they pre-dated the amendment and were lawful when made and performed. Regulation 28(3)(c) identified arrangements by their object or effect, rather than by when they were made. Termination did not alter the leases' objectively determined object of making aircraft available to Russian airlines for use in Russia. The word “is” described the arrangement by reference to its character when entered into; it did not require the arrangement to remain in force when funds were provided.

5. The letters of credit were factually connected with the leases. Payment was therefore prohibited until licences were obtained. On the parties' common ground, the payment obligations were suspended during that period and statutory interest did not accrue. The prohibition was also relevant to the exercise of the costs discretion.

6. Section 44 of the Sanctions and Anti-Money Laundering Act 2018 did not bar access to the courts but supplied a defence to civil liability. Debt proceedings arise from the debtor's omission to pay. Liability for the debt, interest and associated costs was therefore “in respect of” that omission within section 44(2). While the bank reasonably believed that withholding payment complied with regulation 28(3)(c), section 44 protected it against all three forms of liability.

1. United Kingdom Supreme Court: The lessors' appeals were dismissed and the bank's cross-appeals were allowed: [2026] UKSC 10.
2. Court of Appeal: The bank's appeal on regulation 28(3)(c) was allowed. Payment was held prohibited until licences were obtained. The court held, obiter, that section 44 would not protect the bank from debt proceedings, interest or associated costs: [2024] EWCA Civ 628; [2025] 1 WLR 196.
3. High Court: The court held that regulation 28(3)(c) did not prohibit payment: [2023] EWHC 663 (Comm). It later found that the bank's contrary belief was unreasonable and awarded interest and costs: [2023] EWHC 1071 (Comm).