Celestial Aviation Trading Ireland Limited & Ors v Volga-Dnepr Logistics B.V. [2025] EWHC 1156 (Comm)

[2025] EWHC 1156 (Comm)Case No CL-2022-000249
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 13/05/2025
Before
Nigel Cooper KC
Between
CELESTIAL AVIATION TRADING IRELAND LIMITEDClaimantsCELESTIAL AVIATION TRADING 27 LIMITEDClaimantCELESTIAL AVIATION TRADING 6 LIMITEDClaimantCELESTIAL AVIATION TRADING 23 LIMITEDClaimantVOLGA-DNPER LOGISTICS B.V.Defendant
RUPERT ALLEN KC (instructed by Herbert Smith Freehills LLP) for CLAIMANTSMICHAEL McLAREN KC and NATHALIE KOH (instructed by CANDEY) for DEFENDANTHearing Hearing date: 11 April 2025
JUDGMENTThis judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 12:00 on Tuesday 13 May 2025.

Nigel Cooper KC:

[1]This is the Defendant’s application to vary an Order of Mr. Justice Bryan dated 11 February 2025 (“the Interim Payment Order”) by which the Judge ordered that the Defendant make to the Claimants various interim payments in United States Dollars and a payment on account of costs in Pounds Sterling by 1600 hours on 25 February 2025. The Defendant seeks to vary the Interim Payment Order so that its payment obligations only commence after it has obtained licences from one or both of OFSI and OFAC as appropriate.[2]The Defendant has not yet made the payments ordered and says that: i) It is concerned that it is not able to make the payments stipulated in the Interim Payment Order without breaching sanctions regulations and other related legislative provisions. ii) Should there be no variation of the Interim Payment Order, the Defendant is concerned that it will or might be placed in the impossible situation of having to pick between complying with the Interim Payment Order and making or attempting to make an unlawful payment or breaching the Interim Payment Order and potentially being held in contempt of court.[3]On 25 February 2025, the Defendant issued an Application Notice to vary the Interim Payment Order pursuant to what was then CPR 25.8(2)(b) and is now CPR 25.20(6)(b) (“the Variation Application”).

Background

[4]In summary, two companies within the Russian Volga-Dnepr Group (“the Lessees”) operated as airlines and between them entered into leases for eight aircraft (“the Leases”) during the period from 21 December 2005 and 12 July 2021. Each Lease was on the terms of an aircraft specific lease agreement which incorporated the terms of an aircraft lease common terms agreement (“the Common Terms Agreement”).[5]The Defendant, a Dutch company within the group, executed deeds of guarantee and indemnity with each of the Claimants between 19 June 2017 and 17 August 2021 (“the Guarantees”) in order to guarantee the obligations of the Lessees under the Leases. Under the terms of the Guarantees, the Defendant guaranteed to the relevant Claimant, inter alia, the prompt payment and performance by the relevant Lessee of all its obligations under or in connection with the relevant Lease.[6]On 24 February 2022, Russia invaded Ukraine. As a result, sanctions were imposed by the United States, the United Kingdom and the European Union. The Claimants sought to terminate the leasing of each of the aircraft on 04 March 2022. The Claimants’ case is that either Events of Default or Events of Loss have occurred under the Leases and, accordingly, the Lessees are liable to pay various amounts by way of debt, indemnity or damages. The Lessees have not paid these amounts. So on 15 March 2022, the Claimants demanded payment of these sums from the Defendant under the Guarantees. The Defendant has not made any payment to the Claimants.[7]The Claimants issued the Claim Form in this action on 17 May 2022 claiming sums allegedly due under the Guarantees as a result of the Lessees’ failure to comply with their obligations under the Leases. On 03 October 2022, the Claimants issued an application for summary judgment on the claim and sought in the alternative an interim payment under what was then CPR 25.6 and 25.7 (“the Applications”).[8]In light of the delay between the issue of the Claim Form and the hearing of the Applications, I consider it does help to set out some of the relevant procedural history.[9]The Defendant was initially represented by solicitors, Grosvenor Law, but they came off the record one day before the Defence was due to be served. The Claimants say that it was in light of the Defendant’s failure to serve a Defence or otherwise engage substantively with the proceedings that the Claimants issued the Applications.[10]The Defendant’s ultimate beneficial owner, Mr. Alexey Isaykin was added to the consolidated list under the Russia (Sanctions) (EU Exit) Regulations 2019 (“the Russia Regulations”) on 16 June 2022.[11]The Defendant instructed Quillon as its new solicitors shortly before the scheduled hearing of the Applications on 04 November 2022. The Defendant applied on 31 October 2022 to adjourn that hearing on the basis that the Defendant had been unable to pay for legal representation as a consequence of Mr. Isaykin becoming a designated individual. Initially, the Defendant’s adjournment application suggested that the grant of a general licence for the payment of legal fees by OFSI should mean that subject to the Court granting the application, there would then be no delay in progressing the Defendant’s defence. However, by the time of the hearing, the Defendant’s position had changed and it asserted that no work could be carried out even under the OFSI general licence because it was likely that the Defendant’s legal fees would at some point exceed the cap in the general licence.[12]HHJ Pelling KC adjourned the hearing of the Applications to give the Defendant the opportunity to consider whether it needed a specific licence from OFSI and, if so, to make the necessary application.[13]The Defendant did make an application for an OFSI specific licence but that was not granted until July 2024. In the meantime, OFSI granted a new general licence in April 2023 confirming that work could be carried out even if it was expected that a party’s legal fees might in due course exceed the cap.[14]Mr. Isaykin was added to the list of designated persons by the US Office of Foreign Assets Control (“the OFAC Designation”) on 23 August 2024.[15]Following the grant of the specific licence, the Applications were then re-listed for a 1-day hearing on 11 February 2025. A timetable for the service of evidence by the Defendant in response to the Applications was agreed at that time but despite two agreed extensions of time, the Defendant did not serve any evidence prior to 11 February 2025. Very early on 11 February 2025, the Defendant served its application to adjourn the hearing. I pause to note that the Defendant made a contested application for a further extension of time to serve evidence in opposition to the Applications by an application notice dated 06 December 2024. Mr. Paul Stanley KC sitting as a Deputy High Court Judge dismissed the application for an extension by an order dated 20 December 2024. By the same order, he ordered the Defendant to pay the Claimants’ costs in the sum of £50,000 within 14 days. The Defendant has not paid those costs.[16]Bryan J. heard the Applications on 11 February 2025 together with the application by the Defendant to adjourn them. The Defendant was represented by solicitors and counsel for the hearing of the Defendant’s adjournment application. Having heard that application, Bryan J. adjourned the summary judgment application and the interim payment application based on liability being found on the summary judgment application, but refused to adjourn the interim payment application of the Claimants predicated on the Claimants’ submission that they would obtain judgment for a substantial sum of money (other than costs) against the Defendant and that an interim payment should be made under what was then CPR 25.7(1)(c) (“the Interim Payment Application”). After Bryan J. heard the adjournment application and refused to adjourn the Interim Payment Application, the Defendant’s legal representatives withdrew from the hearing as they did not have instructions to attend the Interim Payment Application. Having heard from the Claimants’ counsel on the Interim Payment Application, Bryan J. made the Interim Payment Order requiring, inter alia: i) That by 1600 hours on 25 February 2025, the Defendant shall make interim payments to the Claimants in sums totalling USD 202,811,264 (“the USD Payment Obligation”) in respect of its liability under the Guarantees; and ii) That by 1600 hours on 25 February 2025, the Defendant shall make a payment to the Claimants on account of their costs of the Interim Payment Application in the sum of £50,000 (“the GBP Payment Obligation”).[17]Two points arise in relation to the withdrawal of the Defendant’s legal representatives from the hearing on 11 February 2025 before the hearing of the Interim Payment Application. i) The scope of the Defendant’s instructions to its legal team on 11 February 2025 was to attend the adjournment application only. The reasons for the limited scope of the instructions are very likely privileged. Mr. McLaren KC invited me to infer that the reason for the instruction were the difficulties which the Defendant had in paying its lawyers. However, it does not seem to me that the evidence allows me to go that far. I do accept the submission, however, that I should not draw any conclusion that the Defendant chose for self-serving reasons not to attend the hearing of the Interim Payment Application. ii) The Defendant also submitted that there is no evidence that the question of whether the Interim Payment Order required or risks requiring the Defendant to breach sanctions was considered at the hearing of the Interim Payment Order and so I should infer that the issue was overlooked. I do not consider that I can draw any such inference. The third witness statement of Ms. McKinney of Quillon and the third witness statement of Mr. Solovov of the Defendant deal at some length with the impact of the fact that Mr. Isaykin is a designated person and the difficulties this posed for the Defendant in making payments either in sterling or in dollars under UK and US sanctions. While I accept that this evidence was given principally to deal with the position regarding payment of legal fees, it is clear that Bryan J. was aware of the fact that Mr. Isaykin was a designated person and the restrictions that UK and US sanctions introduced for payment of those fees. Accordingly while I accept that the evidence before Bryan J. about the effect of US and UK sanctions did not specifically address restrictions on the Defendant’s ability to make payments more widely, this is not a good basis on which to infer that the effect of US and UK sanctions on the Defendant’s ability to pay the sums required under the Interim Payment Order was overlooked by the Judge. On the contrary, I think it more likely that Judge was aware when hearing the Interim Payment Application that the UK and US sanctions regimes might create difficulties for the Defendant in making payments in sterling or US dollars more generally.[18]It is common ground between the parties that: i) The only assets apparently available to satisfy the Defendant’s obligations under the Interim Payment Order are funds presently held in a bank account with ING Bank in the Netherlands (“the ING Funds”), which are subject to the control of the Dutch courts as they are subject to a form of garnishee order preserving the funds. ii) Due to the risk of otherwise breaching the US sanctions legislation, ING Bank’s current position is that it is not prepared to release the funds without an OFAC licence permitting their transfer.[19]The Defendant made this application on 25 February 2025, the date by which payment was to be made under the Interim Payment Order.[20]On 07 April 2025, the Defendant applied for licences from OFAC and OFSI to permit payment of the sums due in accordance with the terms of the Interim Payment Order. There is, however, an issue as to whether the applications have been made on the correct basis. Relevant legal principles Exercise of Discretion

Relevant legal principles

[21]CPR 25.20(6) provides that the Court “may adjust any interim payment” and “in particular” may “vary or discharge the order for the interim payment” (sub-rule (b)).[22]As the Claimants pointed out, the rules do not give any further guidance as to how this power to vary should be exercised, but the importance of finality means that the power cannot be unfettered. The Claimants submitted, and I accept, that an analogy can be drawn with the Court’s power under CPR 3.1(7) to vary or revoke an order made under the rules of the CPR. The Court of Appeal in Tibbles v SIG plc [2012] EWCA Civ 518, [2012] 1 WLR 2591 considered how the circumstances in which the power under the Rule can be successfully invoked and held as follows at [39] to [41] (per Rix LJ):
“39. In my judgment, this jurisprudence permits the following conclusions to be drawn: (i) Despite occasional references to a possible distinction between jurisdiction and discretion in the operation of CPR r.3.1(7), there is in all probability no line to be drawn between the two.The rule is apparently broad and unfettered, but considerations of finality, the undesirability of allowing litigants to have two bites at the cherry, and the need to avoid undermining the concept of appeal, all push towards a principled curtailment of an otherwise apparently open discretion. Whether that curtailment goes even further in the case of a final order does not arise in this appeal. (ii) The cases all warn against an attempt at an exhaustive definition of the circumstances in which a principled exercise of the discretion may arise. Subject to that, however, the jurisprudence has laid down firm guidance as to the primary circumstances in which the discretion may, as a matter of principle, be appropriately exercised, namely normally only (a) where there has been a material change of circumstances since the order was made, or (b) where the facts on which the original decision was made were (innocently or otherwise) misstated. (iii) It would be dangerous to treat the statement of these primary circumstances, originating with Patten J and approved in this court, as though it were a statute. That is not how jurisprudence operates, especially where there is a warning against the attempt at exhaustive definition. … 41. Thus it may well be that there is room within CPR 3.1(7) for a prompt recourse back to a court to deal with a matter which ought to have been dealt with in an order but which in genuine error was overlooked (by parties and the court) and which the purposes behind the overriding objective, above all the interests of justice and the efficient management of litigation, would favour giving proper consideration to on the materials already before the court. This would not be a second consideration of something which had already been considered once (as would typically arise in a change of circumstances situation), but would be giving consideration to something for the first time . On that basis, the power within the rule would not be invoked in order to give a party a second bite of the cherry, or to avoid the need for an appeal, but to deal with something which, once the question is raised, is more or less obvious, on the materials already before the court.”
[23]In relation to the passage at paragraph 41 of the judgment in Tibbles, it is, however, appropriate to keep in mind the guidance of Popplewell J. in Orb a.r.l. v Ruhan [2016] EWHC 850 (Comm) at [82], when he said that even on interim applications:
“… a party must bring forward an argument on all points reasonably available to him at the first opportunity … to allow him to take them serially in subsequent applications would permit abuse and obstruct the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions.”
[24]The Claimant submitted that similar principles apply on an application under CPR 25.20(6)(b) and I agree. There is no exhaustive definition of the circumstances as to when a court will exercise its discretion to vary an interim payment order. However, I accept that ordinarily a court should be looking to see whether there is a principled reason to exercise its discretion in the applicant’s favour. That principled reason will normally or ordinarily involve(i) a material change of circumstances since the order was made or(ii) a situation where the facts on which the original decision was made were (innocently or otherwise) mis-stated. I would add that where the application is pursued on the basis that the original decision was made on the basis of facts which were mis-stated, then it seems to me that the mis-statement must go to facts which were material to the court’s original exercise of its discretion.[25]Consistent with the reasoning in paragraph 41 of the judgment in Tibbles, I accept that, if there were evidence that Bryan J. or the Claimants and their legal representatives had overlooked the effect of the US and UK sanctions regime during the afternoon hearing on 11 February 2025, then this would be a ground on which the Court might consider whether it was appropriate to vary the Interim Payment Order.[26]Further, in determining whether to exercise its discretion to vary an interim payment order, the Court will also have in mind the reasons why it is said that the matters which are relied on to ask the Court to vary its order were not before the Court when the order was originally made and whether there has been any delay in making the application.

Law relating to the impact of UK or UK sanctions legislation

[27]So far as the law relating to the effect of sanctions is concerned, it was common ground that Bryan J. could make the Interim Payment Order without itself breaching sanctions. In this regard: i) The Court of Appeal held in PJSC National Bank Trust & Anor v Mints & Ors [2023] EWCA Civ 1132, [2024] KB 559 that(a) the UK sanctions regime did not preclude the entry of a money judgment in favour of a designated person in a civil claim and(b) the Treasury has the power to grant a licence authorising the payment by a designated person of an adverse costs order or the satisfaction of orders for security for costs or payment of damages pursuant to cross-undertakings by a designated person. In addition, the Treasury has the power to grant licences to enable the implementation or satisfaction of a judicial decision which is enforceable in the UK. The Claimant submits, and I accept, that it is necessarily implicit from this that the court may lawfully make an order requiring a designated person to pay money to another person and that it need not defer the enforceability of any such order until a licence is granted. ii) In R v R [2015] EWCA Civ 796, [2016] 2 WLR 127 at [25] – [31], the Court of Appeal made clear that there is nothing wrong with the Court making an order that would require a sanctions licence for it to be satisfied even if it is uncertain whether or when any licence would be issued permitting satisfaction of the order; the Court’s order does not itself involve or require dealing with any frozen assets.[28]The Defendant sought to go further and submitted that the reasoning of the Court of Appeal at paragraph 215 of their judgment in Mints supported the proposition that a court should vary an order requiring payment by a designated person if that person were unable to pay the order due to the absence of a licence. I do not accept that proposition. The question discussed by the Court of Appeal at paragraph 215 was whether OFSI could grant licences to enable payment of an adverse costs order. It is correct that part of the Court’s reasoning for holding that OFSI could grant such licences was because otherwise the designated person risked their claim being stayed for non-payment of adverse interlocutory costs orders through no fault of their own. That is, however, a different question to whether it is appropriate for a court to vary the payment terms of an order because no licence has been obtained by the date on which payment is required. The fact that the Defendant has been unable to obtain a licence is simply one of the facts that the court is entitled to take into account when deciding whether in all the circumstances it is appropriate to vary a payment order. It does not require the court, however, to order a variation.[29]The Defendant also relied on the recent decisions in Re VTB Capital Plc [2022] EWHC 1106 (Ch), [2022] BCC 1049 and Re KRF Services (UK) Ltd [2024] EWHC 2978 (Ch) as supporting the proposition that the Court will not make an order where performance of that order involves the party being in breach of UK and US sanctions. i) Re VTB Capital Plc concerned an application to appoint administrators. The company was subject to sanctions and obtained a general licence from OFSI prior to the application for an administration order being made but OFAC had not granted a licence and the proposed administrators considered that a licence from OFAC was necessary to enable them to carry on administration of the company’s affairs. It was accordingly pointless to make the order to appoint the administrators at that time because they would be unable to achieve the objectives of the administration. The applicant company proposed and the Court accepted that the Court should declare that it was willing to appoint the administrators subject to a licence from OFAC being granted but that no order of appointment should be made until evidence of the necessary licence had been filed at Court; see the judgment of Fancourt J. at [14] and [24] – [25]. ii) In Re KRF Services (UK) Ltd, the judge, Mr. Andrew Twigger KC sitting as a Deputy Judge of the High Court, accepted that the making of an administration order is not a breach of the Russia Regulations. He also accepted that the mere appointment of administrators was not a breach of regulations 11 to 15 of the Russia Regulations. However, he found that, where the licence from OFSI was not in place which would permit the administrators to take the steps they needed to take in the exercise of their powers, that was a factor which the Court should take into account when deciding whether to make an immediate order for the appointment of administrators or whether to suspend the making of an order until a licence has been granted. There may, however, nevertheless be circumstances where it is appropriate to make an immediate order notwithstanding that no licence is in place; see the judgment at [109].[30]Both Re VTB Capital Plc and Re KRF Services (UK) Ltd provide only limited assistance in relation to the present application. Both cases are dealing with a different issue to the one before me, namely the appointment of administrators to run a company in circumstances where it was clear that the administrators would require licences from the relevant national authorities to exercise their powers. In Re VTB Capital Plc, the Court made the order in the form it did at the request of the applicant. Fancourt J. was not required to consider whether it was in fact appropriate to make an immediate order. In Re KRF Services (UK) Ltd, the Deputy Judge did consider whether it was appropriate to make an immediate order or whether to make a suspended order and held that the appropriate form of order depended on the circumstances before the Court. Neither case considers the question of whether more generally the Court should not make an order, performance of which might require a party to take steps in breach of either UK or US sanctions legislation.[31]Of more relevance is the recent decision of Sir Nigel Teare sitting as a Judge of the High Court in O v C [2024] EWHC 2838 (Comm). In that case, the underlying dispute concerned the termination of a charterparty in circumstances where the respondent charterers had been listed as a designated entity by OFAC and the applicant owners brought the charterparty to an end and refused to discharge the cargo. The underlying dispute was subject to arbitration but the owners sought an order from the court for the sale of the cargo and payment of the proceeds of sale into a blocked account with a US financial institution. OFAC had issued a licence which permitted this to happen without breach of sanctions. The charterers did not oppose the making of the order save that they submitted that the proceeds of sale should be paid into court. The owners opposed paying the proceeds of sale into court because to do so, they said, would risk breaching sanctions.[32]The Judge accepted that, on the evidence before it, there was at least a risk that payment of the proceeds of sale into court would be a breach of US sanctions legislation. Nevertheless, having found that there were good reasons to order sale of the cargo, the court ordered payment of the proceeds of sale into court. The Judge accepted that in circumstances where there was a risk that payment into court may be a breach of US sanctions, the court will not lightly make an order that the proceeds of sale be paid into court. However, the Judge found that it is relevant to consider whether there is a real risk (as opposed to a fanciful risk) of prosecution. On the facts, the Judge held (at [33]) that it was much more likely than not that there would be no criminal prosecution. However, he went on to hold (at [35]) that if he were wrong about this, then the risk of prosecution by the US authorities, though real, was still very low. The Judge balanced that risk against the fact that the order sought was in support of a London arbitration. If the proceeds were paid into court, it was simple for the Court to give effect to the decision of the arbitral tribunal. If the proceeds were paid into a blocked account of a US financial institution, it would be necessary for an application for payment to be made to OFAC which might take a different view of the reach of US sanctions than the arbitral tribunal and, if an order for payment were made in favour of the charterers, refuse to allow payment to them of the funds. Accordingly, balancing the competing risks, the Judge held that the proceeds should be paid into court.[33]Considering all of the authorities discussed above, the risk that the Interim Payment Order might require the Defendant to make a payment to the Claimants in breach of either UK or US sanctions is a factor which I should take into account when deciding whether it is appropriate to vary the terms of that order as requested by the Defendant. But it is only one factor to take into account. The risk does not require me to vary the Interim Payment Order nor does it have any priority over the other factors which I have to take into account. The risk of breach of either UK or US Sanctions UK Sanctions

The risk of breach of either UK or US Sanctions

[34]In circumstances where it is accepted that the Defendant’s only available assets to pay the Interim Payment Order are the ING Funds, which are in US dollars and are insufficient to pay the interim payments ordered by Bryan J., UK sanctions legislation is of limited relevance to the present application. This is particularly so, in circumstances where the Claimants have requested payment of the US dollar amounts owed by the Defendant into an account with a bank in the Republic of Ireland.[35]Nevertheless I shall briefly consider the position under the Russia Regulations and also under the Serious Crime Act 2007 (“the 2007 Act”).[36]The Defendant relied on Regulation 11(1) of the Russia Regulations which prevents a person (“P”) from dealing with “funds or economic resources owned, held or controlled by a designated person if P knows, or has reasonable cause to suspect, that P is dealing with such funds or economic resources.”. Per regulation 11(2), this is subject to an exception if a relevant licence is obtained.[37]Regulation 11(4) provides that a person “deals with” funds if that person “(a) uses, alters, moves, transfers or allows access to the funds, (b) deals with the funds in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination or (c) makes any other change, including portfolio management, that would enable use of the funds”.[38]Regulation 11(7) states that “For the purposes of paragraph (1) funds or economic resources are to be treated as owned, held or controlled by a designated person if they are owned, held or controlled by a person who is owned or controlled directly or indirectly (within the meaning of regulation 7) by the designated person.”.[39]The Defendant submitted that any transfer by the Defendant of sums into the Claimants’ bank account would amount to a breach of Regulation because the Defendant would thereby deal with funds owned, held or controlled by a designated person (Mr. Isaykin) by transferring those funds to the Claimants’ bank account. Further the receipt of such funds by the Claimants would also amount to a breach of Regulation 11 as this would also fall within the scope of dealing with those funds.[40]There are in my view significant difficulties with the Defendant’s submissions as to the effect of Regulation 11: i) The Defendant is a Dutch company. It is not therefore a United Kingdom Person for the purposes of the Russia Regulations (see s.21(2) of the Sanctions and Anti-Money Laundering Act 2018). The requirements of the Russia Regulations therefore only apply to the Defendant’s conduct in the United Kingdom or the territorial sea (see Regulation 3 of the Russia Regulations). Notwithstanding Mr. McLaren’s arguments to the contrary, I accept that the giving of a payment instruction by the Defendant to ING outside the UK would not be a breach of Regulation 11 even if the instruction were for the payment of funds into a bank account in the United Kingdom. ii) Although I do not decide the point in view of the limited argument before me, I am also not persuaded that there is a real risk that mere receipt of the funds into a UK bank account would constitute dealing with the funds in breach of Regulation 11 particularly if the movement of funds from that account would be blocked in the absence of an OFSI licence. Certainly, the Defendant has not pointed me to any authorities which support the proposition that receipt of funds into a bank account within the jurisdiction is without more to be treated as dealing with those funds in breach of Regulation 11.[41]The Defendant also submitted that, even if the Defendant was not in breach of the Russia Regulations, the actions of the Claimants and their legal representatives may still be unlawful under the 2007 Act. Section 45 of the 2007 Act specifies that “A person commits an offence if(a) he does an act capable of encouraging or assisting the commission of an offence and(b) he believes (i) that the offence will be committed and (ii) that his act will encourage or assist its commission.”[42]The Defendant identified the relevant acts for the purposes of s.45 as being: i) Breach of Regulation 11 committed by the Claimants’ UK bank; and ii) The Claimants and their legal representatives and/or the Defendant or its legal representatives encouraging or assisting in the commission of this offence by engaging in these proceedings with the aim of effecting the payment of the Defendant’s funds into the Claimants’ UK bank account.[43]In circumstances where I am not persuaded that there is a real risk that mere receipt of funds transferred by ING bank into a UK bank account would without more be a breach of Regulation 11, I am also not persuaded that there is a real risk of the Claimants or their legal representatives or the Defendant and its legal representatives being in breach of s.45 of the 2007 Act.

US Sanctions

[44]I do not need to consider in any detail the question of whether payment out of the sums held in US dollars by ING would necessarily involve a breach of US sanctions or whether there are ways in which payment could be made which would avoid US sanctions being engaged. This is because it is common ground that ING bank will not release the funds without an appropriate OFAC licence and in any event the funds are presently subject to the control of the Dutch court. It will be for the Dutch court to determine in what circumstances it is prepared to order the release of the funds. In reaching that decision, it seems to me inevitable that the Dutch court will consider both the effect of US sanctions and the concerns of ING bank that they should not be required to release the funds without the protection of an OFAC licence.[45]Accordingly, any sums paid in respect of the interim payments will only be made in circumstances where the transfer of those funds will not contravene US sanctions.[46]In the course of argument, the Defendant did seek to suggest that any payment of the interim payments under the Interim Payment Order could only be made through the New York Clearing House System via BNP Paribas as a US correspondent bank in accordance with the terms of the Guarantees. I do not accept this suggestion. Payment by the Defendant under Interim Payment Order is to be made in respect of sums, which the court considers are likely to be adjudged due to the Claimants from the Defendant. The payment obligation under the Interim Payment Order is accordingly in respect of an anticipated judgment debt, not a liability under the Guarantees.

Discussion

[47]For the reasons set out below, I do not consider it appropriate to vary the Interim Payment Order.[48]First, while I am not bound to apply the test that any variation requires the Defendant to establish a material change of circumstance, misstatement or mistake since the Interim Payment Order was made, I accept that the general principles that apply under CPR 3.17 provide good guidance as to how I should decide whether it is appropriate to order a variation to the Interim Payment Order under CPR Rule 25. In this context, it follows that applications to vary orders should be rare and should be made without delay.[49]In the present case, I do not consider that the evidence does establish that the Court overlooked at the previous hearing the possible effect of either the UK or US sanctions legislation when making the Interim Payment Order or that there was otherwise a material change of circumstances, misstatement or mistake since the Interim Payment Order was made. Although the Defendant was not present during the afternoon session of the hearing on 11 February 2025, it was present during the morning session when the effect of the sanctions legislation on the payment of the Defendant’s legal fees was discussed and made submissions on that issue. When Bryan J. came to determine the Interim Payment Application, he was aware that the Defendant was subject to both UK and US sanctions. Having understood and accepted that the Defendant was having difficulty paying its legal fees due to sanctions, it is reasonable to infer that the Judge was also aware that sanctions would mean that the Defendant would have difficulty transferring funds to pay the Claimants. In this regard, the impact of US and UK sanctions on the ability of a sanctioned party or someone closely linked to that party to make payments in sterling or US dollars is well-known. As set out earlier in this judgment, I do not consider that the evidence supports any inference that the Judge overlooked the possibility that sanctions would make it difficult for the Defendant to transfer funds to the Claimants without a licence.[50]I also take into account that the Defendant waited until the last day for payment under the Interim Payment Order before making the present application. The Defendant did not take any steps during the period from 11 to 25 February 2025 to apply for either an OFSI or OFAC licence and only made the necessary applications on 07 April 2025.[51]Accordingly, I am not persuaded that the Defendant has established a sufficient basis on which I should consider exercising a discretion to vary the Interim Payment Order.[52]But even if I were otherwise persuaded that it was appropriate to consider whether to order a variation to the Interim Payment Order, I decline to do so for the following reasons.[53]First, the Interim Payment Order itself does not breach either UK or US sanctions.[54]Second, it is common ground that the only funds available to the Defendant to make payments under the Interim Payment Order are the ING Funds, which are subject to the garnishee order issued by the Dutch court. While I have no evidence of Dutch law before me, it seems to me to be reasonably obvious that the Claimants’ prospects of obtaining an order from the Dutch court for payment out of those funds are better if they have an immediately enforceable order for payment to them rather than an order which makes payment contingent on the Defendant obtaining licences from OFSI or OFAC.[55]Third, there is no realistic prospect of the ING Funds being transferred in breach of US sanctions legislation. ING have already indicated that they are not prepared to release the funds without the protection of an OFAC licence. Further, it would seem inevitable that the Dutch court will want to be satisfied that any order it makes for payment out of the funds does not breach any applicable sanctions legislation.[56]Fourth, given that the interim payments to be made in US dollars exceed the amount of the ING Funds and the Claimants have requested that any dollar funds are paid to a bank account in Ireland, it would seem unlikely that any part of the ING Funds will be paid into the UK. In any event, for the reasons given above, I do not accept that there is a real risk that by paying funds into a UK bank account nominated by the Claimants, the Defendant or indeed the Claimants would breach the Russia Regulations. In particular, even if there were any realistic prospect of the Defendant making such a transfer, the transfer would have to be into an account which was frozen pending approval from OFSI for any dealing with the funds.[57]Fifth, while I accept that in the absence of an order varying the payment terms of the Interim Payment Order, the Defendant is currently in breach of the terms of that order, the Claimants have given an assurance that they will not seek to pursue contempt proceedings against the Defendant. In any event, it seems to me that, while the Defendant is prevented from making any payment under the Interim Payment Order due to the effect of US sanctions legislation on the ING Funds and the garnishee order of the Dutch court, there is no realistic prospect of the Defendant being held to be in contempt of court.[58]In relation to paragraph 57 above, there was a discussion during the hearing as to whether I should require an undertaking from the Claimants that they will not seek to pursue contempt proceedings. However, I am satisfied that the assurance given by Mr. Allen KC on behalf of his clients is sufficient and that it is not necessary to go further and require an undertaking.[59]Finally, the Defendant briefly raised in the second witness statement of Mr. Botiuk two respects in which it submitted that the Claimants had failed to comply with their duty of fair presentations before Bryan J. Those respects were(i) it was suggested that the Claimants had changed the basis on which they were seeking interim payments at the 11February hearing and(ii) that the Claimants had overstated the minimum amounts of their claims by a margin of several hundred million US dollars. Only the second of these was addressed in the Defendant’s skeleton argument and neither point was addressed orally by Mr. McLaren KC. There is in my view no merit to the Defendant’s case on breach of a duty of fair presentation.

Conclusion

[60]For all the above reasons, I dismiss the Defendant’s application and refuse to vary the Interim Payment Order. I would be grateful if the parties could provide a final order reflecting this judgment for my approval.