Judge finds assigned rights were an economic resource, not a fund.
The High Court sanctions ruling means the liquidators of Petropavlovsk plc can consent to an assignment of contractual rights without breaching UK sanctions legislation.
HHJ Johns KC held that the proposed consent by Petropavlovsk’s liquidators would not amount to prohibited dealing with funds or economic resources belonging to designated person Atlas JSC.
The case concerned an assignment made by Atlas to Dubai-based Denali Corp-FZCO on 16 April 2025. Atlas had been designated for UK sanctions purposes on 17 June 2025. The assignment required Petropavlovsk’s consent, which its liquidators had withheld because of concerns that giving consent could breach the sanctions regime.
The rights arose from a 2022 share sale deed between Petropavlovsk and Atlas. They included rights connected with the Term Loan Consideration, the Administration Fund and the Contingency Fund. The amount ultimately recoverable remained uncertain because it depended on the outcome of the liquidation, including recoveries, liabilities, costs and expenses.
The judge rejected an alternative interpretation that Atlas had assigned the underlying US$200 million Term Loan itself. He found that the assignment covered the bundle of contractual rights under clauses 10.1, 12.1 and 13.1 of the share sale deed.
The court also held that those rights were an economic resource under section 60 of the Sanctions and Anti-Money Laundering Act 2018, rather than a “fund”. The uncertainty over the amount that might ultimately be recovered was important to that conclusion.
Under regulation 11(1) of the Russia (Sanctions) (EU Exit) Regulations 2019, a person must not deal with funds or economic resources owned, held or controlled by a designated person where they know or have reasonable cause to suspect they are dealing with them.
For economic resources, regulation 11(5) applies where the resource is exchanged for funds, goods or services, or used in exchange for them. The judge concluded that those provisions did not cover the liquidators simply giving consent to the assignment.
Petropavlovsk was not a party to the transaction between Atlas and Denali, and the consent did not involve the liquidators or Petropavlovsk exchanging the rights for funds or using them in exchange for funds. The court therefore concluded that consent could be given without breaching the Regulations.
The judge reached that conclusion while applying the approach taken by the Court of Appeal in PJSC National Bank Trust v Mints [2023] EWCA Civ 1132, where a claim or cause of action was treated as an economic resource rather than a fund.
The judgment also noted that the conclusion meant there was no need for a Treasury licence to be sought. HHJ Johns KC invited the parties to agree an order giving effect to the judgment.