UK High Court Keeps Sanctions Defense Alive in Property Dispute
A lawsuit between the trustee of a Russian businessman and his "long term" partner will go to trial after the U.K. High Court of Justice on March 13 declined to dismiss their defense, setting up a case that could shed light on the role sanctioned parties play in property disputes.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The suit was filed by Lyubov Kireeva, trustee and bankruptcy manager of Russian businessperson Georgy Bedzhamov, against Bedzhamov's long-term partner Alina Zolotova for claim of an Italian property called Villa Nicolini. In her defense, Zolotova said the property shouldn't be granted to Kireeva since Kireeva's legal challenge is funded by A1 LLC, an investment company sanctioned by the U.S. in September 2023. Zolotova said A1 would be able to access the property, which would violate U.K. sanctions regulations by making funds available indirectly to a sanctioned party.
But Kireeva argued that even if A1 is sanctioned or controlled by sanctioned parties, the court wouldn't be barred from granting her judgment. That argument relied on a British court ruling in Boris Mints & Ors v. PJSC National Bank Trust & Anor, which said that claims made by sanctioned banks were not a "fund" under U.K. sanctions, although it was an "economic resource" (see 2311010031).
The high court here distinguished Mints from the present case since control of the Italian property is a "pre-existing 'fund' for the purposes of the Sanctions Regulations," making it "an asset of a type that cannot be dealt with or made available by Ms Zolotova" in violation of sanctions. The court also said it didn't have "reasonable cause to suspect" that A1 doesn't have ties to sanctioned parties. And "there is at least some reason to think" that ordering Zolotova to transfer the share to Kireeva would be the same as ordering her to "make funds available" to a sanctioned party.
Zolotova's defense now heads to trial, where "the court would be concerned not to order Ms Zolotova to act in breach of the prohibition," it said. The court also found that if Zolotova's allegations are correct, it's "very likely" there has been "a scheme of concealed sanctions evasion" that has involved the trustee, which could "affect the willingness of the court to grant declaratory relief." This could be a case "in which part of the purpose of seeking relief -- depending on the Trustee's relationship with A1, and on the ownership of A1 -- is to advance criminal conduct," the court noted.
The court also held that since sanctions law "is in a state of continuing development in England," that's a "compelling reason" for a trial.