DMC/SandT/24/02

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2023/2866.html

Yash Kulkarni KC and Gaurav Sharma (instructed by Withers LLP) for Der Mond (Buyers)

Sellers succeeded in their application for summary judgment, for the sums owed by Buyers under an addendum to a deed of payment entered into by the parties after Buyers had defaulted in payment of the balance due under a sale contract for crude oil. The defences raised by Buyers, which were based on trade sanctions, on the grounds that Sellers had connections with Russia, were dismissed by the High Court. The Judge held that Buyers had no defence under the terms of the relevant contract, that they could not rely on the Russia (Sanctions) (EU Exit) Regulations 2019 (the “2019 Regulations”) and there was no other compelling reason why the dispute should proceed to a trial. The Judge also held that the powers of President Putin, as the head of a command economy, did not amount in this case to “control” of any party engaged in these proceedings.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes

Sellers, a company incorporated in Switzerland and wholly-owned by a Russian oil company called Lukoil PJSC, and Buyers, a company incorporated in Senegal, entered into a sale contract for Nigerian crude oil on CFR Dakar, Senegal terms, under which only part payment was made after delivery of the cargo. Buyers later failed to pay the balance of the purchase price due. This led the parties to enter into a deed of payment, and later an addendum thereto, but the payments due thereunder were only satisfied in part. In consequence, Sellers commenced the present proceedings to enforce their claim under the addendum.

Buyers raised defences based on alleged misrepresentation, frustration and the force majeure and trade sanctions terms incorporated from the sale contract into the addendum. Sellers considered that the alleged defences did not have a realistic prospect of success and there was, in any event, no compelling reason for a trial. As such, Sellers applied to the High Court for summary judgment. This note focuses on the trade sanctions (clause 15 – fn.1) related aspects of the defence.

Having set out the background to the dispute, the relevant trade sanctions clause, the parties’ respective arguments and reviewed the case law, the Judge proceeded to address whether the defence had a realistic prospect of success or whether there was any other compelling reason for a trial in any event.

The Judge did not consider the present case should proceed to trial as a test case on the issue of ‘control’ under the 2019 Regulations. There was no arguable evidential basis for such a debate nor should Sellers be deprived of a judgment not prohibited by the 2019 Regulations simply to provide the occasion for it.

This judgment provides some relief to concerns due to the obiter (non-binding) view expressed by the Court of Appeal in Mints, to the effect that regulation 7 of the 2019 Regulations may apply to any Russia related public body or private entity over which President Putin may in principle be able to exercise ‘control’. That was contrary to the first instance judgment in Mints (fn.4), where Cockerill J held that a designated person who exercised ‘political control’ over another entity did not satisfy the requirement for ‘control’ in regulation 7.

Footnote 2: [2023] EWCA Civ 1132, see paragraph [225] in particular, available at https://www.bailii.org/ew/cases/EWCA/Civ/2023/1132.html

7.—(1) A person who is not an individual ("C") is "owned or controlled directly or indirectly" by another person ("P") if either of the following two conditions is met (or both are met).