In brief
- Two recent High Court decisions involving VTB Bank, a Russian bank subject to UK sanctions, illustrate how UK sanctions can impact the ability of a designated person to obtain a worldwide freezing order ("WFO").
- Together, the cases confirm that sanctioned litigants can access injunctions as a remedy from the English courts but will not be given any more favourable treatment than a non-sanctioned party, and the practical impact of sanctions can determine whether an otherwise properly obtained injunction survives.
Background: the underlying dispute
VTB Bank obtained a WFO against two Kazakh defendants in aid of substantive proceedings in Russia, who later challenged the order on two fronts.
The set-aside application: is a freezing order an "economic resource"?
In VTB Bank PJSC v Kuanyshev and Askar [2026] EWHC 2140 (Comm), the defendants argued that the freezing injunction breached UK sanctions and should therefore be set aside.
Regulations 11 to 15 of the Russia (Sanctions) (EU Exit) Regulations 2019 form the core of the UK's asset-freezing regime for persons designated under the Russia sanctions.
Regulation 11 imposes the basic asset freeze on funds and economic resources owned, held or controlled by a designated person. Regulations 12 and 13 prohibit making "funds" available, directly or indirectly, to a designated person or for their benefit, while Regulations 14 and 15 impose the equivalent prohibition in relation to "economic resources".
Section 60 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) supplies the definitions that give those Regulations their scope. "Funds" is defined broadly as financial assets and benefits of every kind, including obvious examples such as cash and bank deposits but extending to a non-exhaustive list of other instruments and interests. "Economic resources" is an even wider concept, encompassing assets of every kind, tangible or intangible, movable or immovable, which can be used to obtain funds, goods or services.
The defendants argued that both definitions were engaged here, regardless of the fact that any funds or economic resources would only be made available to VTB as a result of a court order, since the Regulations prohibit funds or economic resources being made available to a designated person "directly or indirectly", whether or not the person making them available was acting under compulsion of a court order.
A freezing injunction is not itself a payment or transfer of assets: it is an order made by the court against a defendant personally, restraining that defendant from dealing with their own assets pending the resolution of the underlying dispute. However, the defendants argued that the freezing injunction should be considered "funds" under section 60(1) SAMLA, on the basis that it had quantifiable financial value by making VTB's underlying claim more valuable. Alternatively, the injunction was said to be an "economic resource" under section 60(2) SAMLA and Regulation 14, since it could be used to obtain the defendants' assets. A further argument was that the disclosure order breached Regulation 12 (treating the disclosed information as "funds" with intrinsic value) or Regulation 14 (as an "economic resource").
Set-aside decision
Mrs Justice Dias rejected all of these arguments, holding that granting a WFO or a disclosure order to VTB did not involve making "funds" or "economic resources" available to it. A freezing injunction is not "funds", since it gives the applicant no proprietary or other interest in the frozen assets. Nor is it an "economic resource", since there was no evidence that it can be used "in exchange for" funds, goods or services. The same reasoning applied to an asset disclosure order made at the same time as the WFO: the disclosed material had no intrinsic financial value, and simply conveying information does not amount to "funds" or an "economic resource".
The discharge application
Meanwhile, in an earlier decision, VTB Bank PJSC v Kuanyshev and Askar [2026] EWHC 1983 (Comm), Mrs Justice Dias considered the defendants' application to discharge VTB's WFO on the basis that VTB failed to provide fortification for its cross-undertaking in damages.
A cross-undertaking in damages is a promise a claimant gives, in exchange for the court granting a freezing order, to compensate the defendant for any loss caused by the order if it later turns out the order should not have been granted. Where there is a real risk the claimant would not be able to honour that promise, the court can require the cross-undertaking to be fortified by way of security, typically in the form of a payment into court. It was common ground between the parties that fortification is the price a claimant must pay in exchange for the grant of a freezing order.
The difficulty in this case was that VTB, as a sanctioned entity, could not simply make a payment, even into court, without first obtaining a licence from the Office of Financial Sanctions Implementation (OFSI), and the court was told at the outset that an OFSI licence could take anywhere between six weeks and 18 months to grant. As OFSI will only grant a licence in relation to a specific, identified transaction, VTB could not obtain one in advance to cover whatever fortification mechanism the court might eventually order, and each new proposal for how to provide fortification triggered other issues.
Over the following months, VTB attempted to provide fortification in various ways:
- First iteration: VTB proposed ring-fencing funds already frozen in a UK JP Morgan account. There was some confusion at the original hearing granting the WFO as to whether licences were already in place for these funds, but it later emerged that licences would still need to be obtained in order to make the payment.
- Second iteration: Alternatively, VTB proposed using funds held at Barclays Bank instead. VTB suggested that this would avoid the need to obtain a licence from the Office of Foreign Assets Control (OFAC), as well as from OFSI. The defendants argued neither this nor the JP Morgan proposal offered real fortification unless and until a licence (from OFSI as a minimum) was actually granted, so the court rejected both and instead ordered payment into court (with the amount increased to £500,000, including security for costs), directing VTB to apply for the necessary licence expeditiously.
- Third iteration: VTB proposed using funds already in the Court Funds Office to the account of VTB's subsidiary, which would only require an OFSI licence to authorise an internal transfer between the companies. OFSI took two months to respond with a draft licence, after the defendants threatened to join OFSI to the proceedings, but this draft licence requested further information from VTB. Further, the Court Funds Office was not prepared to accept the proposed transfer without a separate court order, further necessary licences permitting both payment out of and back into a VTB-connected account, and due diligence on the part of the Court Funds Office itself and its correspondent banks - making the mechanism unworkable in practice.
- Fourth iteration: VTB proposed varying the order to allow fortification to be held in its solicitors' client account instead. The defendants opposed this as offering less protection than payment into court, since a licence would still be needed to pay funds out of a solicitors' client account, whereas a licence for payment into court might make a further licence for payment out unnecessary or quicker to obtain. By the time the discharge application came before the court, nearly six months had passed since the original freezing order, and no fortification had been provided.
Discharge decision
Applying the established test of whether discharge would be unjust or disproportionate, the judge accepted that a designated person is entitled to access the courts but should not thereby be placed in a better position than any other litigant. Weighing VTB's more than minimal efforts to comply against the fact that no fortification had been provided after nearly six months, she held that VTB should have a further 13 days to make the payment into court, failing which the order would be discharged.
In the subsequent set-aside judgment, Mrs Justice Dias stood by this earlier decision but held that the WFO should not be discharged until 31 August 2026, to allow time for VTB to appeal the discharge decision to the Court of Appeal. However, she was careful to note that her decision to discharge the WFO was a discretionary decision, made on the particular facts of this specific case, and it should not be taken as determining the position for other designated persons in other circumstances.
On 28 August 2026, the Court of Appeal refused VTB's application for permission to appeal. The WFO was accordingly discharged.
What the cases mean in practice
- Freezing injunctions and disclosure orders are not "funds" or "economic resources", even where they benefit a designated claimant.
- A party which is subject to a freezing order obtained by a sanctioned counterparty may be able to have the order discharged if fortification is not provided within a reasonable time. However, the court will consider this in light of the specific facts of the case.
- Parties seeking a freezing order where sanctions may make payment of fortification challenging should liaise with OFSI as soon as possible and bear in mind that OFSI's typical timeline for granting licences can cause difficulties in practice.