CL-2022-000456 - [2025] EWHC 1938 (Comm)

EuroChem NW2’s demands were rejected by the Banks, by messages of 10 August 2022 in the case of the SocGen Milan Bond, 16 August 2022 in the case of the other SocGen Bonds, and 17 August 2022 in the case of the ING Bond. The SocGen rejections all stated:

“… we are unable to honour the claim due to the presence of international sanctions directly impacting the transaction. Paying under the above-mentioned claim will indeed constitute a breach of these international sanctions.”

The rejection from ING went into much more detail:

“Our decision is prompted by the need to comply with mandatory EU sanctions restrictions, as further clarified below. By means of such further clarification we firstly note that it recently became apparent to ING that one of the contracting parties of whom certain services and contractual obligations vis-A-vis EuroChem which are covered by the Bond, Tecnimont SpA ('Tecnimont'), strongly disputes the legality of your claim as they deem it '(..) abusive, improper and fails to comply with the express terms of the Bond'. We furthermore understand that Tecnimont 'has not(actually) defaulted in its obligations under a Contract (as this term is defined in the Bond) and/or has failed to make any payment in accordance with a contract', yet they were in fact (shortly summarized) 'entitled to suspend the provision of the (respective services): (...) to the extent that performance of (all or part of) the Services by Contractor(s) in accordance with (the) Contract(s) would cause Contractor(s) to be in breach of any restrictions imposed by embargo or sanctions laws or regulations issued by (inter alia) European Union.

In this context, reference is made to EU sanctions restrictions under: (i) Council Regulation (EU) 833/2014 (as amended from to time: ''Reg. 833/2014''), and (ii) Council Implementing Regulation (EU) 878/2022, implementing Regulation (EU) No. 269/2014 (''Reg. 269/2014, collectively with Reg. 833/2014: ''EU Sanctions Regulations''). Lastly, we understand that the legal counsel of Tecnimont has informed you accordingly, thereby explaining their position that ''there is no basis for EuroChem to assert that MT Russia and/or Tecnimont have defaulted or failed to make a payment under a Contract'', and the suspension of their services under the respective contract(s) with EuroChem serves the purpose of acting in compliance with EU Sanctions Regulations. As you may appreciate, ING is given this situation currently not in the position to grant your claim under the Bond. From a EU sanctions perspective, reference is not only made to the restrictions and legal provisions under the EU Sanctions Regulations which formed the basis for Tecnimont to suspend their services under the respective contract(s), but also to article 11 of both EU Sanctions Regulations, (shortly summarized) prescribing that ING shall not satisfy any claims that are made in connection with any contract or transaction, the performance of which has been affected, directly or indirectly, in whole or in part, by the measures imposed under the respective EU Sanctions Regulation, in the view of ING including your claim under the Bond.”

In due course it became clear that the principal sanctions instrument relied on by both SocGen and ING was Regulation 269. However, they both also rely on Regulation 833.

I should say, for completeness, that EuroChem NW2 made further demands under the SocGen Bonds on or around 7 September 2023 and under all the Bonds on or around 14 August 2024. Nothing turns on these further demands, which did not add anything material to any party’s case.

I should also note that, notwithstanding the Assignment, no demands have ever been made by EuroChem AG. EuroChem AG’s case is that its right to payment derives from the demands made by EuroChem NW2. These were essentially made in August 2022. Even the later demands were still made long before the Assignment, which did not occur until December 2024.