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

The Banks submitted that, even if the case did not fall squarely within the rule in Ralli Brothers (in particular, if the Claimants were right about the place of performance being Russia), the court should still not enforce the Bonds, because to do so would be contrary to public policy. They relied on a dictum from the judgment of Lord Collins, sitting in the Hong Kong Court of Final Appeal, in Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544, at [57], suggesting that this was a possible basis on which enforcement could be refused even outside the rule in Ralli Brothers:

“[56] It has been suggested (obiter) that a contract which is valid by the governing law of the forum, English law, or in this case, Hong Kong law, may be refused enforcement if it has been 'performed in such a way that one party (or both parties) commits a legal wrong': Barros Mattos Jnr v MacDaniels Ltd [2004] EWHC 1188, [2005] 1 WLR 247, [30] (Laddie J). But, …, this obiter suggestion states the principle much too widely.

[57] There may nevertheless be cases in which a sufficiently serious breach of foreign law which reflects important policies of the foreign state or separate law district may be such that it would be contrary to public policy to enforce a contract. But there is no basis in authority or principle for holding that every breach of foreign law would come into this category.”

This dictum was approved as part of English law and applied in Magdeev v Tsvetkov [2020] EWHC 887 (Comm), at [317], albeit Cockerill J concluded at [341] that the breach of foreign law in that case was not sufficiently serious to engage English public policy. Magdeev v Tsvetkov was itself followed in Haddad v Rostamani [2021] EWHC 1892 (Ch), per Zacaroli J at [88], albeit the court again did not consider the breach of foreign law so serious as to justify a refusal to enforce the contract. All these cases recognise that the underlying rationale is comity.

The Banks said that the facts of this case were very different from those in Ryder Industries Ltd v Chan Shui Woo, Magdeev v Tsvetkov or Haddad v Rostamani, and that the breach of French/Italian/EU law was much more serious, so the principle of comity is more strongly engaged. They also said that it is significant that the foreign laws in question (i.e., Regulation 269 and Regulation 833) have counterparts in UK law, enacted for precisely the same policy objectives (i.e., the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2019).

Given that this point was raised only as an alternative argument, I can deal with it briefly, but I have no doubt that the Banks are right. Regulation 269 and Regulation 833 are an important part of EU legislation and of French and Italian domestic law. They were enacted as part of an EU-wide strategy, at the behest of the heads of state and governments of all the member states. Their purpose is as grave as any imaginable. It is evident from the exchanges with the DGT and the CSF that the Regulations are applied and enforced with extreme care and strictness. The punishments available are severe. Moreover, I consider that the Banks are right to suggest that the fact that UK/English public policy on this point is precisely aligned with that of the EU is an important pointer to the very great significance that should be attached to comity, on the facts of this case. (Footnote: ⁹)

Accordingly, if I had not been in the Banks’ favour on the application of the rule in Ralli Brothers, I would have found in their favour on this basis.