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

The Banks also attacked the Assignment on the basis that it was an attempt to circumvent Article 2 of Regulation 269, and therefore prohibited under Article 9.

Mr Hechler was personally involved in the Assignment and gave evidence that it was done “after careful consideration of the legality of the assignment and in compliance with international sanctions” and “after a long analytical process”. He also pointed to the fact that, before it was completed, EuroChem AG wrote to the SECO, who said there were no objections. In cross-examination he seemed reluctant to accept that there was any causal connection whatsoever between the imposition of sanctions and the Assignment, which I thought unrealistic. However, he steadfastly refused to accept that the Assignment was intended to circumvent the sanctions, and I accept that this evidence was honestly given. I am sure that EuroChem AG only entered into the Assignment because it was satisfied that it was legal and proper to do so.

In submissions, the main focus of the Banks’ case on this point related to the Side Letter, because of the very substantial consideration that it provided for EuroChem AG to pay to EuroChem NW2. The Banks said (in my view, rightly) that the fact that clause 2.3 recorded the parties’ agreement that it should be paid from funds “which do not constitute any proceeds from the Bonds” was meaningless, given the fungibility of money. They said that this demonstrated that the Assignment was merely a way for EuroChem AG to funnel back to EuroChem NW2 US$62,358,000 which could not be paid to EuroChem NW2 directly by the Banks.

I would have seen some force in this, were it not for clause 2.2(b), which provides that the Consideration is only payable if all necessary approvals are obtained. In context, this means the approval of the SECO, as the relevant NCA. As I have already noted, Mr Fenwick KC assured me that EuroChem AG will apply for authorisation to pay, if the Claimants succeed in their claims in this action and if EuroChem AG therefore receives the assigned proceeds. On this basis, I do not see that the Assignment can be said knowingly and intentionally to have the effect of circumventing Regulation 269. Clause 2.2(b) suggests, and I have been told, that EuroChem AG will pay EuroChem NW2 only if authorised to do so.