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

It was common ground that, in general terms, the burden of proof was on the Banks and Tecnimont to show that the Bonds were frozen under Article 2(1) and/or that payment under them was prohibited under Article 2(2): Celestial Aviation Services Ltd v UniCredit Bank AG [2024] EWCA Civ 628, at [121]-[124]. There are three qualifications to this.

First, the incidence of the burden of proof was explained by Snowden LJ in Brendon International Ltd v Water Plus Limited[2024] EWCA Civ 220 at [50]:

“[50] The general rule in civil litigation is that they who assert must prove. So, where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the burden of proving such allegation to the civil standard of proof rests on that party at all times. …”

This is why, in general terms, the burden is on the Banks to show that it would be illegal for them to pay under the Bonds, this being the positive case they have asserted in response to the Claimants’ claims for payment. However, it follows in just the same way that, in so far as the Claimants have made positive assertions in their statements of case, the burden is on them to prove those assertions, in so far as they need to do so.

Second, as noted in Section XXXI above, if it is established that an entity is under the control of a designated person, then there is a rebuttable presumption that the control extends to all the entity’s assets. It was common ground that the burden of rebutting the presumption would fall on the Claimants.

Third, in the light of my conclusion in Section XXXVI above, the burden on the Banks and Tecnimont is not to prove ownership or control as such. It is sufficient for them to show a determination of ownership or control by the relevant NCA.

As regards the standard, the relevant elements of Article 2, including as to ownership or control, must be proved on the ordinary civil standard of balance of probabilities. This is not disturbed by Article 10(2), which provides that a person bound by Regulation 269 is not liable for breaches of any prohibition therein, including Article 2, unless they “know” or “had reasonable cause to suspect” the same: see Vneshprombank LLC v Bedzhamov [2024] EWHC 1048 (Ch), at [71]-[72].

Tecnimont sought to go further, suggesting that assets must be frozen under Article 2(1), not only if they are in fact owned or controlled by the designated person, but also if there are merely reasonable grounds to believe this. In support of this submission, they cited the Consolidated FAQ document at p. 29 (in the answer to Question 5 in Section B, Individual Financial Measures).

I regard this as a mis-reading. Unlike the 2020 Opinion and the 2021 Opinion, which provide answers to questions from NCAs, the Consolidated FAQ document is intended to assist “economic operators” – i.e., EU businesses such as the Banks in this case. The text on the first page explains that the purpose of the document is “to facilitate economic operators’ compliance with the restrictive measures”. In other words: to help such parties avoid falling foul of the EU sanctions and so getting into trouble.

The passage relied on by Tecnimont begins by stating, uncontroversially, that Article 2(1) “requires the freezing of all assets currently belonging to, or held, owned or controlled by listed persons.” On its face, this means, in fact belonging to, or held, owned or controlled by.

The next sentence reads:

“If, at the time of the assessment, there are reasonable grounds to believe that certain assets “belong to” or are “controlled by” the listed person, even if they are nominally owned by someone else, then these assets must be frozen under Article 2(1).”

This is what Tecnimont relies on. However, I understand this not as a statement of the law as it must be applied by a court (or by an NCA making the relevant determination for the purposes of the law of the relevant member state), but as advice to economic operators about what they should do. If they have reasonable grounds to believe that the assets are owned or controlled by the designated person, they should treat them as frozen, at least pending a determination by the NCA (to whom they have to report). If it turns out that their reasonable belief was correct, they will have done the right thing. If not, they will have a defence under Article 10 to any claim. This is the prudent course, which avoids the risk of either (i) committing a criminal offence or (ii) liability in damages.

Tecnimont suggested that Cockerill J mischaracterised the standard of proof in Vneshprombank LLC v Bedzhamov. In my judgment, she was right. Article 2(1) applies only to assets that in fact belong to or are held, owned or controlled by a designated person, at the relevant time. Reasonable belief on the part of the economic operator is not sufficient.