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

As set out above, under clause 9 of each Bond, the Bond itself could be assigned in certain circumstances, if the rights, obligations and benefits under the Contracts had been assigned. However, clause 9 also permitted the assignment of “the proceeds arising from the possible drawdown” of each Bond; in which case a request of payment to the assignee was to be executed by the Issuer, provided that this would not constitute a breach of the sanctions law of (among others) the EU.

As noted above, the Assignment that EuroChem NW2 and EuroChem AG entered into on 23 December 2024 was an assignment of the proceeds. The operative provision is clause 2, providing as follows:

“2 Assignment of Proceeds

With effect from the date of this Deed:

(a)

the Assignor hereby assigns to the Assignee the Assignor’s proceeds arisen from possible drawdown of the Bonds, including benefits, interests, rights and claims in and to the Claimed Amounts and the Assignee hereby agrees to accept such assignment from the Assignor; and

(b)

the Assignee shall have all the rights and benefits of a beneficiary with respect to the Claimed Amounts, the Assignee shall have the right to seek enforcement with respect to the Claimed Amounts and pursue all claims and demands (future or existing) whatsoever arising out of or in this respect as if references to the Assignor in the Bonds in this part had been references to the Assignee from the date of issuance of the relevant Bond.”

The “Claimed Amounts” were defined as all EuroChem NW2’s rights to Bond proceeds, including any moneys or proceeds deriving from that Bond and any payment demand.

On 9 January 2025, EuroChem NW2 and EuroChem AG entered into a side letter to the Assignment (the “Side Letter”), which provided at clauses 2 and 3 as follows:

“2 Consideration under Deed of Assignment

2.1

The Parties hereby agree that, as equivalent consideration for the assignment pursuant to Clause 2 of the Deed of Assignment (which sufficiency the Parties hereby acknowledge), the Assignee undertakes to pay to the Assignor the fixed amount of USD 62,358,000.00 (sixty two million three hundred fifty eight thousand US dollars (being an agreed equivalent to EUR 60,000,000.00 (sixty million Euro) based on the European Central Bank Euro Foreign Exchange Reference Rates as of 23.12.2024) (the “Consideration”). The Parties agree that such Consideration reflects the risks, prospects and costs of the court proceedings and potential enforcements of the assigned proceeds in a balanced way.

2.2

The Consideration shall be payable to the Assignor at any date at the Assignee’s discretion but in any event not later than within 1 (one) year from the date of this Side Letter and, in any event, only after the following conditions have been met:

(a)

The Assignee becoming a party to the Proceedings;

(b)

all the necessary Governmental Authority approvals are obtained if required for such payment; and

2.3

The Parties agree that payment of the Consideration shall be made strictly from funds of the Assignee which do not constitute any proceeds from the Bonds.

2.4

If the Conditions set out in Clause 2.2. herein are not met within 1 (one) year from the date hereof, the Parties shall agree in good faith further course of action, including any necessary amendments to the Deed of Assignment and this Side Letter.

2.5

The Assignor undertakes that any amounts received by it as the Consideration will be used solely for the purposes of financing its capital expenditure under the Project. The Assignee shall be entitled to monitor and verify the application of any amount received by the Assignor under or pursuant to the Deed of Assignment and this Side Letter by carrying out audit, as notified to the Assignor in advance, and the Assignor shall cooperate with the Assignee and provide the Assignee, upon request, with such documents, information and assistance necessary for such audit.

2.6

The Assignor shall not directly or indirectly provide, transfer, loan, allow access to or otherwise make available any amounts received by it under or pursuant to the Deed of Assignment and this Side Letter to any Sanctions Restricted Person in violation of the applicable laws, including, but not limited to Sanctions Laws.

2.7

All payments within the Consideration shall be made in Euro or in any other currency as may be agreed by the Parties.

2.8

The Parties shall jointly use their best efforts for the purposes of the Assignee becoming the party to the Proceedings as soon as possible after the date hereof.

3 Reversal of Deed of Assignment in Certain Circumstances

3.1

Each of the Assignee or the Assignor shall have the right to require that the other Party enters into a Deed to reverse the Assignment by a written request in the event that the Assignee does not become a party to the Proceedings within 8 (eight) months from the date hereof and/or in the event that a Court of competent jurisdiction (specifically the English Court) issues a final and binding judgment determining that the Assignment is unlawful and/or void.

3.2

The Assignor shall have the right to require the Assignee to transfer back to it the rights transferred by the Deed of Assignment by giving written notice to the Assignee in the event that the English court refuses to enter judgment in favour of the Assignee in respect of the claims against the Banks under the Proceedings.

3.3

In the event of either Party giving notice under clause 3.1 or of the Assignor giving written notice under clause 3.2 hereof, the Parties shall enter into a further deed re-assigning the rights constituting the subject matter of the Deed of Assignment to the Assignor and the Assignor shall pay to the Assignee the Consideration actually received from the Assignee (if any) and the Assignor shall become the sole and beneficial owner of all such rights.”

The Assignment and the Side Letter were both subject to English law.

As a matter of English law, the distinction between assignment of the Bonds and the assignment of the proceeds is correctly explained in G Affaki and R Goode, ‘Guide to ICC Uniform Rules for Demand Guarantees URDG 758’ (2011), at paragraphs 33.20-21:

“33.20

An assignment of the proceeds of a guarantee is to be distinguished from the transfer of the guarantee itself. When the guarantee itself is transferred… the transferee replaces the transferor as beneficiary, and it is the transferee as the new beneficiary that is entitled to present any future demand. By contrast, in the case of an assignment of the proceeds, there is no contractual relationship between the assignee and the guarantor whose engagement is solely with the assignor, so that the demand and the statement of breach have to be presented by or on behalf of the assignor. The sole effect of the assignment, if agreed to by the guarantor, is that the proceeds, instead of being paid to the assignor, have to be paid to the assignee. Accordingly, the assignee cannot collect until the guarantor has received a complying demand from the assignor. If the assignor fails to present a complying demand prior to the expiry of the guarantee, the assignee has no claim against the guarantor and it has to rely on whatever is available under the applicable law against the assignor.

33.21

An assignment of proceeds also differs from a novation in that the assignee acquires its rights subject to any claims and defences that would have been available against the assignor and subject to rights of set-off as arising under the applicable law. This typically relates to set-off in respect of cross-claims by the debtor (the guarantor) against the assignor arising prior to the guarantor’s receipt of notice of assignment of closely connected to the claim on the guarantee.”

Notice of the Assignment was given to ING on 15 January 2025, and to SocGen on 20 January 2025. EuroChem AG has requested that payment be made to it at its €Euro bank account in Russia.