Lamesa Investments Ltd v Cynergy BankLtd

Lamesa Investments Ltd v Cynergy BankLtd

The risk of US secondary sanctions under section 5(b) of the Ukraine Freedom Support Act constitutes a 'mandatory provision of law' within the meaning of clause 9.1 of the Facility Agreement. Cynergy's non-payment was justified as it was made in order to comply with such a provision, and the clause was intended to protect the borrower from the risk of severe penalties or sanctions, even if the statute did not expressly prohibit payment.

Parties
Claimant/appellant: Lamesa Investments Limited; Defendant/respondent: Cynergy Bank Limited
Jurisdiction
England and Wales
Judgment Date
30 June 2020
Procedural Posture
Civil Appeal / Appeal From High Court Judgment
Outcome
Appeal dismissed
Legal Topics
Interpretation of Loan Agreements, Sanctions Compliance, Secondary Sanctions, Standard Form Contracts, Mandatory Provisions of Law
Contract Law Banking Law International Law Interpretation of Loan Agreements Sanctions Compliance Secondary Sanctions Standard Form Contracts Mandatory Provisions of Law

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Parties

Lamesa Investments Limited

Claimant/appellant

Cynergy Bank Limited

Defendant/respondent

Procedural Posture

Civil Appeal / Appeal From High Court Judgment

Legal Issues

  1. 1 Whether Cynergy was justified in refusing to pay interest under the Facility Agreement due to US secondary sanctions legislation
  2. 2 Proper interpretation of 'mandatory provision of law' in clause 9.1 of the Facility Agreement
  3. 3 Whether the risk of US secondary sanctions constitutes a mandatory legal prohibition excusing non-payment

Ratio Decidendi

The risk of US secondary sanctions under section 5(b) of the Ukraine Freedom Support Act constitutes a 'mandatory provision of law' within the meaning of clause 9.1 of the Facility Agreement. Cynergy's non-payment was justified as it was made in order to comply with such a provision, and the clause was intended to protect the borrower from the risk of severe penalties or sanctions, even if the statute did not expressly prohibit payment.

Court Disposition

Appeal dismissed

Orders

  • Cynergy is entitled to rely upon Clause 9.1 of the Facility Agreement and shall not be in default of any payment obligation under the Facility Agreement for as long as Lamesa remains a Blocked Entity.