Celestial Aviation Services Limited v Unicredit Bank AG (London Branch)

Celestial Aviation Services Limited v Unicredit Bank AG (London Branch)

The court held that the UK sanctions regime (Regulations 28, 11, and 13) did not prohibit or excuse UniCredit from making payment under the standby letters of credit, as the obligations and supply of aircraft predated the sanctions, and payment would not benefit a Russian entity. The autonomy of the letters of credit was decisive. US sanctions did not excuse performance because the place of performance was England/Ireland, and UniCredit could have performed by tendering cash. The burden to prove US law excused performance was not met. The licensing regime did not alter the statutory interpretation.

Parties
Claimant: Celestial Aviation Services Limited; Part 8 Claimant: Constitution Aircraft Leasing (Ireland) 3 Limited; Part 8 Claimant: Constitution Aircraft Leasing (Ireland) 5 Limited; Defendant / Part 8 Defendant: UniCredit Bank AG (London Branch)
Jurisdiction
England and Wales
Judgment Date
23 March 2023
Procedural Posture
Commercial Court Part 8 Claim / Judgment After Trial of Preliminary Issues
Outcome
Judgment for the Claimants on the preliminary issues; UniCredit not excused from payment by sanctions.
Legal Topics
Letters of Credit, International Sanctions, Statutory Interpretation, Conflict of Laws, Aviation Leasing
Banking Law Sanctions Law Contract Law Letters of Credit International Sanctions Statutory Interpretation Conflict of Laws Aviation Leasing

Case Brief

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Parties

Celestial Aviation Services Limited

Claimant

Constitution Aircraft Leasing (Ireland) 3 Limited

Part 8 Claimant

Constitution Aircraft Leasing (Ireland) 5 Limited

Part 8 Claimant

UniCredit Bank AG (London Branch)

Defendant / Part 8 Defendant

Procedural Posture

Commercial Court Part 8 Claim / Judgment After Trial of Preliminary Issues

Legal Issues

  1. 1 Whether UK, EU, or US sanctions excused UniCredit from payment obligations under standby letters of credit confirmed by UniCredit in favour of Celestial and Constitution.
  2. 2 Whether payment under the letters of credit was prohibited by Regulation 28, 11, or 13 of the Russia (Sanctions) (EU Exit) Regulations 2019.
  3. 3 Whether US law or the Ralli Bros principle excused performance of the payment obligations in USD.

Ratio Decidendi

The court held that the UK sanctions regime (Regulations 28, 11, and 13) did not prohibit or excuse UniCredit from making payment under the standby letters of credit, as the obligations and supply of aircraft predated the sanctions, and payment would not benefit a Russian entity. The autonomy of the letters of credit was decisive. US sanctions did not excuse performance because the place of performance was England/Ireland, and UniCredit could have performed by tendering cash. The burden to prove US law excused performance was not met. The licensing regime did not alter the statutory interpretation.

Court Disposition

Judgment for the Claimants on the preliminary issues; UniCredit not excused from payment by sanctions.

Orders

  • Parties to agree an order to give effect to the judgment.
  • Issues of interest, costs, and any consequential matters to be resolved at a further hearing if not agreed.