Celestial Aviation Services Limited v UniCredit Bank GmbH, London Branch

Celestial Aviation Services Limited v UniCredit Bank GmbH, London Branch

Regulation 28(3) of the UK Russia Sanctions Regulations applies to payment under the LCs, as the provision of funds is in connection with arrangements whose object or effect is making aircraft available for use in Russia; the statutory language is broad and not limited to prospective arrangements. The autonomy principle does not override the factual connection between the LCs and the leases. UniCredit cannot rely on US sanctions as a defence because it failed to make reasonable efforts to obtain a licence from OFAC.

Parties
Claimant/respondent: Celestial Aviation Services Limited; Claimant/respondent: Constitution Aircraft Leasing (Ireland) 3 Limited; Claimant/respondent: Constitution Aircraft Leasing (Ireland) 5 Limited; Defendant/appellant: UniCredit Bank GmbH, London Branch (formerly UniCredit Bank AG, London Branch)
Jurisdiction
England and Wales
Judgment Date
06 November 2024
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal allowed in part; judge's conclusion on reg. 28(3) reversed; UniCredit prevented from relying on US sanctions due to lack of reasonable efforts to obtain licence.
Legal Topics
Standby Letters of Credit, UK and US Sanctions, Contractual Autonomy, Statutory Interpretation, Interest and Costs
Sanctions Law Commercial Law Banking Law Standby Letters of Credit UK and US Sanctions Contractual Autonomy Statutory Interpretation Interest and Costs

Case Brief

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Parties

Celestial Aviation Services Limited

Claimant/respondent

Constitution Aircraft Leasing (Ireland) 3 Limited

Claimant/respondent

Constitution Aircraft Leasing (Ireland) 5 Limited

Claimant/respondent

UniCredit Bank GmbH, London Branch (formerly UniCredit Bank AG, London Branch)

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Whether payment under standby letters of credit by UniCredit was prohibited by reg. 28(3) of the Russia (Sanctions) (EU Exit) Regulations 2019
  2. 2 Whether UniCredit could rely on s.44 of the Sanctions and Anti-Money Laundering Act 2018 as a defence
  3. 3 Whether US sanctions regime (Ralli Bros principle) excused UniCredit from payment

Ratio Decidendi

Regulation 28(3) of the UK Russia Sanctions Regulations applies to payment under the LCs, as the provision of funds is in connection with arrangements whose object or effect is making aircraft available for use in Russia; the statutory language is broad and not limited to prospective arrangements. The autonomy principle does not override the factual connection between the LCs and the leases. UniCredit cannot rely on US sanctions as a defence because it failed to make reasonable efforts to obtain a licence from OFAC.

Court Disposition

Appeal allowed in part; judge's conclusion on reg. 28(3) reversed; UniCredit prevented from relying on US sanctions due to lack of reasonable efforts to obtain licence.

Orders

  • Regulation 28(3) of the UK Russia Sanctions Regulations prevents payment under the LCs.
  • Interest and costs awarded to Celestial and Constitution.