CargoLogicAir liquidators seek court path to paying Russian-sanctioned creditors

Jo Milner and David Buchler of Buchler Phillips, the joint liquidators of CargoLogicAir, have applied to the High Court for guidance on the treatment of approximately £5.2 million in claims from sanctioned creditors. The application, brought with assistance from DLA Piper, seeks to establish whether distributions can be held in a blocked account pending regulatory approval or, ultimately, paid into court. The liquidators are currently awaiting evidence from the Office of Financial Sanctions Implementation (OFSI), which is joined in the application, and expect to be able to make distributions to sanctioned creditors once the court has provided the necessary directions and any applicable sanctions requirements have been satisfied.

The application represents the latest development in an insolvency complicated by the sanctions imposed following Russia's invasion of Ukraine. As we previously reported, CargoLogicAir was itself released from UK sanctions in June 2024 after its parent company, Cargo Logic Holding Limited, was dissolved. However, the removal of restrictions on the company did not resolve the position of creditors who remain subject to sanctions, leaving the liquidators unable to distribute funds to those creditors despite having sufficient assets to make payments to other unsecured claimants.

In their annual progress report dated 4 November 2026, the liquidators disclosed that they have received unsecured claims totalling approximately £15.7 million from 147 creditors, including approximately £5.2 million attributable to sanctioned creditors. The claims also include a £6.6 million demand arising from the termination of an aircraft lease, which remains under review pending further information regarding mitigation and the calculation of the amounts claimed. The company originally reported approximately £8.2 million in liabilities to 95 creditors in its statement of affairs.

The liquidators' application under section 112 of the Insolvency Act 1986 seeks directions on the adjudication of sanctioned creditors' claims, insolvency set-off and the payment of distributions under the Russia (Sanctions) (EU Exit) Regulations 2019. In particular, the liquidators have asked whether they can pay distributions into a blocked account in their own names until the relevant creditor obtains an OFSI licence or demonstrates that it is no longer subject to sanctions. They are also seeking confirmation that any distributions remaining unpaid or unclaimed at the conclusion of the liquidation can be paid into court. The liquidators have indicated that obtaining directions is necessary to ensure that all creditors entitled to a distribution can receive one without breaching the sanctions regime, although delays in the proceedings could prolong the liquidation.

The liquidators are also continuing to pursue potential claims against Microsoft Ireland Operations Limited arising from the deletion of the company's electronic records. When we last covered the matter in December 2024, A&O Shearman had issued a letter before action against Microsoft over losses allegedly suffered because the missing records prevented the recovery of certain assets. The latest report reveals that Microsoft has since further restricted and deleted electronic records that the liquidators had been using to pursue outstanding debts. The potential claim remains on hold, but the liquidators have continued corresponding with Microsoft's legal representatives, Matheson, and intend to revisit its merits.

The loss of records has also complicated efforts to recover approximately £3.3 million in potential terminal loss tax relief. The liquidators have contacted the company's former accountants and HM Revenue & Customs (HMRC) to assess whether the claim can be pursued and whether the relevant filing deadline can be extended. However, they acknowledge that the absence of supporting records makes a recovery unlikely.

Meanwhile, the liquidators are continuing to pursue outstanding book debts, having recovered approximately £1.14 million during the administration and a further £1,872 during the latest reporting period. They estimate that another £214,000 may be recoverable from four outstanding debts, with Setfords and overseas counsel assisting in collection efforts. Since the end of the reporting period, one debtor has offered to settle for approximately 66.3% of the amount claimed, an offer that remains under consideration. Separately, a €2.7 million claim against insolvent affiliate CargoLogic Germany GmbH has been deemed irrecoverable because the debt ranks behind ordinary unsecured creditors under German insolvency law.

Another unresolved issue concerns Citibank, which continues to hold approximately £15,863 belonging to the company and has not resolved payments totalling approximately £106,762 to 24 employees that were blocked when sanctions were imposed. The liquidators have escalated the matter to the Financial Conduct Authority and the Financial Ombudsman, seeking either the release of the payments to their intended recipients or the return of the funds to the liquidation estate.

The liquidation estate held approximately £5.7 million in funds and receivables as at 18 September 2026, following the payment of approximately £618,000 in interim distributions to unsecured creditors. Ordinary preferential creditors have been paid in full, while HMRC is expected to receive a full distribution on its secondary preferential claim once the amount has been finalised. The liquidators anticipate further distributions to unsecured creditors, although the ultimate recovery will depend on the adjudication of outstanding claims, further asset realisations and the outcome of the sanctions application.

Buchler Phillips is being assisted by DLA Piper on sanctions matters, A&O Shearman in relation to the potential Microsoft claim, and Setfords and overseas counsel on debt recoveries.