High Court upholds sanctions licensing decisions affecting VTB Bank administration

The High Court has dismissed a judicial review challenge by Russia’s VTB Bank to decisions taken by HM Treasury, acting through the Office of Financial Sanctions Implementation (OFSI), concerning sanctions licensing and consultation during the administration of VTB Capital plc, VTB Bank’s UK subsidiary. The Court held that the Treasury acted lawfully and fairly in its engagement with the administrators and the sanctioned parent, and that the decisions fell well within the scope of the statutory sanctions regime.

The case arose from the impact of UK sanctions imposed following Russia’s invasion of Ukraine, which rendered VTB Capital plc unable to continue trading and led to its entry into administration. OFSI granted licences to permit the administration to proceed in a controlled manner, aimed at protecting unsanctioned creditors while maintaining the core effect of the sanctions against the sanctioned parent. VTB Bank challenged the process on public law grounds, alleging inadequate consultation, irrational decision-making, and failures to make sufficient inquiries.

The Court rejected the consultation challenge, finding that VTB Bank was, in substance, fairly consulted and given a proper opportunity to engage once licence review became a live issue. The judge emphasised that fairness is assessed pragmatically, not mechanistically, and that VTB Bank was kept informed and able to make representations throughout the relevant stages of the administration process.

The Court also dismissed the so-called “Tameside challenge”, holding that the Treasury was not required to conduct further factual inquiries beyond those it reasonably considered necessary. In circumstances where Court-appointed joint administrators (David Soden and Stephen Browne of Teneo) were subject to direct supervision by the Insolvency Court, the Treasury was entitled to place substantial reliance on their advice and representations when exercising its sanctions licensing discretion.

A central theme of the judgment is the Court’s recognition of the policy balance inherent in financial sanctions. The sanctions regime was designed to impose severe constraints on sanctioned persons, even where this resulted in insolvency, while allowing narrowly tailored licences to mitigate collateral damage to unsanctioned parties. The Court accepted that it was never the Treasury’s intention to shield sanctioned creditors from the economic consequences of sanctions, beyond what was strictly necessary to enable an orderly administration.

As a result, the Court rejected VTB’s challenge.

Read the decision here.

Professionals involved:

• Sir James Eadie KC of Blackstone Chambers, Thomas Munby KC of Maitland Chambers & Mr Tom Rainsbury of 3 Verulam Buildings (instructed by the Government Legal Department) for HM Treasury

• Maya Lester KC, Malcolm Birdling and Alastair Richardson of Brick Court Chambers and Ryan Perkins of South Square (instructed by Weil Gotshal & Manges) for the Interested Party

• Tim Owen KC and Tim James-Matthews of Matrix Chambers and William Day of 3 Verulam Buildings (instructed by PCB Byrne) for VTB Bank