Jurisdiction(s):
United Kingdom

English Commercial Court: US secondary sanctions risk triggered contractual ‘mandatory law’ clause, excusing Cynergy from paying interest to Lamesa (Lamesa Investments v Cynergy Bank)

Published on: 16 September 2019

Published by a Law360 reporter

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Article summary

Lamesa Investments Ltd v Cynergy Bank Ltd [2019] EWHC 1877 (Comm) What did the court decide?

Judge Mark Pelling held that Cynergy Bank was entitled to rely on a provision in its agreement with Lamesa Investments that allowed it to withhold payments without falling into default if any law, regulation or court order prevented the transfer of the sums. At the core of the dispute was a £30m loan that Cynergy Bank, then known as Bank of Cyprus UK, obtained from Lamesa Investments in December 2017, under which interest was contractually due to Lamesa Investments twice a year. The ruling records that in April 2018 the US Department of the Treasury Office for Foreign Assets Control placed Viktor Vekselberg (Vekselberg), the owner of Lamesa Investments’ parent company, on its list of 'specially designated nationals' as part of a drive against Russian oligarchs and their companies. The sanctions barred US citizens from dealing with Vekselberg, and, as a consequence of his indirect ownership, Lamesa Investments then became a 'blocked person', the judge said. Accordingly, Cynergy Bank’s reliance on the protective clause meant no event of default arose while such prohibitions applied to the contemplated interest remittances thereunder. Lamesa Investments began English legal proceedings...

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