Foxton J has entered summary judgment for the claimant in a c.€48 million claim, in a decision featuring issues on Russian sanctions, force majeure and allegations of fraud.
Frederick Alliott represented the successful claimant Litasco SA (“Litasco”) in its application for summary judgment for sums amounting to over €48 million in Litasco SA -v- (1) Der Mond Oil and Gas Africa Sa (2) Locafrique Holding SA  EWHC 2866 (Comm).
The claim arose further to the breach of an agreement rescheduling the payment of monies owed further to the delivery of a cargo of West African crude oil, in a highly topical decision concerning the application of UK sanctions on Russian-related parties as well as allegations of fraud. The defendants were the counterparty and receiver of the cargo (“Der Mond”) and the parent guarantor under the rescheduling agreement (“Locafrique”), and were represented by Yash Kulkarni KC and Gaurav Sharma. The decision of Mr Justice Foxton rejected the primary defences put forward based on fraudulent misrepresentation and breach of collateral warranty. The Judge also dismissed defences advanced based on force majeure, frustration and illegality based on the alleged operation of the UK sanctions regime following Russia’s invasion of Ukraine in February 2022.
The Defendants’ primary defence alleged that a fraudulent misrepresentation was made as to Litasco’s intention to enter into a joint venture, for the purpose of inducing the Defendants to sign the agreement rescheduling payment of the purchase price of the oil. The joint venture (and related draft MOU) was allegedly intended to provide the Defendants with a means of earning sufficient ‘margin’ on other commercial deals in order to facilitate repayment of the debt. Mr Justice Foxton found, after a detailed review of the arguments and evidence, that the Defendants’ case had no realistic prospect of success, and was “little more than an exercise in ungrounded speculation” (Judgment, at §27). For similar reasons, the Judge found that related defences based on collateral warranty and breach of an implied contractual term were “completely hopeless” on a number of counts (Judgment, at §30).
As to the sanctions issues, the Defendants alleged that, despite neither Litasco nor its Russian parent Lukoil being designated by the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2019, nevertheless there was a reasonable prospect of the Defendants proving at trial that the alleged refusal of certain banks in effecting payment to Litasco constituted a force majeure event under the terms of the rescheduling agreement, alternatively that Litasco was in fact subject to sanctions and so (as a matter of contract, alternatively as a matter of law) there was an arguable case that the Defendants’ payment obligations had been suspended, alternatively extinguished.
Mr Justice Foxton rejected these arguments for a variety of reasons. He found that the contractual sanctions defence failed on the grounds that there had been no “Sanctions Change” (as defined) following the entry into the rescheduling agreement. He found that there was no coherent explanation as to how the UK regulations applied to the parties, or to the transaction in question, at all. The Judge further decided that the allegation that Mr Vagit Alekperov, a UK-sanctioned individual who stood down as President of Lukoil shortly after the invasion of Ukraine, controlled Litasco for the UK regulations was “pure speculation” (Judgment, §64).
Further, Mr Justice Foxton addressed the recent decision of the Court of Appeal in Mints v PJSC National Bank Trust & Anr  EWCA Civ 1132 (“Mints”), apropos of an alternative argument advanced in writing that Litasco was controlled by President Putin. In doing so, he noted that the better interpretation of Regulation 7(4) (with which the Chancellor of the High Court dealt, obiter, in Mints) was that “it is concerned with an existing influence of a designated person over a relevant affair of the company […], not a state of affairs which a designated person is in a position to bring about” (Judgment, at §70). Were it otherwise, the Judge, went on, “it would follow that President Putin was arguably in control, for Regulation 7(4) purposes, of companies of whose existence he was wholly ignorant, and whose affairs were conducted on a routine basis without any thought of him” (ibid). These remarks and their associated reasoning will be of considerable interest in other cases where the operation and effect of the UK sanctions regime is in issue. In any case, the Judge found that the 2019 Regulations did not prevent a money judgment being entered in Litasco’s favour even were it found to be sanctioned, per the ratio of the Chancellor’s decision in Mints.
Fred Alliott was instructed by Edward Gray and Benjamin Middleton of MFB Solicitors.