Celestial Aviation Services Ltd. v. Unicredit Bank, London Branch [2023 EWHC 1071]

Subsequent History:

As mentioned in the previous summary, in footnotes 8 and 12, a subsequent hearing was held to determine an ancillary issue regarding whether Confirming Bank believed that a different provision of UK sanctions law prohibited payment, and whether that belief was reasonable. Relatedly, what, if any, interest and costs did Confirming Bank owe on the principal amounts under the standbys that Beneficiaries were without from the time of the demands. (“Consequentials Hearing”). In the 5 May 2023 Judgment, Hancock, J., entered judgment in favour of Beneficiaries.

To make a determination regarding a necessarily subjective question, the Judge heard from three Confirming Bank witnesses. The witnesses noted the “low appetite for sanctions risks” held by Confirming Bank and that the bank was “concerned that payment under the Letters of Credit would contravene the provisions of Regulation 28.” The pursuit of relevant licences was also taken into account, although Beneficiaries again stressed that the applications sought to allow for payment from Issuer to then forward to Beneficiaries. It was suggested that Confirming Bank:

had either failed to appreciate, or as they contended, sought to obfuscate, the difference between receiving money from [Issuer] with which to satisfy [Issuer]’s obligations to the beneficiaries, on the one hand, and satisfying [Confirming Bank]’s own, separate obligations, owed to the beneficiaries, which they could do from their own funds. [para.10].