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Chapter 14: Sanctions and Arbitration: The Impact of Sanctions on English Law-Governed
Contracts and English-Seated Arbitrations

Document information
Authors: Tom Cornell
Publication: International Arbitration in England: Perspectives in Times of Change
Publication date: May 2022
Jurisdiction: United Kingdom
Bibliographic Reference: Tom Cornell, 'Chapter 14: Sanctions and Arbitration: The Impact of Sanctions on English Law-Governed
Contracts and English-Seated Arbitrations', in Gregory Roy Fullelove, Laila Hamzi, et al. (eds), International
Arbitration in England: Perspectives in Times of Change, (© Kluwer Law International; Kluwer Law
International 2022), pp. 267 - 286
Copyright: © 2025 Kluwer Law International BV, and/or its subsidiaries, licensors, and contributors. All rights
reserved, including rights for text and data mining, AI training, and similar technologies.

Tom Cornell
(*)

The chapter addresses the substantive and practical issues that may arise in arbitrations as a result of economic sanctions. These
issues are considered from the perspective of parties to arbitral disputes, arbitrators and arbitral institutions. The chapter focuses
primarily on sanctions in force in England and Wales, including the impact of Brexit. However, the chapter also considers the
potential implications, both practical and substantive, of EU and US sanctions on arbitrations seated in England and Wales. The
chapter considers how sanctions may affect the arbitrability of the dispute, as well as the substance and the enforcement of any
award. Although much will depend on the precise content of the sanctions measures themselves, there is nothing in principle to
prevent arbitral tribunals from retaining their neutrality and applying the relevant law, including sanctions law, impartially.

§14.01 INTRODUCTION
Although the arbitral process is often seen as having a quasi-judicial status beyond the ambit of standard commercial services, (1) there is
no denying that the process is, to a large extent, transactional, (2) and therefore potentially susceptible to the impact of sanctions. (3) That is
all the more so given the ever-increasing number of sanctions measures imposed at both the unilateral and multilateral levels, and the
ever-increasing number of international disputes resolved by way of arbitration. The impact of sanctions on arbitration may manifest itself
in many different ways. On a practical level, the ability of arbitrators and arbitral institutions to participate in arbitrations may be affected
by applicable sanctions legislation, thus requiring due diligence in respect of the parties to the arbitration and the application of
restrictive measures to transactions with sanctioned individuals or entities. Sanctions may also affect the arbitrability of the dispute, as
well as the substance itself, and the enforcement of any award.
Naturally, parties are becoming increasingly aware of the potential impact of sanctions on the arbitral process, which is in turn leading
many to reconsider arbitrations seated in jurisdictions associated with the proliferation and enforcement of sanctions measures. England
and Wales is one such jurisdiction. Even after its departure from the European Union (EU), there is nothing at present to suggest that the
United Kingdom (UK) will cease to be an active advocate and implementer of sanctions regimes. That has led to the view in some quarters
that England and Wales, as well as other jurisdictions in Europe, are becoming more risky, or at least more uncertain, from an arbitration
perspective. (4) This chapter aims to test that view by gauging the impact of sanctions on arbitrations seated in England and Wales and a
number of other European jurisdictions. In order to do so, it is important to identify with precision the nature of the sanctions measures in
question, whether they are actually binding (as the lex arbitri) or under the governing law of the underlying contract (the lex causae), and
how exactly they might have an impact on the arbitral process. This chapter therefore considers some of the key ways in which sanctions
may affect arbitrations, particularly arbitrations arising out of English law-governed contracts.

§14.02 OVERVIEW OF SANCTIONS MEASURES

Sanctions are, broadly speaking, economic measures designed to pressurise states and individuals to change their behaviour. Before the
mid-1990s, sanctions would usually take the form of trade embargoes, and these were conventionally applied in respect of particular
countries. (5) Although trade sanctions are still widely used, states and international organisations have, since the mid-1990s, moved towards
the use of more targeted sanctions, also known as ‘smart’ sanctions. (6) Rather than imposing broad trade embargoes on states, these
targeted sanctions impose certain restrictions on so-called designated individuals and entities. This was originally intended to avoid the
inevitable humanitarian impact of bringing economic pressure to bear on whole countries. (7) In order to understand the potential impact of
sanctions on English-seated arbitrations, it is important to understand what sanctions measures are actually in force in England and Wales.

[A] Sanctions in England and Wales after Brexit

Before Brexit, most sanctions measures in force in the UK were designed and decided on at the EU level. In the post-Brexit world, the UK is
technically the master of its own sanctions destiny. In practical terms, that means that sanctions measures decided at the EU level are no
longer applicable and binding in the UK. As of 1 January 2021, the UK develops and implements its own independent sanctions policy. Policy
decisions with respect to sanctions are generally made by the Foreign Commonwealth and Development Office. (8) Legal implementation
then occurs primarily through the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) and secondary legislation implemented
thereunder. Notwithstanding this important shift in the way sanctions measures are legally implemented in the UK, the content and focus of
the sanctions measures themselves, including the individuals and entities targeted by those measures, have remained broadly similar.

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Although the UK has repeatedly stated that it values the power of multilateral sanctions and hopes to remain closely aligned with the EU, (9)
the UK has not committed itself to any such alignment. (10) The failure to reach any sort of formal agreement in this respect may well pave
the way for greater divergence between the UK and EU when it comes to sanctions policy in the future. For now, however, the UK remains
largely in step with EU sanctions policy.
Before 1 January 2021, most sanctions in force in the UK originated in EU sanctions legislation, which was then implemented in the UK. As of 1
January 2021, EU law is no longer applicable in the UK, but the UK government took steps to ensure that the EU sanctions regimes in force as
at that date were carried across into UK law via SAMLA. So, for example, the EU sanctions regimes on Russia were transposed into UK law via
the Russia (Sanctions) (EU Exit) Regulations 2019. (11) These regulations – and many others like them – preserve the financial sanctions that
were previously in force under EU law, and have maintained broadly the same list of designated individuals and entities. The upshot is that
the sanctions that were previously in force in the UK under EU law are now largely in force under UK law. That is not entirely the case,
however, which means that sanctions in force under English law and EU law must be checked separately. (12)
UK sanctions measures can broadly be broken down as follows: (i) financial sanctions; (ii) travel bans; (iii) trade sanctions; and (iv) ‘other’
sanctions measures, including capital market restrictions.

[B] Financial Sanctions

Financial sanctions are a widely used form of targeted sanctions measure. Generally speaking, financial sanctions work by freezing the funds
and economic resources of designated persons. This is usually achieved by imposing a prohibition on dealing with funds belonging to
designated persons. So, for example, a bank holding funds on behalf of a designated person must freeze the designated person’s account
and ensure that the designated person is unable to withdraw or otherwise access those funds. Breach of financial sanctions measures is a
criminal offence in the UK.
If a person is designated pursuant to a UK financial sanctions regime, then the following financial restrictions will generally apply in respect
of them: (i) a prohibition on dealing with funds and assets owned or belonging to them; and (ii) a prohibition on making funds or economic
resources available to them (directly or indirectly). (13) Importantly, these restrictions extend to persons and entities owned and controlled
by designated persons, whose names may not appear on the relevant designated persons list. (14) The prohibitions apply to (and are binding
on): (i) persons and companies located within the UK; (ii) all UK citizens (anywhere in the world); and (iii) all UK-incorporated companies. (15)
Breaching the prohibitions is a criminal offence carrying a maximum sentence of seven years’ imprisonment. (16)
Compliance with financial sanctions is monitored and enforced in the UK by the Office of Financial Sanctions Implementation (OFSI). OFSI
maintains a consolidated list of all the individuals and entities designated under the various separate sanctions regimes in force in the UK.
(17) A designated person will usually also be subject to travel restrictions, including a prohibition on entering or remaining in the UK. (18)

In respect of UK financial sanctions, OFSI maintains a licensing regime that allows persons to apply for a licence to enable the payment, for
example, of: (i) reasonable professional fees for the provision of legal services, or (ii) reasonable expenses associated with the provision of
legal services. (19)
These targeted sanctions measures are the most likely to have an impact on arbitrations seated in England and Wales. That is all the more
so given the recent increase in designated persons following the invasion of Ukraine in February 2022. (20)

[C] Trade Sanctions

In addition to financial sanctions, trade sanctions are still often used to restrict exports and imports to and from particular countries. For
example, the UK currently prohibits the export of certain goods to Syria, including ‘goods relating to crude oil and natural gas’, ‘internal
repression goods’ and ‘goods relating to chemical and biological weapons’. (21) Likewise, the import of ‘arms and related materiel’ and
‘crude oil and petroleum products’ from Syria to the UK is prohibited. (22) As with financial sanctions, there has also been a significant
expansion in UK trade sanctions against Russia following the invasion of Ukraine. (23) Trade sanctions in the UK are administered by the
Department for International Trade, and, more specifically, the Export Control Joint Unit, which is responsible for trade sanctions licensing.

[D] Sectoral Sanctions

Among various other types of sanctions currently in force in England and Wales, it is worth mentioning so-called sectoral sanctions. The EU
first imposed sanctions targeting specific sectors of the Russian economy in 2014, following the annexation of Crimea. (24) These sanctions
included, among other restrictions, a prohibition on dealing with transferable securities and money market instruments issued by certain
Russian entities. (25) The restrictions were intended to prevent targeted Russian banks, companies, and their subsidiaries from accessing EU
primary and secondary capital markets (including access to loans). (26) Post-Brexit, the UK has preserved sectoral sanctions on Russia, albeit
that there are important differences in the scope and content of the UK measures. (27) Following the invasion of Ukraine, the UK’s capital
market restrictions against Russia have been expanded, including to cover all ‘persons connected with Russia’. This means, among other
things, a prohibition on dealing with transferable securities or money-market instruments issued after 1 March 2022 by any Russian entity, or
by persons ordinarily resident in Russia or physically located in Russia. (28)

[E] Sanctions in Other Jurisdictions

Sanctions applicable under English law are not, however, the only sanctions that need to be taken into account when considering the
potential impact of sanctions on English-seated arbitrations. EU sanctions law continues to apply to nationals of EU Member States, as well
as companies incorporated or doing business in the EU. (29) EU sanctions regimes usually contain targeted financial measures, including
asset freezes, which apply in broadly the same way as those now applicable under English law. Moreover, EU sanctions regimes usually
contain what are known as ‘no claims’ clauses. (30) These clauses operate by excluding liability for, and preventing claims against, persons
who have taken steps to comply with EU sanctions regimes, particularly where those steps involve the non-performance of contractual

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obligations with third parties. The potential impact of ‘no claims’ clauses in the context of arbitration is discussed in greater detail below.
US sanctions law may also impact arbitrations seated outside of the US in a number of different ways. US financial sanctions apply in
respect of Specially Designated Nationals (SDNs) on the Specially Designated Nationals and Blocked Persons List (SDN List). SDNs are cut off
from the US financial system, and it is an offence for US persons (31) to deal with SDNs. Moreover, the recent expansion in the US
Government’s use of ‘secondary sanctions’ (32) – that is, US sanctions imposed against non-US persons where there is no connection to the US
– means that the impact of US sanctions on international arbitration is also expanding. US secondary sanctions generally work by targeting
non-US persons who provide assistance to SDNs. The extraterritorial reach of US secondary sanctions appears to be unlimited, and may
therefore impact arbitrations even where they are not seated in the US and do not involve US parties.
As a result of these overlapping sanctions regimes, it is important to address sanctions issues holistically and not just in terms of the
sanctions measures that are binding on the parties or under the lex arbitri, particularly where the arbitration in question involves parties
from different jurisdictions or relates to a contract or transaction with some cross-jurisdictional element. This chapter therefore goes on to
consider the potential impact of both sanctions measures applicable under English law and sanctions measures in force in other
jurisdictions which may nevertheless still have an impact.

§14.03 COMMENCING THE ARBITRATION AND THE PRACTICAL IMPACT OF SANCTIONS MEASURES
The impact of sanctions on the arbitral process may well start long before the tribunal comes to consider the substance of the dispute
between the parties. First, sanctions may impact the willingness and ability of arbitrators, arbitral institutions and legal representatives to
act in the matter. Second, sanctions may impact the constitution of the arbitral tribunal itself.

[A] Practical Issues

It is important to recognise at the outset, as arbitral institutions have been at pains to emphasise, (33) that UK and EU sanctions do not
generally preclude parties from referring their disputes to UK or EU-based arbitral institutions. However, there are a number of reasons why
arbitrators, arbitral institutions and lawyers may be unwilling or unable to participate in an arbitration as a result of sanctions. If, for
example, one of the parties to the arbitration has been designated pursuant to a UK sanctions regime (or is a company owned or controlled
by a designated person), a UK citizen is likely to have serious difficulties acting as an arbitrator in the matter. The same will apply to a UK-
incorporated arbitral institution, such as the London Court of International Arbitration. Although on one view UK financial sanctions do not
technically prohibit the receipt of payments from a designated person, there is a prohibition on dealing with funds owned or belonging to
designated persons, which would, in practice, be highly likely to give rise to numerous sanctions-related issues. For example, HM Treasury
adopted a policy in 2014 whereby any funds received directly or indirectly by a UK person from a designated person outside the EU must be
frozen. (34) A UK bank would therefore have to freeze any payments received from a designated party, and would be unable to transfer those
payments to a UK arbitrator or arbitral institution without a licence from OFSI. (35) Similarly, the travel restrictions that apply to designated
persons would make it impossible for the designated party to enter the UK to attend an ‘in person’ hearing. Similar practical issues would
apply in respect of EU sanctions regimes where the parties planned to appoint an EU arbitrator or arbitral institution to act in the matter.
In short, if one of the parties is a designated person under a UK or EU regime (or is owned or controlled by a UK or EU designated person),
then there are likely to be significant difficulties in appointing UK or EU persons as arbitrators. The same is true in respect of arbitral
institutions subject to UK and EU sanctions, although the parties will usually have agreed to use a particular arbitral institution at the outset
of their contractual relationship. By the time it comes to appointing arbitrators and engaging with the arbitral institution, therefore, it may
be too late to avoid the impact of sanctions. In this scenario, it may even be open to a party seeking to avoid the arbitration to argue that
the arbitration agreement has been frustrated by the supervening imposition of sanctions (see further at §14.05 below). The practical
difficulties relating to financial sanctions can, however, potentially be mitigated by making use of the applicable UK and EU licensing
regimes. Arbitrators, arbitral institutions and legal counsel can apply to OFSI for a licence to enable the payment of legal fees and
‘expenses associated with the provision of legal services’. (36) Likewise, licences are available to authorise the use of a designated person’s
frozen funds or economic resources for the ‘satisfaction of an obligation of that person (whether arising under a contract, other agreement or
otherwise)’. (37)
As discussed above, US sanctions may well impact a UK or EU-seated arbitration, even if none of the parties (or arbitrators etc.) are bound
by those sanctions measures as US persons. For example, if one of the parties to the arbitration is added to the SDN List, non-US persons
involved in the arbitration will have to be very careful not to end up ensnared by the Office of Foreign Assets Control (OFAC)’s broad
approach to the interpretation and enforcement of US sanctions restrictions. (38) The designation of one of the parties as an SDN will also
give rise to significant practical difficulties for the designated party itself. This is exactly what has happened in the arbitration brought by
Nord Stream 2 AG (a Swiss subsidiary of Gazprom) against the EU under the Energy Charter Treaty, albeit that the arbitration is seated in
Canada. (39) On 22 February 2022, following the invasion of Ukraine, Nord Stream 2 AG was designated as an SDN. The claimant notified the
tribunal of its designation, complaining that its bank accounts had been frozen and that it was ‘unable to make any payments or access
finance’. (40) The claimant also informed the tribunal that its external counsel had ceased to represent it and requested a temporary
suspension of the arbitration. The tribunal acceded to that request and vacated the hearing fixed for June-July 2022. (41)
There are two main ways in which OFAC might determine that a non-US person has infringed US sanctions by transacting with a SDN: (i) OFAC
might find that the transaction in question has some US nexus (e.g., the non-US company has paid the SDN in US dollars, thus availing itself
of the US financial system and ‘causing’ a US person to violate applicable sanctions prohibitions); (42) or (ii) OFAC might impose secondary
sanctions on the non-US person for dealing with or providing material assistance to the SDN. (43) By dealing with an SDN, a non-US person
therefore runs the risk of becoming an SDN itself, which could have catastrophic consequences for its business. That risk may well mean that
many if not most arbitrators and arbitral institutions are unwilling to act in an arbitration involving a US-designated SDN.
The risk of dealing with a designated person and breaching sanctions prohibitions means that, before accepting an appointment or
instruction, arbitrators, arbitral institutions and lawyers must conduct some measure of due diligence in relation to the parties to an
arbitration. At the very least, potential arbitrators and lawyers should establish whether the parties involved are themselves designated
individuals under UK, EU or US sanctions regimes. Beyond that, if the parties are from certain high-risk jurisdictions, (44) then arbitrators
should also check whether the parties are owned and controlled by designated persons.
Aside from issues relating to the participation of designated individuals and/or entities, prospective parties and arbitrators should also

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consider whether the subject matter of the dispute gives rise to any practical sanctions issues. For example, if the dispute relates to money
market instruments falling within the scope of UK sectoral sanctions imposed in relation to Russia, there is a risk that, by resolving the
dispute, the arbitrators will inadvertently ‘deal’ with those money market instruments in contravention of applicable sectoral sanctions. The
parties and arbitrators should therefore consider the subject matter of the dispute – in particular whether the dispute relates to the oil,
banking and/or defence sectors in Russia – and whether the final resolution of the dispute could result in any collateral breach of
applicable sanctions measures.

[B] Constitution of the Tribunal

As to the constitution of the tribunal, it has previously been argued that ‘no claims’ clauses in applicable sanctions regimes may prevent a
party from appointing an arbitrator. In the case of Air France v Libyan Arab Airlines, (45) for example, Libyan Arab Airlines commenced arbitral
proceedings alleging that Air France had failed to undertake certain services pursuant to a contract between the two parties. In response to
Libyan Arab Airlines’ request for arbitration under the International Air Transport Association (IATA) Rules, the French airline refused to
appoint an arbitrator, arguing that it was prevented from doing so by UN sanctions measures prohibiting claims commenced by Libyan
persons in relation to contracts affected by those sanctions. (46) Following that refusal, the Director General of the IATA appointed an
arbitrator instead and the arbitral proceedings went ahead, with Air France raising a preliminary objection of non-arbitrability based on the
UN sanctions. The tribunal dismissed that objection and ultimately ruled in favour of Libyan Arab Airlines. Air France subsequently initiated
proceedings in Canada (the seat of the arbitration) challenging the award, and again raised the point that it had been unable to appoint an
arbitrator as a result of the UN sanctions on Libya. However, the Quebec Court of Appeal ruled that the UN Security Council resolution in
question did not actually prohibit Air France from appointing an arbitrator. Moreover, the Court of Appeal held that the relevant procedural
rules permitted the arbitral tribunal to rule on the issue of its own jurisdiction. (47)
Given the wording of the UN resolution in question, it does appear that, in seeking to argue that the resolution prohibited the appointment
of arbitrators, Air France adopted an overly broad interpretation. Moreover, the UN resolution was not technically binding on Air France as a
private company. (48) It is important to note, however, that the wording of the EU Council Regulation implementing UN Security Council
resolution 883 (1993) (the EU Regulation) went further than the originating UN resolution. Article 2 of Regulation (EC) 3275/93 read as follows:
(1)
It shall be prohibited to satisfy or to take any step to satisfy a claim made by;
(a)
a person or body in Libya or acting through a person or body in Libya; […]
(2)
The prohibition referred to in paragraph 1 shall apply within the Community and to any national of a Member State and any body
which is incorporated or constituted under the law of a Member State (emphasis added).
The prohibition on taking any step to satisfy a claim made by a Libyan company was therefore binding on Air France as a French national. On
that basis, it was arguable that appointing an arbitrator, in an arbitration initiated by a Libyan company, would have amounted to taking a
step to satisfy a claim made by that Libyan company. Whether or not that specific point was raised by Air France is a different matter;
however, the question of obligations created by EU implementing legislation only appears to have been dealt with in passing by the Quebec
Court of Appeal. In particular, the Court concluded that it would be ‘illogical to believe that the regulation respecting the embargo prevents
the parties from initiating the arbitration process, if only so that the arbitral tribunal may rule on the applicability of the measures in
question’. (49) It could be argued that the Quebec Court of Appeal’s conclusion failed to fully appreciate the applicability and enforcement
of EU sanctions measures within the EU. EU sanctions measures, such as those under Regulation (EC) 3275/93, create binding obligations on
EU nationals. A breach of those obligations usually gives rise to criminal liability in EU Member States, depending on how exactly the
measures are implemented domestically in each Member State.
It could in turn be argued that a breach of the sanctions measures in question did not fall to be assessed first and foremost by the arbitral
tribunal constituted under the terms of the arbitration agreement. On that view, the assessment of any breach of the sanctions measures –
and corresponding penalties – fell primarily within the remit of the French authorities responsible for the domestic implementation and
enforcement of those sanctions measures. It was therefore arguably not ‘illogical’ of Air France to avoid taking steps, including the
appointment of an arbitrator, which might have amounted to a criminal offence in France.
For practical purposes, this point is no longer as relevant as it was because the wording of existing ‘no claims’ clauses in EU sanctions
legislation appears to be more limited in scope, and does not extend to a prohibition on taking ‘any step to satisfy’ a claim made by a
designated person. (50) On that basis, the argument that an EU national subject to a ‘no claims’ clause would be prohibited from appointing
an arbitrator could be said to carry less weight now than it did for Air France in the context of the arbitration commenced by Libyan Arab
Airlines. Moreover, ‘no claims’ clauses have not been transposed into post-Brexit UK sanctions law. As a result, a UK person subject to UK
sanctions law post-Brexit would be unable, prima facie, to invoke a ‘no claims’ clause to argue that it was prohibited from appointing an
arbitrator (or taking any other step to facilitate arbitration proceedings). In any event, the wording of any ‘no claims’ clauses that are in
force and binding under applicable sanctions legislation at the time of the commencement of arbitration must be carefully considered. It is
also worth bearing in mind that domestic sanctions legislation implementing international sanctions may differ, as was the case in Air
France v Libyan Arab Airlines, where the obligation under the EU Regulation was broader than the obligation under the originating UN
Security Council resolution.

§14.04 JURISDICTION AND THE IMPACT OF SANCTIONS ON THE ARBITRABILITY OF THE DISPUTE
Sanctions measures are generally treated as mandatory provisions of law in the sense that they impose binding obligations as a matter of
public policy on those who fall within their jurisdictional scope. As a result, it is sometimes argued that disputes involving sanctions are
fundamentally incapable of resolution by arbitration, falling within the narrow category of ‘non-arbitrable’ disputes. However, most
jurisdictions have now rejected that approach, and the prevailing view among commentators is that disputes involving sanctions measures
are suitable for arbitration. (51) The sanctions in question may, of course, still create substantive issues for the performance of the contract
that go to the merits of the dispute.

In Fincantieri-Cantieri Navali Italiani SpA v M and Arbitral Tribunal, (52) the Swiss Federal Tribunal rejected the applicant’s argument that the
dispute, which involved issues arising as a result of UN sanctions on Iraq, was inarbitrable because of sanctions issues. In that case, a
number of Italian companies had engaged a Syrian agent (‘M’) to assist in the sale of ships and other military equipment to Iraq. The

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commercial arrangement was impacted by the total prohibition on commercial relationships with Iraq from 1990, as mandated by a number
of UN Security Council resolutions. The International Chamber of Commerce (ICC) tribunal upheld the arbitrability of the dispute,
distinguishing the application of the sanctions regime as a matter of mandatory law going to the merits of the dispute from the question of
arbitrability. (53) On an application by the Italian companies challenging the tribunal’s ruling on jurisdiction, the Swiss Federal Court took a
similar approach, holding that ‘the dispute cannot be denied for the sole reason that the mandatory provisions or some material public
policy render said claim void or make its performance impossible’. (54) The Court went on to hold that the real issue for the tribunal would
be the validity of the underlying contracts, given the imposition of the sanctions measures.
Interestingly, the Genoa Court of Appeal took a different approach in a parallel claim brought by the Italian companies in the Italian courts.
(55) The Italian companies argued that the arbitration clause in the contracts should be declared void as a result of the sanctions measures.
The Genoa Court of Appeal agreed, holding that the clause in question was contrary to UN sanctions measures, and therefore void. In
particular, the Italian court held that the parties could not freely dispose of their rights in accordance with the Italian Code of Civil
Procedure, meaning that the dispute could not be submitted to arbitration as a matter of Italian procedural law. However, when the Italian
companies applied to enforce the Italian judgment in France, the Paris Court of Appeal refused enforcement on the basis that the judgment
had not been rendered by a court of competent jurisdiction. (56)
The Fincantieri cases show that different jurisdictions take different approaches to the question of arbitrability, notwithstanding that
sanctions are not generally considered to be an area of the law that is fundamentally unsuited to arbitration. There are no publicly reported
English cases dealing specifically with the arbitrability of sanctions disputes. However, given that the principle of separability is enshrined
in the Arbitration Act 1996, (57) English courts might resist the argument accepted by the Genoa Court of Appeal in Fincantieri that the
arbitration agreement itself, rather than the underlying contract, was vitiated or frustrated by sanctions measures.

§14.05 SANCTIONS AND THE MERITS OF THE DISPUTE

Sanctions measures may, of course, have an impact on the merits of the dispute. Whether or not sanctions have an impact on the merits,
and the extent of any such impact, will largely depend on the governing law of the contract – the lex causae. If, for example, the contract is
governed by English law, then sanctions applicable under English law may operate to frustrate the contract. The sanctions of third states
may also need to be taken into account, particularly if performance of the contract is likely to take place across multiple jurisdictions.
Lastly, multilateral sanctions, including UN sanctions, may be said to affect the dispute substantively, including under the doctrine of
transnational public policy.

[A] Sanctions under the Lex Causae

If there are sanctions in force under the governing law of the contract, then it makes sense to consider the potential impact of those
sanctions as a matter of priority. If the contract is governed by English law, and one of the parties has been designated pursuant to
sanctions applicable under English law, the other party may be prohibited from performing its side of the contract. To take an obvious
example, if an English bank has agreed to provide funding to a designated individual, the contract would prima facie fall foul of the
prohibition on making funds or economic resources available to designated persons. If the party in question was designated before the
contract was agreed, and the contract is impossible to perform without illegality, then the contract will generally be treated as illegal and
void ab initio under English law. (58) If, on the other hand, the party was designated after the contract was agreed, then the contract may,
depending on the circumstances, be treated as frustrated by supervening illegality.
The doctrine of frustration in English law operates where the nature of a contract is so radically altered by a supervening event that it would
be unjust to hold the parties to their original bargain. (59) The English courts have to date taken a narrow approach to the circumstances in
which a contract will be treated as frustrated due to the imposition of sanctions. In IRISL v Steamship Mutual Underwriting Association
Bermuda Ltd, (60) for example, the defendant argued that a contract for the provision of indemnity insurance to cover oil tankers, governed
by English law, was frustrated by the imposition of sanctions prohibiting commercial relations with IRISL under English law. (61) However, the
Court found that, on the correct interpretation of a licence granted by HM Treasury, the defendant was permitted to continue to provide
insurance under the contract after the imposition of the sanctions. (62) This case, as well as more recent authorities, (63) show that the English
courts have been slow to accept the argument that the implementation of sanctions necessarily constitutes a frustrating event. Much will
depend on the particular circumstances surrounding the imposition of the sanctions, including the existence of exemptions and licences
enabling the parties to continue to perform their obligations under the contract.
Separately, the parties may have included a ‘sanctions clause’ in the contract which provides for termination, or merely suspends
performance, upon the imposition of sanctions. The precise effect of the clause will come down to what it says and how it is interpreted, as
well as the nature and origin of the sanctions in question. In Mamancochet Mining Ltd v Aegis Managing Agency Ltd, (64) there was a contract
for the provision of marine insurance, and the parties agreed that, were it not for the imposition of sanctions, the claimant had a valid
insurance claim in respect of the theft of certain cargoes. The sanctions clause in question stated that the defendant insurers would not be
liable to pay out on a claim to the extent that such payment would ‘expose that (re)insurer to any sanction, prohibition or restriction under
United Nations resolutions or the trade or economic sanctions, laws, or regulations of the European Union, United Kingdom or the United
States of America’. The defendants argued that the imposition of EU and US sanctions meant that there was a risk that any payment under
the policy would be treated as prohibited by the relevant enforcement authorities. However, the Court found that, on a proper construction
of the clause, the payment would not be strictly prohibited until later in the year (when further US sanctions were due to come into effect),
meaning that the defendants could still pay out on the policy without exposing themselves to the sanctions in question. (65) The case shows
that the English courts have taken a strict approach to the interpretation of ‘sanctions clauses’ in English law-governed contracts, which
parties should be mindful of when it comes to arbitral disputes raising similar substantive issues.

[B] The Impact of Non-UK Sanctions

An English law-governed contract may also be affected by non-UK sanctions (namely sanctions, such as EU sanctions, that are not directly
applicable under English law). Here again, the English courts have taken a strict approach. In Libyan Arab Foreign Bank v Bankers Trust, (66)
for example, the Court found that performance of contractual obligations should only be treated as impossible in circumstances where such
performance necessarily involves an act that would be unlawful under non-UK sanctions. In that case, the Court found that certain payments
under the contract in question necessarily involved acts that were unlawful under US sanctions, while other payments did not. Moreover, the

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Court found that the contractual acts that were prohibited under US sanctions should only be treated as suspended, not discharged. Once
again, this case shows that the courts have been slow to hold that obligations under an English law-governed contract have been terminated
by the imposition of sanctions.

More recently, in a case between a borrower and a lender in respect of unpaid interest under an English law-governed loan agreement, (67)
the borrower, a non-US person, argued that US secondary sanctions prevented it from paying the lender, who had been designated as a
‘blocked person’ under US sanctions legislation in respect of ‘the situation in Ukraine’. (68) Although the US secondary sanctions were not
strictly binding on the borrower as a non-US person, they created a risk that the borrower would be prohibited from maintaining a
correspondent bank account in the US, which was crucial for its business. In other words, non-compliance with the US sanctions would have
a potentially ruinous effect on the borrower’s business. (69) On that basis, the borrower argued that the US secondary sanctions constituted a
‘mandatory provision of law’, which meant that it was contractually exempt from paying interest under the sanctions clause in the loan
agreement. Both the first instance judge and the Court of Appeal accepted this interpretation of the US secondary sanctions in question and
the relevant contractual terms, holding that the borrower’s refusal to pay interest was done in order to comply with US secondary sanctions.
(70) Although much in the case turned on the terms of the loan agreement, the courts essentially reached the view that the borrower’s
obligations under the contract were impacted by sanctions imposed by a third state.

§14.06 SANCTIONS POST-ARBITRAL AWARD

The parties to an arbitration agreement are under an implied obligation to abide by and perform any award issued following an arbitration.
(71) Once an award has been issued by the arbitral tribunal, the parties are also free to apply for permission to enforce the award in a
particular jurisdiction. In England and Wales, a signatory to the New York Convention, the enforcement of arbitral awards is governed by the
Arbitration Act 1996, in particular sections 100-103. Pursuant to section 101, a party to an arbitral award may apply for permission to enforce
the award in England and Wales as if it were a judgment of the Court to the same effect. An argument might therefore arise at this stage as to
whether or not the enforcement of the award in question, or part of the award, infringes applicable sanctions prohibitions. Alternatively, the
losing party might challenge the award of its own motion on the basis that it contravenes applicable sanctions prohibitions.

In the case of Ministry of Defence & Support for the Armed Forces of the Islamic Republic of Iran v International Military Services Ltd, (72) the
parties had entered into a contract for the sale and supply of armoured vehicles in the 1970s. Following the Iranian revolution in 1979,
International Military Services Ltd (IMS) – a company owned by the UK government – terminated the contract, and Ministry of Defence &
Support for Armed Forces of the Islamic Republic of Iran (MODSAF) commenced arbitration proceedings for unlawful termination. The
tribunal ultimately issued an award of over GBP 140 million plus interest in MODSAF’s favour in 2001, and MODSAF applied for permission to
enforce the award in England and Wales under section 101 of the Arbitration Act 1996.
It was common ground before the English courts that IMS was precluded from paying any amount owed under the arbitral award as a result
of EU sanctions imposed against Iran in 2008. (73) In particular, MODSAF had been added to the list of designated Iranian entities pursuant to
EU Regulation 423/2007, which came into effect in June 2008. Although IMS was thus unable to satisfy the award, MODSAF argued that there
was nothing to prevent the English courts from entering judgment in its favour for the relevant amount, which should include interest
accrued since the award was issued in 2001, notwithstanding the sanctions imposed in 2008. IMS, on the other hand, argued that, as a result
of the sanctions measures, it could not be held liable for interest accrued on the award from 2008. IMS’ position was essentially that,
because it was unable to satisfy the award after 2008, it should not be penalised for failing to pay after that time. That argument turned on
the ‘no claims’ clause in the sanctions provisions in question, which prohibited any claims ‘in connection with any contract or transaction
the performance of which has been affected, directly or indirectly, in whole or in part, by the measures imposed under this Regulation […]’.
(74)

Ultimately, both the High Court and the Court of Appeal concluded that the ‘no claims’ clause did prevent MODSAF from claiming interest on
the award from 2008. (75) The courts found that the purpose of the legislative provision in question was to protect parties against claims for
contractual non-performance where such performance was impacted by sanctions measures. (76) That applied to non-payment of interest on
the arbitral award because MODSAF’s application to enforce the interest component of the award was held to be ‘in connection’ with the
original contracts for the supply of military equipment. (77) That was the case even though payment of that interest was not, strictly speaking,
an obligation under the original contracts, but arose separately out of the arbitral award issued in 2001. The Court of Appeal nevertheless
took the view that, although MODSAF’s claim in respect of termination was valid, that was not the case in respect of its claim for the interest
payable under the arbitral award, which had to be treated separately. (78)
Another recent case in which an arbitral award was challenged in the courts on the basis of sanctions targeting Iran, albeit in the French
courts, is Sofregaz v Natural Gas Storage Company. (79) In that case, Sofregaz had entered into a contract with Natural Gas Storage Company
(NGSC), an Iranian company, for the storage of gas in Iran. Problems arose in 2008 when Sofregaz found itself unable to secure an extension
of bank guarantees for subsequent phases of the project. (80) NGSC terminated the contract, citing a failure by Sofregaz to progress the
project, and Sofregaz issued a request for arbitration, seeking a declaration of unlawful termination by NGSC. An ICC tribunal seated in Paris
issued an award in 2018, largely in favour of NGSC. Sofregaz then applied to set aside the award in the French courts on the basis that it
infringed international public policy under the French Code of Civil Procedure. (81) In particular, Sofregaz argued that a number of relevant
sanctions measures formed part of international public policy and should be treated as binding under French law (being the law of the seat
of the arbitration).
The Court confirmed that the award should be set aside if its enforcement infringed the French understanding of international public policy.
(82) It went on to hold, however, that while UN and EU sanctions did form part of international public policy, US sanctions did not. (83) In
respect of the latter, the Court referred to the French government’s criticism of the extraterritorial effect of US secondary sanctions on Iran,
and held that US sanctions could not found a set-aside application in the French courts. (84) The Court then considered whether the award
contravened UN or EU sanctions, reaching the view that it did not because the contract underlying the award did not infringe the particular
sanctions measures in question. (85)
Taking a step back, it is clear that arbitral tribunals have usually dealt with issues regarding the substantive impact of sanctions on a
contract as a merits issue. In the Sofregaz case, it is notable that, as NGSC pointed out to the French court, Sofregaz did not raise the
sanctions issues before the arbitral tribunal. That may have been because the only sanctions that substantively impacted the performance
of the contract were US extraterritorial sanctions, which were not binding as a matter of Iranian law (the lex causae) or French law (the lex
arbitri). Had those US sanctions been raised during the arbitration, the tribunal may have taken the view that they did not necessarily
prevent the performance of the contract, and that Sofregaz should have been able to perform its obligations under the contract

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notwithstanding the imposition of US sanctions. (86) In the event, Sofregaz waited until after the award had been issued to argue that all the
sanctions measures (namely UN, EU and US) formed part of international public policy, and that the tribunal had failed to take them into
account in issuing the award. The French court’s rejection of that argument shows that sanctions should not be assessed on an aggregated
basis, or in the abstract. The question of whether sanctions are engaged under a particular contract or in relation to a particular dispute
must therefore be assessed on a case-by-case basis. Much will depend on the specific sanctions in force under the lex causae or the lex
arbitri.

§14.07 CONCLUSION
Despite the proliferation of sanctions in recent years, including UK sanctions, sanctions measures will not necessarily prevent parties from
referring their disputes to arbitrations seated in England and Wales, or in EU Member States. Although there may be practical issues
involved in setting up the arbitration, these will only really arise at present if one of the parties to the arbitration is itself a designated
person under UK, EU or US sanctions law.
If sanctions impact the arbitration at all, they are most likely to impact the substance of the dispute. If this is the case, however, the parties
are likely to be well aware of the impact of sanctions on the relevant contract before the decision is made to refer the dispute to
arbitration. Moreover, these substantive issues would arise regardless of the particular forum the parties chose to resolve the dispute. In
this sense, it could be argued that there is nothing about the arbitral process itself that is rendered unsuitable by the fact that the
underlying dispute involves an assessment of the impact of sanctions measures on the contract. Put differently, arbitral tribunals should in
theory be capable of retaining their neutrality and applying the relevant law, including sanctions law, impartially. Given that the English
courts appear to have taken a pragmatic and neutral approach to sanctions issues in litigation to date, there is no reason why arbitral
panels should not be able to do the same.
Notwithstanding the above, there is still a pervading sense of uncertainty when it comes to sanctions and arbitration. That is in large part
due to the unpredictable nature of sanctions themselves, with new designations being made from month to month without warning. It is also
probably due to the lack of guidance for practitioners and arbitrators operating in the area. While sanctions may pose a risk for arbitrations,
most UK and EU sanctions do not apply in a blanket fashion in respect of particular jurisdictions. As a result, any sanctions risk can be
mitigated with a better understanding of how sanctions work and the specific issues they raise. It is therefore incumbent on arbitral
institutions and professional bodies to provide comprehensive guidance for navigating sanctions issues – both practical and substantive –
in the arbitration context.
References
*)
The views expressed in this chapter are the author’s own.
1)
See, e.g., Chartered Institute of Arbitrators v B, C and D [2019] EWHC 460 (Comm) (per Moulder J), at [48]: ‘Arbitration is a quasi-judicial process
for the resolution of disputes and in my view the interests of justice lie in supporting the integrity of this alternative dispute resolution
mechanism.’
2)
The arbitration agreement between the parties is obviously a contract, and there is a separate contract between the parties and the
arbitrator or arbitrators. See, for example, Jivraj v Hashwani [2011] UKSC 40, at [23]: ‘It is common ground, at any rate in this class of case, that
there is a contract between the parties and the arbitrator or arbitrators appointed under a contract and that his or their services are
rendered pursuant to that contract […].’
3)
For the purpose of this chapter, I will take ‘sanctions’ to mean non-forcible foreign policy measures adopted by states or international
organisations and designed, possibly among other things, to influence other states or non-state entities to change their behaviour or take a
particular course of action: see Richard Gordon QC, Michael Smyth QC (Hon) Smyth and Tom Cornell, Sanctions Law (1st ed., Hart 2019), ¶ 0.4.
4)
See, e.g., K. Kroll, Impact of Sanctions on International Arbitration Involving Russian Parties: New Developments, Practical Law Arbitration Blog
(23 June 2020); IBA Arb 40 Subcommittee, The Current State and Future of International Arbitration: Regional Perspectives (August 2015), 27-28:
‘It was particularly highlighted that the impact of sanctions was driving Russian parties to seek new venues for the resolution of their
disputes away from the region.’
5)
See, e.g., the US trade embargo on Cuba (under the Foreign Assistance Act 1961 and related legislation) and the UN trade embargo on Iraq
(under UN Security Council resolution 661(1990) and other resolutions).
6)
R. Gordon, M. Smyth and T. Cornell, Sanctions Law (1st ed., Hart 2019) ¶¶ 0.6 and 1.67-1.70; L. van den Herik, The Individualization and
Formalization of UN Sanctions in L. van de Herik (ed.), Research Handbook on UN Sanctions and International Law (Edward Elgar Publishing
2017).
7)
Gordon, Smyth and Cornell, supra n. 6.
8)
Emil Dall, UK Sanctions Policy: A Progress Report (Royal United Services Institute 18 February 2021).
9)
See, e.g., the UK government’s response to the EU External Affairs Sub-Committee of the European Union Committee’s report entitled Post-
Brexit Sanctions, dated 8 February 2018: ‘The Government believes that the UK and EU will continue to share common threats, interests and
values in a way that will lend itself to close cooperation, including on sanctions. […] we will continue to work closely with European and
other international partners in designing and implementing sanctions regimes which support and protect our mutual interests. We envisage
a model of UK/EU sanctions cooperation based on two-way exchanges of analysis and information, reflecting the starting point of close
alignment and the strength of UK expertise in areas such as gathering the evidence needed to comply with high legal standards for
sanctions.’
10)
The Trade & Cooperation Agreement between the UK and the EU dated 25 December 2020 does not cover sanctions or other aspects of
foreign policy. The EU Commission press release of 24 December 2020 stated as follows: ‘As of 1 January 2021, there will therefore be no
framework in place between the UK and the EU to develop and coordinate joint responses to foreign policy challenges, for instance, the
imposition of sanctions on third-country nationals or economies.’

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11)
The Russia (Sanctions) (EU Exit) Regulations 2019 were imposed pursuant to s. 1 of SAMLA (‘Power to make sanctions regulations’).
12)
Office of Financial Sanctions Implementation (OFSI) has stated that ‘[w]hile these regulations are intended to deliver substantially the same
policy effects as the existing regimes, you should not assume that they are identical’ (see OFSI note, Get Ready for the End of the Transition
Period, dated 1 December 2020). One important change is the approach taken to entities owned or controlled by designated persons. The EU
applies a rebuttable presumption in respect of any funds or economic resources made available to an entity owned or controlled by a
designated person (i.e., EU law assumes that this will be a breach of applicable sanctions restrictions unless it can be shown otherwise),
while there is no scope for leniency under the new UK regulations – restrictions apply automatically to entities owned or controlled by
designated persons.
13)
OFSI, General Guidance for Financial Sanctions under the Sanctions and Anti-Money Laundering Act 2018, Part 3 (Financial Sanctions
Restrictions); see, e.g., the Russia (Sanctions) (EU Exit) Regulations 2019, Part 3, Ch. 1.
14)
Ibid., ¶ 4.1 (Ownership and control); see, e.g., the Russia (Sanctions) (EU Exit) Regulations 2019, regulation 7.
15)
Ibid., ¶ 1.4 (Who needs to comply with financial sanctions).
16)
See, e.g., the Russia (Sanctions) (EU Exit) Regulations 2019 (Part 9).
17)
See OFSI, Consolidated List of Financial Sanctions Targets in the UK, available at: https://www.gov.uk/government/publications/financial-
sanctions-consolidated-list-of-targets/consolidated-list-of-targets.
18)
See, e.g., supra n. 16 (Part 4).
19)
OFSI, Licences That Allow Activity Prohibited by Financial Sanctions, available at: https://www.gov.uk/guidance/licences-that-allow-activity-
prohibited-by-financial-sanctions; see, e.g., supra n. 16, Sch. 5.
20)
The UK imposed asset freezes on 807 individuals and 50 entities between 22 February 2022 and 12 April 2022, including Vladimir Putin,
Sergei Lavrov and Roman Abramovich.
21)
The Syria (Sanctions) (EU Exit) Regulations 2019, 28 and 29.
22)
Ibid., 36.
23)
For example, on 15 March 2022, the UK government announced a ban on the export of certain luxury goods to Russia. On 14 April 2022, the UK
introduced the Russia (Sanctions) (EU Exit) (Amendment) (No. 8) Regulations 2022, which prohibit the export of ‘luxury goods’ – including
caviar, truffles, wines and spirits – to, or for use in, Russia.
24)
The EU sectoral sanctions target the Russian oil, banking and gas sectors; see EU Council Regulation No. 833/2014.
25)
EU Council Regulation No. 833/2014, Art. 5.
26)
EU Commission, Guidance Note on the Implementation of Certain Provisions of Regulation (EU) No 833/2014 (25 August 2017): ‘On 31 July 2014
the European Union adopted a package of restrictive measures targeting sectorial cooperation and exchanges with the Russian Federation. The
package consist [sic] of measures aimed at limiting access to EU capital markets for Russian State-owned financial institutions […].’
27)
OFSI, Russia Guidance: Guidance for the Financial and Investment Restrictions in Russia (Sanctions) (EU Exit) Regulations 2019 (June 2020) 2-3;
The Russia (Sanctions) (EU Exit) Regulations 2019, Part 3, Chapter 2: ‘Other Financial and Investment Restrictions’.
28)
The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022.
29)
See, e.g., EU Regulation 267/2012 (Iran), Art. 49; EU Regulation 269/2014 (Russia), Art. 17.
30)
See, e.g., EU Regulation 269/2014 (Russia), Arts 10 and 11; EU Regulation 267/2012 (Iran), Arts 38 and 42.
31)
See https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-
readable-lists.
32)
The use of US secondary sanctions has increased dramatically over the last decade, starting with those under the Comprehensive Iran
Sanctions, Accountability, and Divestment Act 2010. The Trump Administration then expanded the use of secondary sanctions to cover North
Korea, Russia, Venezuela, Syria, and Hong Kong, as well as terrorism.
33)
See, e.g., the joint statement published by the ICC International Court of Arbitration, London Court of International Arbitration (LCIA) and
Arbitration Institute of the Stockholm Chamber of Commerce (SCC), The Potential Impact of the EU Sanctions Against Russia on International
Arbitration Administered by EU-Based Institutions (17 June 2015).
34)
Although that policy was adopted pursuant to changes in EU law, there is nothing at present to suggest that OFSI will abandon the policy
now that the UK has left the EU.
35)
Licences are available from OFSI in respect of a range of activities: see, supra n. 19 and https://ofsi.blog.gov.uk/2021/04/19/introduction-to-
licensing/.
36)
See, e.g., The Libya (Sanctions) (EU Exit) Regulations 2020, Sch. 4.

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37)
Ibid.
38)
Equally, EU and UK persons should be mindful that, in seeking to avoid the consequences of US sanctions, they do not inadvertently fall foul
of the EU Blocking Regulation (EU Regulation 2271/96) or its retained equivalent (The Protecting against the Effects of the Extraterritorial
Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2020). The Blocking Regulation prohibits compliance with
certain US sanctions measures, including in respect of Iran.
39)
PCA Case No. 2020-07: Nord Stream 2 AG (Switzerland) v The European Union.
40)
PCA Case No. 2020-07, Procedural Order No. 7.
41)
Ibid., paras 6-7.
42)
See, e.g., 50 USC §1705(a): ‘It shall be unlawful for a person to […] cause a violation of any […] prohibition issued under this chapter.’
43)
Under Executive Order 13902, for example, OFAC may sanction non-US individuals and entities if they knowingly engage in a ‘significant’
transaction for the sale or supply to or from Iran of ‘significant’ goods or services ‘used in connection with’ the Iranian construction, mining,
manufacturing, or textiles sectors.
44)
High-risk jurisdictions for the purpose of UK, EU and US sanctions include, among others, Iran, Russia, Syria, North Korea, Libya, Myanmar,
Cuba and Venezuela.
45)
Air France v Libyan Arab Airlines, Quebec Court of Appeal (31 March 2003).
46)
Security Council resolution 883 (1993), Art. 8 (implemented in Canada pursuant to the United Nations Libya Regulations, Art. 14): ‘no claim
shall lie at the instance of […] any Libyan national, or of any Libyan undertaking […] in connection with any contract or other transaction or
commercial operation where its performance was affected by reason of the measures imposed by or pursuant to this resolution or related
resolutions […]’ (emphasis added); Ibid., ¶ 15.
47)
Supra n. 45, ¶ 48.
48)
Under international law, UN Security Council resolutions are treated as binding on UN Member States, not persons within those Member
States; see Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) Notwithstanding Security
Council Resolution 276 [1971] ICJ Rep 16, 50, ¶ 116.
49)
Supra n. 45, ¶ 47.
50)
See, e.g., Council Regulation (EU) 2016/44 (‘concerning restrictive measures in view of the situation in Libya […]’), Art. 17: ‘No claims in
connection with any contract or transaction the performance of which has been affected […] shall be satisfied, if they are made by: […]’
(emphasis added).
51)
See, e.g., E. De Brabandere and D. Holloway, Sanctions and International Arbitration in L. van de Herik (ed.), supra n. 6; E. Geisinger, P. Bartsch,
J. Raneda and S. Ebere, Les conséquences des sanctions économiques sur les obligations contractuelles et l’arbitrage, International Business
Law Journal 405 (2012).
52)
Fincantieri-Cantieri Navali Italiani SpA and Oto Melara S.p.A. v M and Arbitral Tribunal, Swiss Federal Tribunal, 23 June 1992, ATF 118 II 353,
1993(1) ASA Bull. 58, XX Y.B. Com. Arb 766 (1995).
53)
Fincantieri Cantieri Navali Italiani SpA and OTO Melara Spa v ATF (25 November 1991) ICC Award Nr 6719 (Interim Award) Journal du droit
international (1994) 1074.
54)
Supra n. 52.
55)
Fincantieri-Cantieri Navali Italiani SpA v Iraq (1994) Riv. Dell’arb 4 (1994) (Genoa Court of Appeal, Italy) 505.
56)
Legal Department of the Ministry of Justice of the Republic of Iraq v Fincantieri-Cantieri Navali Italiani (15 June 2006) Rev Arb (2007) (Paris Court
of Appeal, France) 87.
57)
Arbitration Act 1996, s. 7.
58)
See, e.g., David Taylor & Son v Barnett Trading Co [1953] 1 WLR 562.
59)
See, e.g., National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; Lauritzen AS v Wijsmuller BV [1990] 1 Lloyd’s Rep 1.
60)
Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association (Bermuda) Ltd [2010] EWHC 2661 (Comm), [2011] 2 All ER
(Comm) 609.
61)
The defendant terminated the insurance contract on 30 October 2009, after certain sanctions prohibiting business transactions with the
claimant came into effect on 12 October 2009 (the relevant sanctions prohibition was contained in the Financial Restrictions (Iran) Order
2009, which was implemented under the Counter-Terrorism Act 2008).
62)
[2010] EWHC 2661 (Comm), supra n. 60, [114]-[115].
63)

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Melli Bank plc v Holbud Ltd [2013] EWHC 1506 (Comm); DVB Banks SE v Shere Shipping Co Ltd [2013] EWHC 2321 (Comm).
64)
Mamancochet Mining Ltd v Aegis Managing Agency Ltd [2018] EWHC 2643.
65)
Ibid., [83].
66)
Libyan Arab Foreign Bank v Bankers Trust [1989] QC 728.
67)
Lamesa Investments Ltd v Cynergy Bank Ltd [2020] EWCA Civ 821.
68)
Executive Order 13662; see OFAC Sanctions Brochure, Sanctions Against Persons Contributing to the Situation in Ukraine and Prohibiting
Certain Transactions with Respect to the Crimea Region of Ukraine (OFAC 16 June 2016).
69)
Supra n. 67, [10].
70)
Lamesa Investments Ltd v Cynergy Bank Ltd [2019] EWHC 1877 (Comm), [24]-[28]; supra n. 67, [45].
71)
Bremer Oeltransport GmbH v Drewry [1933] 1 KB 753; F. J. Bloemen Pty Ltd v Council of the City of Gold Coast [1973] AC 115 at 126C-F; The
Bumbesti [2000] QB 559, [9]-[12]; Associated Electric & Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] UKPC 11, [9]; Gater
Assets Ltd v Nak Naftogaz Ukrainiy (No. 3) [2008] EWHC 1108 (Comm), [23]; National Ability SA v Tinna Oil & Chemicals Ltd [2009] EWCA Civ 1330.
72)
MODSAF v IMS [2019] EWHC 1994 (Comm); MODSAF v IMS [2020] EWCA Civ 145.
73)
EU Regulation 423/2007.
74)
EU Regulation 267/2012, Art. 38.
75)
MODSAF v IMS [2019] EWHC 1994 (Comm), [70]; MODSAF v IMS [2020] EWCA Civ 145, [61].
76)
MODSAF v IMS [2020] EWCA Civ 145, [40].
77)
MODSAF v IMS [2019] EWHC 1994 (Comm), [51]; MODSAF v IMS [2020] EWCA Civ 145, [57].
78)
MODSAF v IMS [2020] EWCA Civ 145, [47]-[48].
79)
Sofregaz v Natural Gas Storage Company, Paris Court of Appeal (Chamber 5-16) (3 June 2020) No 19-07261.
80)
The bank in question – the Bank of Industry and Mine – refused to extend the bank guarantees (denominated in US dollars) for the execution
of the two secondary phases of the contract. In June 2008, Sofregaz proposed to terminate the contract by mutual agreement and replace it
with a new contract, denominated in euros, with no obligation to provide a bank guarantee.
81)
French Code of Civil Procedure, Art. 1520.
82)
Supra n. 79, ¶ 47.
83)
Ibid., ¶ 68.
84)
Ibid., ¶¶ 64-68.
85)
Ibid., ¶¶ 80, 84 and 94.
86)
That was broadly the approach taken by the English court in Libyan Arab Foreign Bank v Bankers Trust [1989] QC 728.

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