Oil Trader Can’t Point to Sanctions as Reason for Not Paying Russian Company, UK Court Says

The U.K. High Court in a decision released Nov. 15 said Senegalese oil trading company Der Mond Oil and Gas couldn't rely on sanctions as a reason for not paying Russian company Litasco SA for money due under an oil sale contract.

The contract in dispute was signed in April 2021 and said Litasco, which hasn't been sanctioned, would sell Der Mond 950,000 barrels of Nigerian crude oil. The oil was delivered and Der Mond made partial payments in November 2021 and January 2022. The court rejected a host of claims from Der Mond, which said that the contract's sanction provisions eliminated the need for further payments.

One clause included a "mutual acknowledgment" that performance "shall be in compliance" with various sanctions regimes, including the U.K.'s restrictions. The clause said the contract did not and will not violate any sanctions "as at the Effective Date" of Nov. 7, 2022. The court said that since no sanctions changes occurred after this date, which would allow for the suspension of performance, the contractual sanctions defense fails.

The court also noted that Der Mond failed to show Litasco was owned or controlled by sanctioned oligarch "Mr Alekperov," which could have subjected the company to blocking sanctions. The court also pointed to a recent consequential decision by a British appellate court that suggested all Russian companies could be found to be controlled by Russian President Vladimir Putin and could thus be sanctioned (see 2310160019). Here, there was no reasonable case to be made that Putin controls Litasco, the judge said.

Ownership and control relates to an "existing influence of a designated person over a relevant affairs of the company" and "not a state of affair which a designated person is in a position to bring about," the opinion said. "Were matters otherwise, it would follow that President Putin was arguably in control" of the company, "of whose existence he was wholly ignorant, and whose affairs were conducted on a routine basis without any thought of him." As a result, there is "no arguable case" that Putin controls Litasco.