A British Virgin Islands law firm has been prevented from coming off the record as counsel to a sanctioned Russian bank and the bank's receivers could not be discharged without a license.

Background 

Russian bank, VTB, sought to enforce a US$30 million judgment debt against a Ukrainian businessman and politician which was obtained prior to the invasion of Ukraine.

VTB had been sanctioned by the UK and its BVI legal advisors applied to come off the record on grounds that acting for VTB would damage its reputation and likely be in breach of UK sanctions legislation (which applies in the BVI).

The BVI receivers, appointed to enforce the debt over a local entity, questioned whether the receivership order and any steps taken under it required a licence under the sanctions legislation and whether it could be discharged.

Decision

• The legal advisors must continue to represent VTB including advising them and advocating on their behalf. Their duties as officers of the court outweighed the issue of reputational damage. 
• The legal advisors could obtain a licence under the sanctions legislation from the BVI Governor (including for payment of their fees). 
• The receivership could not be discharged without a licence being obtained, because it was a “financial benefit” to VTB within the sanctions legislation. 
• The receivers required a license to take steps under the receivership and until then, were permitted to take no further action.

Key takeaways

Office-holders and professional advisors should note the judge's observations that the sanctions regime is exclusively aimed at freezing the assets of sanctioned entities and individuals, but their access to the courts and the right to litigate has not been curtailed.

Leave to appeal to the Court of Appeal was granted.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.