The recent High Court decision in Re Petropavlovsk Plc [2022] EWHC 2097 (Ch) considers the interaction of UK insolvency procedure and the sanctions regime imposed on Russia. 

Background 

Administrators were appointed to the English holding company of Russian gold mining group, Petropavlovsk Plc, in July 2022. The holding company was not sanctioned but sanctions had affected its ability to refinance and to pay its debts as they fell due.

The administrators decided that it was in the interests of stakeholders to sell the company's assets to a non-sanctioned Russian company. However, certain stakeholders were potentially subject to sanctions and some shareholders opposed the sale. An application for an OFSI license would cause delay and risk the sale. The administrators sought directions from the court and a declaration that the sale would not breach the sanctions regime.

Decision 

The judge held that the proposed sale was in the best interests of all stakeholders and granted an order allowing the administrators to enter into the sale.

The judge said that there was 'little practical risk' that the administrators would breach the sanctions regulations but it was not appropriate for the court to make such a declaration. OFSI was not represented and the judge had not heard argument as to any potential breach of the sanctions regulations. Such a declaration was also not necessary to give the administrators the direction sought.

Key takeaways 

The court will take a pragmatic approach to administrators' requests for directions where the risk of a breach of sanctions is low and the administrators have minimised it as far as possible.

Find out more 

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