Banking Litigation Podcast EP59: Monthly Update – March/April 2026

OK, well, to kick things off in the most interesting way possible, I could only begin with the Supreme Court's seminal decision on the UK's Russian sanctions regime.

I am, of course, talking about none other than Unicredit and Celestial Aviation.

And that's right.

So this decision is of crucial importance to banks and other financial services firms.

Indeed, and the high-level snapshot is that the Supreme Court held that the Unicredit Bank was prohibited from making payments under various letters of credit issued in connection with the supply of Russian aircraft to Russian airlines.

So do you mind explaining the background of the case and how it came before the Supreme Court, John?

Of course I don't mind, Kerry, but thank you for checking.

So, casting our minds back, between 2017 and 2020, Spare Bank issued a series of English law-governed letters of credit in favour of two aircraft letters as security for leases to Russian airlines.

Now, following Russia's invasion of the Ukraine, the leases were terminated in March 2022, and the lessors made conforming demands under the letters of credit for liabilities arising on default and termination.

Now, Unicredit refused to pay, and its position was that payment was prohibited in the UK and potentially the United States because of the sanctions.

The lexers then brought to proceedings in England, and although Unicredit later obtained the licences and paid the principal sums, the question of interests and costs remained in dispute.

So how did the lower courts approach these issues?

Well, the High Court held that sanctions did not suspend or excuse Unicredit's payment obligations.

So you may recall the rather controversial bags of cash argument, I think, for a previous podcast where we worked out 70 suitcases would be required to carry the cash.

But effectively, the High Court essentially suggested that any impediment to payment presented by the US sanctions regime could be avoided by paying in cash rather than through a US correspondent bank.

Yes, controversial is definitely the word.

Yes, and the Court of Appeal partially overturned that decision, holding the payment was prohibited by Regulation 28.3 of the Russia Sanctions EU Exit Regulations 2019.

Knacky title.

Well, indeed.

Now, that regulation prohibits the provision of financial services or funds in relation to the supply of certain restricted goods, in this case aircraft.

But the Court of Appeal found that if payment had not been prohibited, statutory interests and costs themselves were not protected by Section 44 of SAMLA, that's the Sanctions and Anti-Money Laundering Act 2018.

So both parties appealed to the Supreme Court.

Thanks for the background, John.

Did the Supreme Court find that Unicredit was successful on both issues under appeal?

Yes, it did.