Can a sanctions licence be used to change how a sanctioned creditor is treated in a UK insolvency? On 30 October 2026, in PJSC VTB Bank v HM Treasury [2026] EWCA Civ 1373, the Court of Appeal (Sir Geoffrey Vos MR, Bean LJ and Zacaroli LJ, giving a judgment of the court) dismissed VTB Bank’s appeal against the Office of Financial Sanctions Implementation’s January 2025 amendment to a general licence. The court upheld the amendment, emphasising its permissive effect: it decriminalises conduct, but it does not determine the Bank’s rights in the insolvency, which remain for the Insolvency Court (paras 15, 17).
What the case was about
The Bank, Russia’s second largest bank and majority owned by the Russian Government, was designated under the UK’s Russia sanctions regulations on 24 February 2022 (para 2). Its UK subsidiary, VTB Capital plc, went into administration in December 2022 (para 3). The Bank’s proof of debt exceeded £205 million, while many of the subsidiary’s assets, estimated at some £180 million, were in Russia and practically unrecoverable; the Bank had also taken enforcement action against assets in Russia (paras 4, 31).
The administrators’ proposed scheme of arrangement failed when the Bank voted against it in September 2024 (paras 6, 35). They asked OFSI for a “sanctions solution” (paras 36–37). On 8 January 2025 OFSI added a new paragraph [5.3A] to the licence: no funds or economic resources were to be made available to the Bank, “including the making of any provision” for later payment, without first deducting the value of assets it had enforced against and certain intra-group receivables, converted to sterling at 6 December 2022 rates, and without statutory interest for the related periods (paras 8, 40). A revised scheme then secured the required creditor majority after the Bank’s voting claim was reduced, but it has not yet been sanctioned by the court (paras 41, 44). Collins Rice J dismissed the Bank’s challenge under section 38 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) on 19 December 2025 (para 9).
What the Court of Appeal decided
The court gave “two conclusive answers” to the Bank’s case: the amendment is permissive, and the wide purposes of SAMLA and the Russia regulations allowed OFSI to relax the asset freeze in this limited way (para 17). The amendment authorises, and so decriminalises, conduct otherwise prohibited by the regulations, but it does not override insolvency law or any other legal impediment (para 140). Making provision in the administration for a sum that might be owed to the Bank would not be making funds available to it, so the words in [5.3A] purporting to prohibit provision without the deductions “can have no legal effect”, save perhaps to suggest a direction of travel (para 140). The amendment does not extinguish or materially alter the Bank’s rights in the insolvency (para 141).
Each ground then failed. Acting to make the sanctions effective was a valid purpose, even if in one sense OFSI acted to prejudice the Bank’s economic interests (paras 144–145). The amendment neither imposes the historic exchange rates nor prohibits provision for the Bank’s claims, so the irrationality ground failed (para 146). It does not predetermine the Bank’s rights, so there was no breach of Article 6 (para 147). Procedural fairness did not require prior consultation with the Bank, because the amendment was purely permissive and consulting all affected creditors would have been wholly impracticable (para 148).
But the court was clear that OFSI cannot, by licence, dictate how the administrators or the Insolvency Court resolve disputed issues of insolvency law (para 149), and acknowledged that the amendment had not achieved the “sanctions solution” the administrators wanted (para 152). Without reaching a concluded view, it saw force in an insolvency route, for example through the hotchpot rule or provision made from the Russian assets and receivables, and noted a further licence amendment might be needed (paras 155, 157–158). It added that if an insolvency solution values the Russian assets at an earlier date, before the fall in the rouble, the Bank cannot complain of prejudice caused by the delay (para 159).
Why it matters
- Licences permit; they do not adjudicate. A licence removes the sanctions consequences of permitted acts but cannot itself reallocate a designated person’s insolvency rights (paras 140, 143).
- Challenge the right decision. The court called it unfortunate that the challenge targeted the licence when any effect on the Bank’s rights would come from Insolvency Court orders (para 151).
- Sanctions are meant to hurt. The court cited the Supreme Court’s statement in Shvidler that designation has to hurt those subject to it (para 17).
- No prior consultation required on these facts. The amendment decided nothing finally against the Bank, and consulting all affected creditors would have been impracticable (para 148).
- In our view, the practical contest now moves to the Insolvency Court, where the administrators’ application to make distributions in line with the amendment remained pending at the date of judgment, and where the Court of Appeal’s provisional observations about a possible insolvency solution are likely to be tested (paras 42, 44, 151, 153, 155, 157–158).
Free to search across 25 official UK databases — no account needed. Explore the authorities behind this case:
Read the full judgment: PJSC VTB Bank v HM Treasury [2026] EWCA Civ 1373 (The National Archives).