LLC Eurochem North-West-2 v Société Générale S.A.

Hearing dates: 11, 12, 13, 16, 17, 18, 19, 23, 25 June, 1, 2, 3 July 2025

Approved Judgment

This judgment was handed down remotely at 10:30am on 31/07/25 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Contents

PART A: INTRODUCTION AND PARTIES [1]–[22]

I: Overall introduction [1]–[10]

This judgment is concerned with six on-demand bonds (“the Bonds”), each governed by English law, issued by the First to Third Defendants (“SocGen”) and the Fourth to Fifth Defendants (“ING”) (together “the Banks”), in favour of the First Claimant (“EuroChem NW2”) as beneficiary.

The total value of the Bonds was over €280 million. They were issued on various dates in 2020 and 2021, in connection with the construction for EuroChem NW2 of a major fertiliser plant in Kingisepp, Russia.

On 24 February 2022, Russia invaded Ukraine. On 9 March 2022, the EU imposed sanctions on the founder of the EuroChem Group, Mr Andrey Melnichenko. On 3 June 2022, the EU imposed sanctions on his wife, Mrs Aleksandra Melnichenko. The EU sanctions include, in particular, designation by being listed under Annex I to Council Regulation (EU) No. 269/2014 (“Regulation 269”).

EuroChem NW2 made demands under the Bonds on various dates in August 2022. The Banks have declined to pay, on the basis that to do so would be illegal because of the EU sanctions.

On 23 December 2024, EuroChem NW2 entered into a Deed of Assignment and Assumption (“Assignment”) by which it assigned the proceeds of the Bonds to the Second Claimant (“EuroChem AG”).

The issues that I have to determine largely focus on whether either EuroChem NW2 or EuroChem AG is owned or controlled by Mr or Mrs Melnichenko, for the purposes of Regulation 269. The provision within Regulation 269 that is at the heart of the case is Article 2. This has two limbs:

(1) Article 2(1) provides: “All funds and economic resources belonging to, owned, held or controlled by” anyone listed in Annex I “shall be frozen.”

(2) Article 2(2) provides: “No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of” anyone listed in Annex I.

As already stated, Mr and Mrs Melnichenko are both listed in Annex I to Regulation 269. The case therefore is principally concerned with whether the Bonds are frozen under Article 2(1), because they must be considered funds or economic resources that belong to, or are owned, held or controlled by Mr or Mrs Melnichenko; and whether payment under the Bonds is prohibited under Article 2(2), because it would make funds or economic resources available to Mr or Mrs Melnichenko.

The Banks say that one or both of Article 2(1) and Article 2(2) apply. They say that payment under the Bonds therefore would be illegal under the law of France or Italy, or any other relevant EU country; and that this foreign illegality renders the Bonds unenforceable as a matter of English law. The Claimants deny this, and also say that illegality under the law of any EU country is irrelevant.

There are also issues as to a separate EU sanctions provision, Council Regulation (EU) No. 833/2014 (“Regulation 833”); implied terms; the Bonds' expiry dates; and as to the validity and effectiveness of the Assignment.

The Claimants' case was primarily presented by Mr Justin Fenwick KC, with assistance from others including Mr Tim Chelmick. SocGen's case was primarily presented by Mr Richard Handyside KC, with assistance from others including Ms Natasha Bennett. ING's case was presented by Mr Neil Kitchener KC, with assistance from others including Mr James Weale. The Third Party's case was presented by Mr Alan Maclean KC. I am very grateful to them all, and to the extensive teams of barristers and solicitors behind the lead advocates, for their assistance. The trial was conducted on all sides with great skill and professionalism.

II: The Claimants [11]–[17]

The EuroChem group was founded by Mr Melnichenko in Russia in 2001. Since its foundation, the group has grown considerably and is now one of the largest fertiliser manufacturers in the world. Most of its manufacturing and production continues to take place in Russia. However, it has interests in many countries around the world. Some are in the EU; in particular, there are fertiliser production...