PJSC VTB Bank (A Company Incorporated in the Russian Federation) v HM Treasury

Hearing dates: 12 th & 13 th November 2025

APPROVED JUDGMENT

This judgment was handed down remotely at 10.30am on 19 December 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This application brings before a reviewing court issues about Government decision-making within the Russia sanctions regime, in an insolvency context in which both the insolvent company, and its controller and principal creditor, are subject to sanctions.

The Claimant is Russia's second largest bank (“the Bank”). It is majority-owned by the Russian government. It was placed under sanctions by the UK Government (and internationally) in February 2022, following the full-scale Russian invasion of Ukraine. Those sanctions extended indirectly via an asset freeze to the Bank's UK subsidiary VTB Capital plc (“VTBC”, itself an investment bank), the Interested Party in this case. The effect of the sanctions was to render VTBC insolvent, and it entered into administration in December 2022. It participates in these proceedings by its court-appointed Joint Administrators (the “JAs”).

The management of, and decision-making within, the UK sanctions regime is the responsibility of the Office of Financial Sanctions Implementation (“OFSI”), a part of HM Treasury, the Defendant in this case. OFSI made a number of adjustments to the sanctioning of the Bank and of VTBC, as VTBC's administration proceeded. The latest of these was a decision promulgated on 8 ^th January 2025.

The Bank exercises its statutory right to bring that decision before the Administrative Court for review. It says the decision is unlawful on a total of six grounds.

The Sanctions Regime

Government-imposed financial sanctions, targeted at named individuals and commercial entities, constitute restrictions on their rights and freedoms in order to achieve specific foreign policy or national security objectives.

(a) Statutory framework

The Government's legal powers to do this derive from section 1 of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”), and regulations made under it. As relevant to the present case, SAMLA provides:

1. Power to make sanctions regulations

(1) An appropriate Minister may make sanctions regulations where that Minister considers that it is appropriate to make the regulations—

(a) for the purposes of compliance with a UN obligation,

(b) for the purposes of compliance with any other international obligation, or

(c) for a purpose within subsection (2).

(2) A purpose is within this subsection if the appropriate Minister making the regulations considers that carrying out that purpose would—

(a) further the prevention of terrorism, in the United Kingdom or elsewhere,

(b) be in the interests of national security,

(c) be in the interests of international peace and security,

(d) further a foreign policy objective of the government of the United Kingdom,

(e) promote the resolution of armed conflicts or the protection of civilians in conflict zones,

(f) provide accountability for or be a deterrent to gross violations of human rights, or otherwise promote—

(i) compliance with international human rights law, or

(ii) respect for human rights,

(g) promote compliance with international humanitarian law,

(h) contribute to multilateral efforts to prevent the spread and use of weapons and materials of mass destruction, or

(i) promote respect for democracy, the rule of law and good governance.

(3) Regulations under this section must state the purpose (or purposes) of the regulations, and any purpose stated must be—

(a) compliance with a UN obligation, or other international obligation, specified in the regulations, or

(b) a particular purpose that is within subsection (2).

(5) In this section “sanctions regulations” means regulations which do one or more of the following—

(a) impose financial sanctions (see section 3);

…

(g) make supplemental provision in connection with any provision of the regulations or other regulations made under this section.

…

This power was exercised to make, and subsequently update, the Russia (Sanctions) (EU Exit) Regulations 2019 (“the Regulations”), the current legal framework of the Russia sanctions regime. As required by section 1(3) of SAMLA, their purpose is expressly set out as follows:

Purposes

4. The regulations contained in this instrument that are made under section 1 of the Act are for the purposes of —

(a) encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine;

(b) promoting the payment of compensation by Russia for damage, loss or injury suffered by Ukraine on or after 24th February 2022 as a result of Russia's invasion of Ukraine.

The Regulations give the Secretary of State power to ‘ designate’ persons (individuals or corporate entities) by name, and to impose a range of sanctions on designated persons. Among these available sanctions are: (a) asset-freezing — a prohibition on ‘ dealing with funds or economic resources’ owned, held or controlled by a designated person, (b) a prohibition on making funds and/or economic resources ‘ available directly or indirectly to a designated person’, and (c) a prohibition on making funds or economic resources available for the benefit of a designated person.

Contravention of a sanction constitutes a criminal offence. Contravention for these purposes includes ‘ intentionally participating in activities knowing that the object or effect of them is (whether directly or indirectly) to circumvent any of the prohibitions … or to enable or facilitate the contravention of any such prohibition’ (Regulation 19).

The Regulations confer on the Treasury (for these purposes, OFSI) a power to issue a ‘ licence’ to ‘ authorise acts which would otherwise be prohibited’ (Regulation 64). A licence may be general, or specific to a particular designated person. A specific licence may be granted only where the Treasury considers it appropriate for certain specified purposes set out in Schedule 5 to the Regulations. These purposes include enabling a designated corporate entity to: (a) meet ‘ basic needs’ such as the payment of taxes, wages, utility bills and so on, (b) pay for legal services, (c) cover the reasonable fees and charges of holding or maintaining frozen assets, and (d) implement or satisfy certain judicial decisions or comply with certain prior obligations. A specific licence may also be granted for purposes connected with insolvency, subject to a proviso that any funds flowing out of the insolvency to a sanctioned creditor must be frozen and rendered inaccessible.

Regulation 66 makes general provision about the power to issue licences as follows:

Licences: general provisions

66.—(1) This regulation applies in relation to Treasury licences…

(2) A licence must specify the acts authorised by it.

(3) A licence may be general or may authorise acts by a particular person or persons of a particular description.

(4) A licence may —

(a) contain conditions;

(b) be of indefinite duration or a defined duration.

(5) A person who issues a licence may vary, revoke or suspend it at any time.

(6) A person who, on the application of a person (“P”), issues a licence which authorises acts by a particular person, or varies, revokes or suspends that licence, must give written notice to P of the issue, variation, revocation or suspension of the licence.

(7) A person who issues, varies, revokes or suspends a general licence or a licence which authorises acts by persons of a particular description must take such steps as that person considers appropriate to publicise the issue, variation, revocation or suspension of the licence.

(b) OFSI Guidance

OFSI publishes UK Financial Sanctions General Guidance ((“the Guidance”) — the latest version is dated 27 ^th June 2025) which gives a general overview of the sanctions legislation and regime. It points out (at [1.4]) that ‘ UK financial sanctions apply to all persons within the territory and territorial sea of the UK and to all UK persons, wherever they are in the world’; accordingly the Guidance is entirely generally addressed. That of course reflects the legal framework, which is also generally addressed in relation to contraventions (Regulation 19), as set out above.

The Guidance includes an extended section dealing with the licensing regime. It includes this paragraph:

HM Treasury can vary, suspend or revoke general licences at any time. OFSI aims to engage with relevant stakeholders before taking such action unless revocation takes place because the activity or designated person specified in the general licence is no longer subject to sanctions. General licences may also be revoked when their permitted activities are provided for on a permanent basis by new exceptions added into the sanctions regulations. Where there is a specific and urgent need to revoke a general licence, OFSI will aim to give notice to its users by, for example, amending the licence first to include a new expiry date...