The Supreme Court has handed down judgment in UniCredit Bank GmbH v Celestial Aviation Services Ltd and v Constitution Aircraft Leasing [2026] UKSC 10.
The appeal considered whether Regulation 28(3) of the Russia (Sanctions) (EU Exit) Regulations 2019 prohibited payment by a German bank to Irish companies under letters of credit (“LCs”) issued by Sberbank in respect of aircraft leases to Russian airlines entered into before the imposition of sanctions, between 2005 and 2014.
In a unanimous decision, the Supreme Court held that payments under the LCs were prohibited, even though both the issue of the LCs and the leases pre-dated the sanctions and the leases had already been terminated by the time payment under the LCs fell due. The Court held that it was sufficient to engage the sanctions that the payments were connected to arrangements involving the provision of aircraft to Russia. By the structure of the sanctions regime Parliament intended to cast a wide net of prohibitions, in which any unintended consequences are to be mitigated by the licensing system.
The Court also held (obiter), and in contrast to the obiter opinion of the Court of Appeal, that UniCredit would have had a complete defence under s.44 Sanctions and Anti Money Laundering Act 2018 where it reasonably believed payment was prohibited.
The decision is likely to be commercially consequential given the reliance placed on letters of credit in international markets, and the Court’s conclusion that the prohibition in Regulation 28(3) is neither causally nor temporally restricted.
Akhil Shah KC and Leonora Sagan acted for the Appellants, Constitution Aircraft Leasing, instructed by Yasseen Gailani, Marina Boterashvili, and Jasdeep Gill of Quinn Emanuel.
The judgment of the Supreme Court can be accessed here.
