The case of Lamesa Investments Ltd v Cynergy Bank Ltd  EWHC 1877 (Comm) involved a bank caught up in the crosshairs of international sanctions but could apply to any contractual scenario.
Lamesa was a company registered in Cyprus, ultimately owned by Viktor Vekselberg.
Cynergy was a UK retail bank with a US Dollar correspondent account with a US bank.
Lamesa advanced £30 million to Cynergy, with interest payments due every 6 months.
There was a clause in the loan agreement that provided:
"[Cynergy] shall not be in default if...such sums were not paid in order to comply with any mandatory provision of law, regulation or order of any court of competent jurisdiction."
In April 2018, Mr Vekselberg was placed on a list of "Specially Designated Nationals" (SDN) by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). As a result, Lamesa became a "blocked person."
This meant that any US person anywhere in the world, any person dealing with property subject to US jurisdiction or any person operating in the US is potentially subject to "primary sanctions" if they deal with Mr. Vekselberg, as a SDN, or Lamesa, as a blocked person.
However, "secondary sanctions" also apply to non-US persons with no property or operational connection to the US in relation to a SDN or blocked person, in particular, on foreign financial institutions that knowingly facilitate "significant" financial transactions on behalf of a blocked person.
There was no dispute that if Cynergy's payment of interest to Lamesa was a "significant financial transaction," the US Government had the power to impose secondary sanctions on Cynergy and such a sanction would be highly damaging to Cynergy's business.
Cynergy was in an unenviable psition of having to choose to comply with its contractual obligation to pay interest or face sanctions. Cynergy withheld £3.6 million in interest citing the exclusion clause in the loan agreement referred to above.
Lamesa sought a declaration in the UK High Court to the effect that the exclusion clause did not entitle Cynergy to avoid payment and that the outstanding interest was due and payable.
Cynergy argued that in light of the risk of secondary sanctions on it, this was a "mandatory provision of law". Therefore its non-payment of the interest was within the scope of the exclusion clause.
Lamesa sought to argue that the risk of secondary sanction was not an express prohibition and that...