Briefing

Sanctions and commodities: Resisting payment of a judgment debt to a sanctioned entity

Sanctions against Russia have impacted the performance of many commodities contracts. Some traders have refused to perform contracts where they consider performance to be prohibited by sanctions, because of the commodity in question, the currency of the contract or the entities involved.

Disputes have inevitably arisen as a result and we are now at a point where many of these actions have come to, or are close to, the enforcement stage.

In this article, we consider recent Swiss and UK decisions and an EU Advocate General opinion which have shed some light on the potential issues that sanctions may bring to the enforcement of a foreign award or judgment. We assess their potential impact for parties seeking to resist enforcement of foreign awards or judgments on sanctions grounds.

What if the judgment creditor is (or is suspected to be) subject to sanctions?

Swiss position

This question was recently addressed by the Swiss Federal Tribunal in case 4A_305/2025.

A limited liability company under Angolan law active in the diamonds and minerals sector sought to enforce an LCIA award in Switzerland. The enforcement application was granted but the debtor appealed, on the basis that the creditor was controlled by a sanctioned person, and thus providing funds to the creditor was prohibited under Article 15(2) of Ordinance 946.231.176.72¹ (the Swiss Ordinance).

The District Court held that the creditor’s claim had lapsed as a result of subsequent objective impossibility pursuant to Article 119(1) of the Swiss Code of Obligations and therefore definitive debt relief could not be granted. This was based on its finding that the creditor was controlled by a company subject to sanctions under Annex 8 of the Swiss Ordinance, within the meaning of Article 15(1)(c) of the Swiss Ordinance and that a payment by the debtor to the creditor was therefore permanently impossible under Article 15(2) of the Swiss Ordinance.

The creditor appealed to the Swiss Federal Tribunal.

The Swiss Federal Tribunal held that Article 15(2) of the Swiss Ordinance applied to the enforcement of a payment obligation based on a judgment or arbitral award that is, in principle, enforceable. It also found that the exceptions contained in Article 15(2ter) and Article 15(2quater) of the Swiss Ordinance, for transfers into blocked accounts of sums due under arbitral decisions or judgments, did not alter the position. It held that these provisions only permitted financial institutions to book such payments to frozen accounts. It queried whether this allowed debtors to make such payments into frozen accounts but decided that, in any event, the exceptions could not be taken to mean that a payment by the debtor which is itself prohibited may be enforced by the creditor through the use of the state enforcement mechanism.

Therefore, the Swiss Federal Tribunal concluded that Article 15(2) prevents the sanctioned creditor from demanding performance from the debtor for the duration of the sanctions. This is because the debtor could not be compelled to make a payment that is itself prohibited under threat of criminal sanctions. The practical effect of this judgment was that the due date of the claim was suspended for the duration of the sanctions (meaning interest stopped accruing whilst sanctions were in force). However, the obligation to pay will be revived as soon as the sanctions on the creditor are lifted.

EU position

In the EU, the position seems likely to be similar to that in Switzerland. Article 2(2) of Council Regulation (EU) No. 269/2014 prohibits making funds or economic resources available, directly or indirectly, to or for the benefit of persons or entities subject to sanctions. There is a specific exception for funds which are subject to an arbitral decision, however this exception is subject to strict cumulative conditions, including that the decision must not be for the benefit of a sanctioned person, so it will not assist a sanctioned party seeking to enforce a judgment or award.

UK position

In PJSC v Mints², the UK Court found that payment of damages pursuant to a judgment was capable of being licensed by the UK regulator, OFSI. As long as a licence is obtained, a judgment in favour of a sanctioned person/entity could therefore technically be enforceable in the UK, despite the prohibition on making funds available to sanctioned persons, although in practice such funds would be ordered paid into a blocked account. However, debtors may try to resist enforcement in other ways.

What if sanctions issues could be re-examined at the enforcement stage?

Is it possible for sanctions issues to be re-examined at the enforcement stage and decisions set aside altogether?

EU position

The CJEU has been asked a question in case C‑802/24, which shines some light on this issue.

NV Reibel, a Belgian company operating in logistics and the international transportation of goods, concluded an agreement with a Russian company, JSC VO Stankoimport, for the supply of goods. Following a decision of the Belgian authorities, the goods could not be exported because they were classified as ‘dual-use items,’ the sale of which is prohibited by Council Regulation (EU) No. 833/2014 (the EU Regulation). Stankoimport had made a part payment in advance which Reibel failed to repay. Stankoimport brought a successful arbitration claim to recover this sum. However, the EU Regulation includes, at Article 11, provisions designed to protect EU companies from legal or financial claims by Russian persons, companies, or organisations when EU sanctions prevent them from fulfilling contracts or transactions.

Reibel brought an action before the Court of Appeal in Stockholm, seeking to have the arbitration award set aside. That Court referred 3 questions to the CJEU for preliminary ruling, including whether Article 11 must be interpreted as meaning that a national court hearing an application for setting aside or annulment of an arbitration award in which Article 11 has been applied, must determine of its own motion whether the tribunal’s application of the law is compatible with the EU Regulation and, in such a case, whether the national court must annul or set aside the award in whole or in part if the arbitration tribunal’s application of the law was contrary to the EU Regulation.

On 26 February 2026, the EU Advocate General Andrea Biondi issued his opinion on the question. He recorded that that the provisions of the EU Regulation are essential to the European Union’s mission of contributing to peace, security and mutual respect among peoples. He thus concluded that Article 11 was part of EU public policy. Therefore, he considered that the national courts had the right – and in fact, the obligation – to review arbitral decisions in this respect (i.e. to address the question of the compatibility of arbitration awards with EU public policy).

In his view, a national court or tribunal before which an action for an arbitration award to be set aside is brought must ensure, where appropriate, on its own motion, that the application of Article 11 by the tribunal was consistent with that provision. If there is an incompatibility, the court or tribunal should grant the application to have the award set aside based on the breach of EU public policy.

The decision from the CJEU following this opinion is due later this year. It may disagree with the opinion of the Advocate General but if Article 11 is held to constitute EU public policy by the CJEU, this may pave the way for other foreign awards or judgments to be challenged at national level, at the appeal stage or during the enforcement phase. EU respondents could thus have two bites at the cherry to try and resist a claim which has been affected by sanctions.

UK position

In the UK, section 44 of SAMLA³ provides that a party who acted in the reasonable belief that it was complying with sanctions will not be liable to civil proceedings. This could be raised by respondents and defendants to resist enforcement. In Celestial Aviation⁴, the UK Supreme Court suggested that s.44 SAMLA may be part of public policy. This raises the question as to whether an English court asked to enforce a foreign award or judgment may refuse to do so if, in its view, enforcement would be incompatible with s44 SAMLA.

Swiss position

In the Swiss case above⁵, both the District Court and the Swiss Federal Tribunal examined the sanctioned status of the creditor (i.e. whether it was controlled by a sanctioned entity). It is not clear whether this had been considered in the arbitration itself, but the question arises whether courts dealing with enforcement matters may be willing to reconsider the sanctioned status of a creditor, even if that question has already been decided in the award or judgment. The Swiss Federal Tribunal recorded that the Swiss Ordinance was to be classified as “a foreign policy measure intended to uphold international law and pursue Switzerland’s imperative foreign policy objectives” and thus had a “mandatory scope of application“. If that means that the Swiss Ordinance is part of Swiss public policy, a debtor may try to challenge a foreign award on public policy grounds and Swiss courts could be willing to reconsider the control issue at the enforcement stage. It is not clear whether the effect of such a reconsideration would be for the court to set aside the foreign award altogether, or simply to suspend enforcement until sanctions are lifted.

HFW comment

At least in Switzerland, and perhaps in the EU, judgment debts may not be enforced by a sanctioned creditor until sanctions against it have been lifted. In these circumstances, there may come a point when, if the sanctions are still in place after many years, the debt could be extinguished.

The CJEU’s decision in the Stankoimport case is much anticipated and should provide more clarity on whether sanctions issues can be re-examined at the enforcement stage.

If Article 11 of the EU Regulation is found to be part of EU public policy, we can certainly expect that defendants and respondents will argue that other provisions of the EU Regulation should constitute EU public policy too. Further, if national courts can re-examine sanctions issues at the enforcement stage on public policy grounds, that is bound to have a significant impact on many current sanctions-related disputes in the commodities sector, which creditors will soon be seeking to enforce.

Footnotes