Sanctions, fortification, and worldwide freezing relief: VTB Bank PJSC v Kuanyshev

04/09/26

The recent decisions in VTB Bank PJSC v Kuanyshev et al consider whether a sanctioned claimant may retain freezing relief when sanctions and associated licensing requirements create obstacles to giving fortification, and whether the grant of freezing and asset disclosure orders in favour of a designated person is itself prohibited by the UK sanctions regime.

The decisions follow VTB Bank PJSC v Kuanyshev [2026] EWHC 591 (Comm), summarised here, in which Peter MacDonald Eggers KC, sitting as a Deputy High Court Judge, ordered VTB to pay £500,000 into Court by way of fortification and security for costs (the “Fortification Order”) for the worldwide freezing order (the “WFO”) VTB had obtained against the defendants ex parte in February 2026 in support of proceedings against the first defendant in Russia. 

Two sets of applications subsequently came before Dias J. First, the defendants applied to discharge the WFO because VTB had failed to provide the required  fortification (the “Discharge Application”). Second, they applied to set aside the WFO, on the grounds that: (i) the WFO and associated asset disclosure order breached the Russia (Sanctions) Regulations 2019 and (ii) the relief was inexpedient under s25 of the Civil Jurisdiction and Judgments Act 1982 (the “Set-Aside Application”).

Dias J granted the Discharge Application but gave VTB until 10 August to provide the fortification, marking six months from the grant of the WFO in February —the longest period the Judge considered reasonable for compliance. She refused VTB permission to appeal but stayed discharge until 31 August to allow VTB to apply to the Court of Appeal. On 28 August, the Court of Appeal refused VTB’s application for permission to appeal; the WFO was then discharged.

The Judge dismissed the Set-Aside Application, save for a limited carve-out for the first defendant’s Kazakh assets. She granted the defendants permission to appeal on the sanctions issue.

The Discharge Application: VTB’s failure to pay fortification [2026] EWHC 1983 (Comm) 

The defendants applied to discharge the WFO because months after the Fortification Order (made in March 2026), and nearly six months since obtaining the WFO, VTB had still failed to provide the fortification. Two days before the hearing, in an attempt to avoid discharge, VTB applied to vary the Fortification Order so that the fortification could be held in its solicitors’ client account rather than paid into court. VTB relied on sanctions-related difficulties in making payment, including licensing requirements and difficulties in making payment to the Court Funds Office.

Dias J granted the Discharge Application and refused VTB’s application for a variation. She found no material change of circumstances and held that VTB’s delay reinforced the need for payment into court. Fortification was the “price” VTB had to pay for the WFO, and VTB “should not be in a better position by virtue of its designation than any other litigant”. Dias J regarded six months as the longest reasonable period for compliance and on that basis, gave VTB “one last chance” to provide the fortification by 10 August, failing which the WFO would be discharged.

In [2026] EWHC 2140 (Comm), Dias J refused VTB permission to appeal but ordered that discharge would not take effect until 31 August, subject to any order of the Court of Appeal.  Although VTB faced genuine sanctions-related obstacles, the Judge emphasised, when refusing permission to appeal, that VTB’s position resulted from a combination of its designated status and its having “constantly changed tack regarding the proposed mechanism of fortification”. VTB had been given an indulgence to obtain the necessary licences and permissions but had “not helped itself” by those constant changes.

The Set Aside Application: sanctions and inexpediency under s25 [2026] EWHC 2140 (Comm)

The defendants separately sought to set aside the WFO on grounds of sanctions and s25. A further ground, that the second defendant – against whom there was no cause of action – held no assets against which VTB had a legitimate right to enforce, was adjourned by consent pending parallel proceedings in Kazakhstan.

On sanctions, the defendants argued that the WFO and asset disclosure order made “funds” or “economic resources” available to VTB in breach of the Russia (Sanctions) Regulations 2019. Dias J disagreed. She held that the Regulations do not prevent a designated person from bringing proceedings or obtaining freezing relief, subject where necessary to licensing requirements. The Judge refused to set aside the WFO on this ground but granted the defendants permission to appeal.

The defendants also argued that the WFO was “inexpedient” under s25, mainly because VTB could have sought equivalent relief in Russia. Dias J rejected that argument, save as to the first defendant’s Kazakh assets as described below. The question was whether English relief was “inexpedient”, not whether it was positively expedient; the English court’s role was to remain “subordinate to but supportive of” the foreign court with primary jurisdiction. English relief was not inexpedient here: the defendants were resident and domiciled in England, had assets here, and the WFO provided “considerable added value” beyond the relief available in Russia, including asset disclosure and by extending to assets indirectly or beneficially owned or controlled by the defendants.

Dias J did, however, carve out the first defendant’s Kazakh assets from the scope of the WFO. Applying JSC VTB Bank v Skurikhin [2014] EWHC 2254 (QB), she held that relief over those assets should be sought in Russia, where the Court had power, and had shown itself willing, to grant freezing relief over specified Kazakh assets. The carve-out did not extend to the second defendant, who was not a party to the Russian proceedings.

The Court of Appeal refused VTB permission to appeal

VTB sought permission to appeal the discharge of the WFO on grounds of error of fact, irrationality, and error of law. It argued that the six-month period should have run from the later Fortification Order and that the 10 August deadline gave it no realistic prospect of providing fortification. Relying on Mints v PJSC National Bank Trust [2023] EWCA Civ 1132, VTB also argued that discharge of the WFO because VTB’s designated status had prevented it from providing fortification impermissibly impeded VTB’s right of access to justice.

On 28 August, Males LJ refused permission on the papers. The time allowed for fortification was a matter of discretion, and Dias J was entitled to conclude that six months was long enough. Her decision turned not on whether VTB had taken all reasonable steps to comply, but on the balance between the parties: the defendants remained subject to a draconian order without the protection the Court had required. Nor did discharge deny VTB access to the Court. Freezing relief may be conditional on fortification to protect the respondent, and VTB’s designation should not place it in a better position than a non-designated claimant. Although Males LJ assumed that VTB had acted reasonably in seeking to overcome the Court Funds Office and OFSI difficulties, those difficulties arose from its designated status and were not attributable to the defendants. The appeal therefore had no real prospect of success.

The WFO was accordingly discharged.

The decisions address two questions: whether sanctions prevent a designated claimant from obtaining freezing relief, and whether sanctions-related difficulties excuse compliance with conditions imposed on that relief. On the latter, Males LJ found no real prospect of challenging Dias J’s decision that a claimant’s sanctioned status does not entitle it to maintain freezing relief without satisfying the conditions on which relief was granted, including the payment of fortification and security for costs. On the former, anterior question, Dias J held that designation does not prevent a claimant from obtaining freezing or disclosure orders though she gave the defendants permission to appeal that ruling. The important question whether the UK-Russia sanctions regime prohibits such relief in favour of a designated person therefore remains unresolved by the Court of Appeal.