Commercial Court holds that US sanctions suspend payment obligation

25/11/25

The Commercial Court has this week rejected a claim for payment of money held in a client account, on the basis that payment would involve a breach of US sanctions. This is one of a handful of cases addressing the issue whether an English law governed payment obligation is suspended as a result of a violation of US sanctions.

The claimant, Beneathco, held a derivatives trading account with the defendant, RJ O’Brien Limited (RJOL). It held a cash balance of around $16.5 million in its account with RJOL when in 2020 it was designated under the US’s Iran sanctions programme. The dispute centred around whether RJOL was required to pay that sum to Beneathco to its nominated account in the UAE.

In a judgment handed down yesterday, the Commercial Court (Simon Colton KC, sitting as a Deputy Judge) held that RJOL was under no payment obligation because:

- First, because Beneathco had not made a valid demand. Payment could only be made in US dollars to Beneathco. Beneathco had sought payment in an alternative currency and to another payee and those demands were ineffective.

- RJOL was in any event entitled to rely on the Ralli Bros defence – since payment in US dollars would have required an act of performance in the United States (through the use of a correspondent bank) and would have breached US sanctions. In this context there is a detailed discussion of the UK Blocking Regulation, which makes some acts of compliance with US sanctions law a criminal offence as a matter of English law.