Sanctions and insolvency: High Court hands down judgment on asset freeze

10/09/26

The High Court has handed down an important judgment on UK sanctions in Denali Corp FZCO v Manson & Ors [2026] EWHC 2287 (Ch), interpreting the central asset-freeze provision in the Russia (Sanctions) (EU Exit) Regulations 2019 (the Regulations).

The dispute arose out of the administration of Petropavlovsk plc, an English company trading in gold mining in Russia. Sanctions on Russia made its business untenable. It therefore entered administration in July 2022. Pursuant to a court-approved share sale deed, Petro agreed the sale of its business to Atlas, a Russian company, for a total consideration of USD 619 million; Re Petropavlovsk plc [2022] EWHC 2097 (Ch). Under that share sale deed, Atlas was entitled to any surplus in the liquidation and any residue of two trust funds.

In April 2025, Atlas assigned its contractual rights in the liquidation to Denali, a Dubai company. That assignment was made in settlement of another contract between Atlas and Denali. Atlas and Denali agreed that the assignment would only become effective upon the liquidators’ consent. Two months later, Atlas was designated under the Regulations. The liquidators refused to consent to the assignment on the concern that granting consent would amount to dealing with a designated person's frozen assets contrary to the Regulations. Denali applied under s. 112 of the Insolvency Act 1986 for a direction that consent would be lawful.

HHJ Johns KC, sitting as a High Court judge, held that the liquidators may give consent without being in breach of the Regulations. In particular, the Judge found that:

• On a proper construction of the agreements, Atlas assigned to Denali the  “right to prove in the liquidation for what is an uncertain sum” (§45, see also §37).
• On a proper construction of the Regulations, the liquidators’ consent would not breach the asset-freeze in Regulation 11. Applying the Court of Appeal's analysis in PJSC National Bank Trust v Mints [2023] EWCA Civ 1132, HHJ Johns KC held that Atlas’s rights under the share deed were an "economic resource" rather than a "fund" under s. 60 of the Sanctions and Anti-Money Laundering Act 2018, since they were rights to an uncertain sum dependent on future recoveries and expenses rather than rights to a liquidated amount (§42). Further, HHJ Johns KC found that the giving of consent did not amount to "dealing with" the economic resource since the giving of consent involved no exchange or use of the rights for funds: the liquidators’ consent would place nothing in the hands of the designated person, Atlas, which had already received all the benefits of its transaction with Denali (§§ 52-55).

The judgment is here.