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Global Trade & Sanctions LawPublished on:
Sanctions Do Not Excuse Non-Payment to a Non-Sanctioned Party If Obligation Accrues Prior to Sanctions Coming into Force
Takeaways
- Sanctions operate prospectively and do not affect payment obligations to a non-sanctioned party accruing before sanctions became effective.
- Payment obligations under standby letters of credit at issue were autonomous and unconnected with the underlying transaction.
- The fulfilment of an independent obligation owed by a German bank to Irish-incorporated aircraft lessors was found not to have intended to benefit the Russian entities involved in other elements of the transaction.
The English Court recently confirmed that sanctions do not excuse non-payment to a non-sanctioned party where the aircraft lease arrangements and related letters of credit were created before sanctions came into effect: Celestial Aviation Services Limited, Constitution Aircraft Leasing (Ireland) 3 Limited and another v UniCredit Bank AG (London Branch) [2023] EWHC 663 (Comm).
