Jersey Court Enforces €214M Award Against Russian Firm, Sidestepping Sanctions Defence in Ukraine Fallout

Jersey Court Enforces €214M Award Against Russian Firm, Sidestepping Sanctions Defence in Ukraine Fallout

A Jersey court has upheld the enforcement of a €214 million arbitration award issued by the London Court of International Arbitration (LCIA) against RTI Ltd, a Jersey-based subsidiary of the Russian aluminium giant Rusal.

The case stems from a currency swap dispute with OWH SE, formerly VTB Bank (Europe) SE. This German bank was ringfenced from its Russian parent, VTB Russia, following the imposition of international sanctions after the 2022 invasion of Ukraine.

This ruling is significant for international arbitration and sanctions law, as it reinforces that valid arbitration awards can still be enforced even when sanctions are involved, provided the enforcement does not directly contravene the sanctions regime.

Key Points:

1. The Dispute: In 2019, RTI Ltd entered into a currency swap agreement with OWH to hedge against rouble volatility. After the 2022 sanctions, OWH terminated the contract, citing compliance obligations. RTI challenged this in LCIA arbitration, but the tribunal sided with OWH, awarding it over €213 million.
2. Sanctions Argument: RTI and Rusal argued that enforcing the award in Jersey would breach public policy under Jersey’s sanctions law (Article 46A of the Sanctions and Asset-Freezing (Jersey) Law 2019), which protects parties acting in good faith to comply with sanctions.
3. Court’s Decision: The Royal Court of Jersey rejected this argument, stating that enforcement of the award did not violate public policy. The court emphasised that the sanctions regime did not override the enforceability of a valid arbitral award under the New York Convention.

Summary and Analysis: Royal Court of Jersey Decision on Arbitration Award Enforcement

Summary

1. The Royal Court of Jersey rejected RTI Limited's (RTI) attempt to block enforcement of a €213.77 million arbitral award in favour of OWH (formerly VTB Bank (Europe) SE), a German subsidiary of the sanctioned Russian bank VTB Russia.
2. The case arose from a 2019 currency swap agreement under ISDA terms between OWH and RTI (a Jersey entity in the Rusal Group), governed by English law and resolved via LCIA arbitration in England.
3. Following Russia’s February 2022 invasion of Ukraine, VTB Russia was designated a "sanctioned person" under the UK/Jersey regimes, and the German regulator BaFin imposed measures to isolate OWH (e.g., appointing a sanctions monitor and banning payments to VTB entities).
4. A rouble crash prompted OWH’s US$43.5 million margin call on February 28, 2022. RTI refused payment, citing Jersey sanctions (SAFL Article 11, which prohibits funds from being sent to designated persons) and concerns about US secondary sanctions.
5. OWH proposed a ringfenced Bundesbank account, but RTI’s non-payment led to OWH’s contract termination on March 25, 2022, and an arbitral award in favour of OWH.
6. RTI opposed Jersey enforcement under Article 44(3) of the Arbitration (Jersey) Law 1998, arguing it violated public policy under SAFL Article 46A (effective June 8, 2022), which shields acts reasonably believed necessary for sanctions compliance from civil liability.
7. Adopting a "very restrictive" English-style approach to public policy exceptions, the Court held Article 46A non-retrospective, so pre-June 2022 acts (RTI’s non-payment) lacked a public policy shield.
8. Even if applicable, RTI’s subjective belief in necessity was not objectively reasonable due to ignored BaFin safeguards and contract alternatives (e.g., "Illegality" notice).
9. Enforcement was granted, prioritising the finality of arbitration.

Key Points from the Judgment ([2025] JRC 145):

1. Background:

1. OWH SE, a German financial institution in solvent liquidation, had entered into agreements with RTI Ltd in 2019, guaranteed by Rusal. These agreements were governed by English law and subject to LCIA arbitration.

2. Impact of Sanctions:

1. Following Russia’s invasion of Ukraine in February 2022, international sanctions were imposed on Russian entities. OWH issued margin calls to RTI, which were not met, leading to claims of default.

3. Arbitration Outcome:

1. On 25 September 2024, the LCIA tribunal ruled in favour of OWH, awarding €213,770,661.77 against RTI and Rusal. [2]

4. Court’s Decision:

1. The Jersey court rejected RTI’s attempt to set aside a worldwide freezing and disclosure order (WWFDO). It dismissed arguments that enforcement would violate Jersey’s public policy under the Sanctions and Asset-Freezing (Jersey) Law 2019. The court found that RTI could not rely on sanctions-related defences to avoid liability.

5. Legal Significance:

1. The judgment reinforces Jersey’s commitment to honouring international arbitration awards, even in complex cases involving sanctions and geopolitical tensions.

Key Implications:

1. Retrospectivity and Timing: Article 46A applies only post-June 8, 2022, leaving pre-enactment acts exposed to contractual liability despite sanctions concerns, emphasising the need for swift legislative updates in crises.
2. Objective Reasonableness Test: The Court’s scrutiny of RTI’s failure to explore BaFin safeguards or contract options sets a high bar for Article 46A defences, requiring evidenced diligence to deter opportunistic defaults.
3. Sanctions vs. Commercial Obligations: The ruling shows sanctions’ ripple effects on non-sanctioned entities (OWH) and unrelated parties (RTI), prioritising arbitration unless a clear statutory defence applies. Parties must document compliance efforts thoroughly.
4. Broader Commentary: With ongoing Ukraine-related sanctions (as of 2025), this precedent may spur arbitral challenges in offshore centres. It signals to ISDA users the importance of prioritising governing law and forum choices, as sanctions defences require precise statutory alignment. The decision strikes a balance between the efficacy of sanctions and commercial predictability, although post-2022 cases may favour non-enforcement if Article 46A applies fully.

Analysis

1. This decision highlights the tension between enforcing New York Convention awards (favouring commercial stability) and Jersey’s sanctions compliance amid the Ukraine crisis.
2. Aligning with English precedents, the Court reinforces Jersey’s pro-arbitration stance, limiting public policy exceptions to preserve the finality of awards while integrating international sanctions norms.

References

JERSEY court papers and judgements:

• https://www.jerseylaw.je/judgments/unreported/Pages/[2025]JRC160.aspx

• https://www.jerseylaw.je/judgments/unreported/Pages/[2025]JRC145.aspx

• https://www.jerseylaw.je/judgments/unreported/Pages/[2025]JRC137.aspx

Rusal and RTI v. OWH, Judgment of the Jersey Royal Court [2025] JRC 145 https://jusmundi.com/en/document/decision/en-united-company-rusal-and-rti-ltd-v-owh-se-i-l-judgment-of-the-jersey-royal-court-2025-jrc-145-wednesday-28th-may-2025

Jersey's Royal Court rejects public policy challenge to arbitration https://www.bedellcristin.com/knowledge/briefings/fy-2425/q4/jerseys-royal-court-rejects-public-policy-challenge-to-arbitration-award-enforcement/

Jersey's Royal Court rejects public policy challenge to arbitration https://www.bedellcristin.com/knowledge/briefings/fy-2425/q4/jerseys-royal-court-rejects-public-policy-challenge-to-arbitration-award-enforcement/

https://www.gov.je/gazette/Pages/RTILimited.aspx

https://globalarbitrationreview.com/article/jersey-court-upholds-enforcement-against-rusal