In a significant judgment handed down on 31 July 2025 ([2025] EWHC 1938 (Comm)), Mr Justice Bright has dismissed claims brought by Russian fertiliser giant EuroChem against Société Générale and ING Bank, finding that the banks were entitled to refuse payment under a suite of on-demand bonds worth over €280 million. The trial featured as one of The Lawyer’s ‘Top 20’ cases of 2025.
The dispute arose out of the construction of an ammonia plant in Kingisepp, Russia. After Russia invaded Ukraine in February 2022 and the EU imposed sanctions on Russia, the Italian contractor ceased work on the plant and EuroChem called for payment under the bonds which had been issued in its favour. The banks refused to pay on the basis that doing so would breach EU sanctions.
EuroChem had been founded by Russian oligarch Andrey Melnichenko, and its operating companies are nestled within a labyrinthine offshore structure ultimately owned by a Bermudian discretionary trust. Mr Melnichenko was designated as subject to EU sanctions under Council Regulation (EU) No. 269/2014 (“Regulation 269”) in March 2022. He purported to resign as the sole discretionary beneficiary under the trust in favour of his wife, Aleksandra Melnichenko, the day before his designation; though she was herself designated as subject to sanctions shortly afterwards. The two EuroChem Claimants (the first based in Russia and the second its Swiss parent company) claimed that they were no longer “owned” or “controlled” by the Melnichenkos, and that payment to them would not “benefit” the Melnichenkos within the meaning of Article 2 of Regulation 269.
The 514-paragraph judgment (handed down just four weeks after the end of trial) found for the banks on multiple fronts. On the facts, Bright J held that Mr Melnichenko continued to own the entire trust structure, including because: (i) Mrs Melnichenko was Mr Melnichenko’s mere proxy (at [166]-[175]); (ii) the beneficiary under a discretionary trust is the owner of the trust assets for the purposes of EU sanctions law (at [260]-[278]); and (iii) the trust was in any event not a true discretionary trust at all (falling squarely within the Pugachev principle) (at [283]-[293]). He also held that Mr Melnichenko continued to have de facto control over at least the Russian companies in the EuroChem group (at [294]-[305]). In reaching these findings, Bright J held that Mr Melnichenko’s resignation as beneficiary had been backdated (at [155]-[165]), noted that he considered Mr Melnichenko and his right-hand man to be “unscrupulous” (at [289]), and said that the former chairman of the trustee company (who had previously been the Secretary-General of Interpol) was “a very unsatisfactory witness” whose practice of not taking any notes in meetings and of using only disappearing messages was “striking” (at [86]-[94]).
On the basis of those findings, Bright J concluded that the bonds were unenforceable (i) under the rule in Ralli Bros (on the basis that payment would be illegal in the place of performance), or alternatively (ii) as a matter of public policy (at [436]-[473]). In reaching the conclusion on Ralli Bros, the judgment contains important guidance on the binding nature of determinations made by national competent authorities in EU member states (at [306]-[347]), and on the place of performance of obligations under English law-governed financial instruments like performance bonds (at [441]-[461]).
Practitioners may also be interested in reading the coda to the judgment, in which Bright J was scathing of EuroChem’s approach to its disclosure obligations, including its overzealous application of redactions to relevant documents (at [498]-[514]). Although it turned out not to be determinative, this was a rare case in which the Court was willing to draw adverse inferences from a party’s failure to provide adequate disclosure and to call key witnesses (at [360]-[369]).
Neil Kitchener KC and Robert Harris (along with James Weale of Serle Court) acted for ING Bank, instructed by Clifford Chance.
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