VTB Capital PLC v Continental Capital Markets Ltd
The yet to be decided case of VTB Capital PLC v Continental Capital Markets Ltd (case number LM-2025-000237), which concerns settling securities trades for a sanctioned Russian company, illustrates how sanctions can result in costly legal disputes concerning contractual non-performance.
The decision in VTB Capital PLC v Continental Capital Markets Ltd will provide strong indications about how the High Court will interpret the ongoing obligations of contractual parties when one party and their affairs are affected by international sanctions. This is incredibly important for businesses, which require certainty when it comes to entering into cross-border contracts.
Background of the Case
VTB Capital PLC (VTB) is the UK arm of VTB Bank, one of Russia’s largest financial institutions. Continental Capital Markets Ltd (CCM) was a London-based brokerage firm specialising in settlement services for securities transactions.
The two parties had entered into a contract in which CCM was to perform trades in Russian securities. The contract was entered into before Russian sanctions were put in place. However, trades were due for settlement after the UK, EU, and US tightened restrictions on Russian banks. VTB claims CCM owes around $3.4 million for the trades that were left unsettled.
The timeline leading up to the dispute is as follows:
- Pre February 2022 – Trades executed without controversy.
- February 2022 onwards – Invasion of Ukraine prompts coordinated sanctions.
- Post-sanctions – VTB’s UK operations restricted, accounts frozen, and financial institutions forced to reassess obligations.
- VTB brings a claim against CCM, alleging breach of contract.
The Impact of Sanctions
Although financial sanctions are designed to injure the country or persons connected with a particular State, they can and do cause considerable commercial upheaval and uncertainty.
For VTB, the sanctions meant its accounts were frozen. The bank was barred from receiving payments or settling trades without UK government authorisation. Similar restrictions applied across Europe and the United States, creating uncertainty for contractual parties such as CCM.
In practical terms, trades lawfully executed before Russia invaded Ukraine and sanctions imposed could not be settled afterwards. The result was millions of dollars in suspended transactions, leaving brokers and banks exposed to financial and legal risk.
This is a textbook example of how international sanctions can affect investment bankers, forcing them to weigh contractual obligations against compliance with sanctions law.
What are both parties’ legal arguments?
There are three interlocking concepts: illegality, frustration, and sanctions licences.
VTB position:
- CCM owes $3.4 million under trades executed before the sanctions.
- Performance was still possible under an OFSI general licence granted in February 2022, which permitted certain wind-down activities.
- VTB expressed a “clear intention” to fulfil its obligations under the contract and argued that sanctions did not extinguish CCM’s duty to perform the trades in question.
CCM’s defence:
- Performance of the trades was illegal under UK sanctions law without specific licences that were not available at the time.
- The contracts were frustrated, meaning events outside the parties’ control made performance impossible.
- Even where licences existed, they were limited and temporary, designed for winding down positions rather than creating new obligations.
- Any payment would result in an overall loss rather than profit, since the resale of securities linked to VTB was effectively blocked.
What are the implications of the High Court’s decision in VTB Capital PLC v Continental Capital Markets Ltd?
The case before the High Court will hopefully clarify the following questions:
- Can UK sanctions imposed under the Sanctions and Anti-Money Laundering Act 2018, frustrate contracts or simply suspend them until licences permit performance?
- To what extent should the court prioritise commercial certainty when governments impose sanctions?
To mitigate the risks of contract disputes developing, due diligence needs to be undertaken when entering into commercial contracts where one party is based, or is a subsidiary of a company based in a volatile region. An experienced Commercial and Sanctions Law Solicitor can assess the risks, including whether the scope of existing OFSI licences will allow ongoing performance. In addition, they can draft effective force majeure and frustration of contract clauses to protect their client’s interests.
Wrapping up
The High Court’s decision in VTB Capital PLC v Continental Capital Markets Ltd is highly anticipated. However, given the sums involved, certainty may remain elusive whilst the inevitable appeals proceed.
We will keep you updated as more information comes to light.
FAQs
What is the VTB Capital v Continental Capital Markets case about?
It concerns unsettled Russian securities trades worth around $3.4 million. VTB sued CCM for payment, but CCM argued the contracts were frustrated and illegal due to sanctions.
What does “frustration” mean in English contract law?
A contract may be discharged on the ground of frustration when something happens which makes it physically, legally, or commercially impossible to fulfil, or changes the obligations so radically that they are completely different to what was originally agreed.
How do UK, US, and EU sanctions implemented after the Ukraine invasion affect investment bankers?
They may prevent payments to and from sanctioned Russian banks, freezing transactions, and making settlement of specific trades highly uncertain.
What is an OFSI general licence?
It is an authorisation issued by the Office of Financial Sanctions Implementation allowing limited activities that would otherwise breach sanctions, such as winding down existing trades.
Why does this case matter beyond the two parties?
The decision may offer some commercial certainty about how the courts will handle claims brought on the grounds that contractual obligations disrupted by sanctions resulted in breach of contract.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
Note: This article does not constitute legal advice. For further information, please contact our London office.
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