Background
Petropavlovsk plc, a Russian gold-mining business incorporated in England and Wales, entered creditors’ voluntary liquidation after its assets were sold to Atlas JSC under a 2022 share sale deed. Atlas held rights under that deed to receive any liquidation surplus applied to the term loan, and any residual sums from administration and contingency funds.
In April 2025, Atlas assigned those rights to Denali Corp – FZCO, a Dubai company, as consideration for termination of a loss-making gold contract. The assignment required Petropavlovsk’s consent, acting through its liquidators. Atlas became a designated person under the Russia sanctions regime in June 2025, and the liquidators withheld consent pending a ruling on whether doing so would breach the asset-freeze rules.
The Court’s Holding
HHJ Johns KC held that the liquidators could consent to the assignment without offending regulation 11 of the Russia (Sanctions) (EU Exit) Regulations 2019. The rights assigned were not the term loan itself, Atlas’s proof of debt, or the declared liquidation dividend. Properly construed, they were the contractual rights under the share sale deed to receive uncertain future liquidation proceeds and possible residual fund balances.
Those rights were “economic resources,” not “funds,” under section 60 of the Sanctions and Anti-Money Laundering Act 2018. Their value was uncertain: the clause 10.1 right depended on the eventual surplus in the liquidation, while the fund rights were contingent reversionary interests. Applying PJSC National Bank Trust v Mints, consent was not an exchange or use of those economic resources for funds, goods or services, and therefore was not prohibited “dealing” under regulation 11(5).
Key Takeaways
- An assignment of contractual rights to uncertain liquidation recoveries can be an economic resource rather than frozen funds.
- The court distinguished those rights from the underlying term loan, the proof of debt, and an already declared dividend.
- A liquidator’s consent to such an assignment is not, without more, prohibited dealing under regulation 11(5).
Why It Matters
The decision applies the Court of Appeal’s distinction in Mints between funds and economic resources to an insolvency setting. The classification turns on the legal and commercial substance of the assigned rights, including whether their amount is definite or contingent.
It also confirms that a designated person’s later sanctions listing does not necessarily prevent office-holders from consenting to a pre-designation transaction. Here, consent would transfer the rights to Denali and would not make assets available to Atlas.