Russian court judgment in VEF case – foreign sanctions contrary to public policy

3 October 2025

The Moscow Commercial Court has ordered BNY Mellon Corporation to pay damages to VEB.RF in Case A40-89051/2025.

VEB bought bonds issued by RusHydro Capital Markets DAC, an Irish subsidiary of RusHydro PJSC. 4 days after RusHydro was UK sanctioned in 2022, it tried to transfer 812.5 million Roubles to the Irish subsidiary for a dividend due to VEB that day. The London branch of BNY blocked the payment because of the UK sanctions. VEB, having not received its dividend, sued BNY for damages.

The Russian Court asserted jurisdiction over the claim under Articles 247 and 248 of the Russian Arbitration Procedure Code because VEB and RusHydro were subject to UK sanctions and the damage of not unblocking the transaction was felt in Russia. The Court rejected all of BNY’s arguments and ordered BNY to pay damages to VEB. On sanctions, it said:

• BNY’s argument that VEB could have applied for a licence to receive the payment was wrong because VEB could not have realistically obtained a license because it was subject to UK sanctions. As it was unsuccessful in other licence and delisting applications in the US and the EU, it would likely fail in the UK too.

• BNY was not contractually obligated to block the funds – the funds were blocked solely because BNY said it had to comply with UK sanctions law, which the Court said did not apply because the damage caused by blocking the funds was in Russia, bringing the claim within the Russia's exclusive jurisdiction.

• Foreign sanctions breach Russian public policy because sanctions always violate the rights of Russian entities. Russia’s own sanctions are retaliatory and do not legitimise foreign measures. The UK sanctions were not force majeure because BNY deliberately chose to comply with UK law instead of making the funds available for eventual payment to VEB.