Russian court dismisses contractual damages claim for value of funds frozen under UK financial sanctions

30 October 2026

The Arbitrazh Court of Sverdlovsk Region has rejected a claim for damages under Article 393 of the Russian Civil Code  for the “improper execution” of a payment order (contrary to Article 865 of the Code) which did not reach its destination because the funds were frozen under UK financial sanctions. The claim was brought by Damir Garifullin against Russian bank Ural Bank for Reconstruction and Development (UBRiR) - Damir Irekovich Garifullin v Ural Bank for Reconstruction and Development, Case No. A60 - 42276/2025.

In July 2022 Mr. Garifullin issued a payment order instructing UBRiR to transfer USD 1,345 from his account in Russia to an account at Trustbank in Tashkent, Uzbekistan. UBRiR sent the funds through its US dollar correspondent account in the US (The Bank of New York Mellon) and BNY Mellon transferred them to Standard Chartered Bank in the UK (Trustbank’s US dollar correspondent). Standard Chartered froze the funds to comply with UK financial sanctions in November 2022.

Mr. Garifullin claimed the USD 1,345 in damages on the basis that UBRiR had improperly executed his payment order in breach of contract. Russian banking contracts are governed by the Russian Civil Code. Under the Code, a bank must properly execute a payment order using one of the methods listed in Article 865, or it will be liable in damages under Article 866. Under Russian law, liability in damages requires a claimant to prove that (1) the defendant breached its legal obligation, (2) the defendant was at fault when breaching that obligation, and (3) the breach caused the claimant damage, which entails permanent financial loss.

The Court dismissed the claim because Mr. Garifullin failed to prove these requirements:

• The lawful methods for properly executing payment orders under Article 865 include transferring funds to an intermediary bank. UBRiR complied with this requirement when it transferred the funds to BNY Mellon and did not breach its legal obligation;

• UBRiR had no choice but to send the funds to BNY Mellon for the funds to reach their destination in US dollars (because it was its only US dollar correspondent). Had this method not fallen within those listed in Article 865, UBRiR would in any event have not been at fault for using it;

• Garifullin failed to prove that the freezing of the funds to comply with sanctions caused him damage by resulting in permanent financial loss. The Court said that fund freezes caused by foreign sanctions only amount to permanent financial loss if the claimant has applied for (and been refused) a licence for the funds to be unfrozen by the relevant sanctioning state. Mr. Garifullin provided no evidence of having applied for an OFSI licence for the funds to be unfrozen and/or returned to him (as he had requested UBRiR to do after the funds were frozen).

All Russian sanctions-related judgments are on our Russia judgments page.