UK Supreme Court confirms broad reach of Russia sanctions and suspends payment obligations under letters of credit
TLT picks out the key points you shouldn’t miss...
What’s this about?
The UK Supreme Court has handed down a landmark sanctions judgment in UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another; UniCredit Bank GmbH, London Branch v Celestial Aviation Services Ltd [2026] UKSC 10.
The Court confirmed that UK Russia sanctions can suspend payment obligations under letters of credit pending the grant of a licence, and clarified the scope of the statutory civil defence under section 44 of the Sanctions and Anti‑Money Laundering Act 2018 (SAMLA).
The decision has wide implications for banks, payment providers and other financial institutions managing sanctioned exposures.
Our Head of Risk and Financial Crime, Ben Cooper says...
“This judgment reinforces just how widely UK sanctions canoperate. The Supreme Court has made clear that where payments are factuallyconnected to a sanctioned arrangement, firms should expect obligations to befrozen unless and until licensing is in place - with SAMLA providing criticalprotection where decisions are taken reasonably and in good faith.”
The points not to miss...
The Court confirmed that regulation 28(3)(c) of the Russia (Sanctions) (EU Exit) Regulations 2019 can suspend payment obligations under letters of credit while a licence is pending, with the result that statutory interest does not accrue during that period.
No causal link is required between the payment and the prohibited activity. If a payment is factually connected to an arrangement whose object or effect is making aircraft available to Russia, it falls within scope — even where contracts pre‑date the sanctions.
The Court was explicit that sanctions are designed to exert economic pressure on Russia, including by disrupting strategic sectors such as aviation, even where this overrides well‑established principles underpinning financial instruments like letters of credit.
The judgment underlines that licensing — not private interpretation — is the mechanism for mitigating hardship or unintended consequences, reinforcing the need for early engagement with OFSI and other licensing authorities.
Where a firm acts (or omits to act) in the reasonable belief that sanctions prohibit payment, section 44 can provide a defence to claims for the debt itself, interest and associated costs — a critical point for litigation and risk strategy.
At a glance...
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2026. Specific advice should be sought for specific cases. For more information see our terms & conditions.
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