Key Aspects:

• The legal battle centered on the ownership of High Sulphur Vacuum Gasoil (VGO) cargo, claimed by VTB Commodities but contested by Petraco.
• The High Court of Justice in London rendered a pivotal judgment on March 27, 2024, regarding the nature of the Secured Sum in litigation, dismissing VTB Commodities' redemption rights. 
• Crucially, the court clarified that VTB Commodities, controlled by a sanctioned bank (VTB PJSC), had no right to redeem the escrow payments in the dispute.

Background

Who is who in the case

ABFA Commodities Trading Limited (formerly known as VTB Commodities Trading Limited and VTB Commodities Trading DAC) is an Irish-registered company with a branch in Zug, Switzerland. Between 2017 and 2019, it was a subsidiary of PJSC VTB Bank, a major Russian bank, which operated from a branch in Zug, and which, by 2019, had developed a significant oil trading business.

JSC Antipinsky Refinery was Russia's largest stand-alone oil processing plant. It generally processed Urals Crude shipped by pipeline to the refinery, refining it into VGO. On 30 December 2019, Antipinsky was declared insolvent, and it has not played any active part in the proceedings since then.

Petraco Oil Company SA is part of a group of companies founded in Milan in 1972 and is a long-established oil trader. It is located in Lugano, Switzerland.

Parties Narratives

The narrative commenced with decisive action, as VTB Commodities (now operating as ABFA Commodities Trading), formerly a subsidiary of VTB PJSC, pursued an injunctive remedy against its former counterpart, the Antipinsky Oil Refinery, back in 2019. For more details on the reported judgements, please follow the links ([2019] EWHC 3292 (Comm), [2020] EWHC 72 (Comm) and [2021] EWHC 1758 (Comm)). 

The judgments can be summarised as follows: the focal point of the dispute rested upon High Sulphur Vacuum Gasoil (VGO) designated for Petraco, contained on a tanker, which VTB Commodities asserted as rightfully belonging to them.

Petraco, refusing to be sidelined, interjected with a counterclaim, challenging the lawfulness of the injunction and seeking restitution for the losses it incurred due to VTB Commodities' restrictive actions. In response, VTB Commodities launched a counterclaim against Petraco, aiming to restitute losses stemming from prior dealings between Petraco and Antipinsky Oil Refinery.

January to March 2024 Much Awaited Rulings

On January 30, 2024, Mr Justice Foxton rendered the pivotal ruling, thereby bringing an extensive legal dispute to its conclusion.
 

At the core of VTB Commodities' contention rested Petraco's purportedly questionable business dealings. Specifically, VTB Commodities alleged that Petraco engaged in contractual agreements with intermediaries of the Antipinsky Refinery, despite purportedly possessing knowledge of VTB Commodities' prior contractual entitlements to the refinery's output. This scenario, colloquially referred to as a 'double sale,' formed the crux of VTB Commodities' argument.

March 27, 2024 Judgement: the Nature of the Secured Sum in Litigation

In the dispute over ownership of the VGO cargo, the High Court ordered the cargo to be sold and VTB to pay USD 30 million in favor of the court or into their solicitors’ client account (“the Secured Sum") until the dispute is resolved.
 

By a decision issued in January 2024, the High Court granted Petraco's claim in respect of the disputed cargo and found that VTB has no rights or interests in respect of the Secured Sum.
 

In a decision published on March 27, 2024, the High Court ruled that the result of this determination was the cancellation of any right to redemption that VTB might have had in respect of the Secured Sum. Regulation 11 of the Russia (Sanctions) (EU Exit) Regulations 2019 applies to "funds or economic resources owned, held or controlled by a designated person." Funds are "owned, held or controlled" by a designated person if that person has a "legal or equitable interest" in them. The effect of the Justice’s findings is that VTB Commodities has no legal or equitable interest in the Secured Sum. Therefore, the Secured Sum cannot be "owned, held or controlled” by VTB Commodities.

References:

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2024/706.html&query=(sanction) 
https://www.bailii.org/ew/cases/EWHC/Comm/2024/147.html