V & Anor v K (Re Arbitration Act 1996) [2025] EWHC 1523 (Comm) (19 June 2025)

IntelBrief: Sanctions Intelligence Digest

The case concerns an arbitration dispute over the sale of a vessel (MT vessel) under a Memorandum of Agreement (MOA) worth US$13.1 million.
The defendant, K, terminated the MOA citing US OFAC sanctions imposed on claimant V after V nominated N as buyer.
Claimants V and N argue the MOA was novated to N, who is not sanctioned, thus termination was wrongful.
The arbitration tribunal awarded K the release of a US$1.965 million deposit, subject to OFAC approval.
Claimants challenge the award on grounds of tribunal bias and procedural irregularities under Arbitration Act 1996 sections 67 and 68.
The case highlights the intersection of sanctions law, arbitration jurisdiction, and procedural fairness.

OFAC sanctions on V triggered K’s termination of the MOA on 30 September 2022.
K’s entitlement to the deposit release depends on OFAC permission, underscoring US sanctions control over escrow funds.
N, nominated by V, is not subject to sanctions, complicating the legal status of the MOA and parties’ rights.
Allegations include conflicts of interest involving Reed Smith LLP, the escrow holder and K’s legal representative, raising concerns about sanctions compliance and impartiality.
Sanctions implications are central to the dispute’s merits and procedural challenges.

Potential for arbitration awards to be challenged on jurisdictional and bias grounds when sanctions affect contractual parties.
Risk of tribunal members’ impartiality questioned due to undisclosed relationships with parties’ solicitors amid sanctions-sensitive transactions.
Escrow arrangements involving sanctioned parties may face legal and regulatory scrutiny, risking asset freezes or delayed releases.
Litigation and arbitration may be prolonged by procedural disputes over service validity and extensions, increasing costs and uncertainty.

The case involves UK courts and arbitration seated in London, highlighting London’s role as a key venue for resolving sanctions-related commercial disputes.
US sanctions enforcement via OFAC directly influences UK arbitration outcomes, demonstrating extraterritorial reach of US sanctions.
The dispute reflects tensions between UK commercial law principles and US sanctions policy, with implications for cross-border trade and dispute resolution.
UK courts’ handling of sanctions-related arbitration challenges may affect international perceptions of UK legal reliability amid geopolitical sanctions regimes.

The dispute involves a high-value maritime asset sale ($13.1 million) and a substantial escrow deposit ($1.965 million).
Sanctions-related termination risks disrupting maritime trade finance and escrow mechanisms.
Legal uncertainty over sanctions compliance and arbitration jurisdiction may deter counterparties from engaging in transactions involving sanctioned entities.
Potential delays in deposit release pending OFAC approval could impact liquidity and financial planning for involved parties.

Parties engaged in sanctions-sensitive transactions should ensure full disclosure of all relationships and conflicts to arbitral tribunals to avoid bias allegations.
Legal counsel must rigorously assess sanctions status of all counterparties and nominees before contract execution and dispute resolution.
Escrow arrangements should incorporate clear sanctions compliance protocols and contingency plans for regulatory approvals.
Arbitration clauses should explicitly address sanctions-related jurisdictional challenges and procedural safeguards.
UK legal practitioners should monitor evolving case law on sanctions and arbitration to advise clients on risks and mitigation strategies.

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**Source Notes:**

Case Title: *V & Anor v K (Re Arbitration Act 1996) [2025] EWHC 1523 (Comm)*

Link: https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1523.txt