OWH SE i.L v RTI Limited: [2025] JRC 137

This case involves a dispute between OWH SE i.L, a German bank and subsidiary of VTB Russia, and RTI Ltd, a Jersey-incorporated company and member of the Rusal Group. The dispute arose from a currency swap contract under an ISDA Master Agreement, which included provisions for margin calls and early termination in case of default.

Facts:

On 24 February 2022, Russia invaded Ukraine, leading to international sanctions against Russian entities, including VTB Russia.  OWH issued multiple margin calls to RTI, which RTI did not pay, citing concerns about breaching sanctions.  OWH issued a Notice of Early Termination on 23 March 2022, leading to an arbitration award in its favour on 25 September 2024.

Legal Issues:

RTI argued that enforcing the award would be contrary to public policy under Article 46A of the Sanctions and Asset-Freezing (Jersey) Law 2019.  The court had to determine whether the public policy exception applied retrospectively to acts committed before the law came into effect.  The court held that Article 46A did not have retrospective effect and only applied to acts committed after it came into force on 8 June 2022. The court found that RTI’s belief that it was necessary to default on the margin calls to comply with sanctions was not reasonable.  The court emphasised the importance of considering the underlying contract and the public policy objectives of the sanctions law.

The court dismissed RTI’s application to set aside the ex parte order, allowing OWH to enforce the arbitration award. The court found that enforcing the award was not contrary to Jersey public policy, as the relevant acts occurred before the sanctions law came into effect.

Key Takeaways:

Non-Retrospective Application: Public policy exceptions in sanctions laws do not apply retrospectively to acts committed before the law’s enactment.

Reasonableness of Belief: A party’s belief that it is necessary to default to comply with sanctions must be reasonable and well-founded.

Public Policy Considerations: Courts will consider the underlying contract and the broader public policy objectives when determining the enforceability of arbitration awards.

Importance of Documentation: Proper documentation and legal advice are crucial in navigating complex international sanctions and contractual obligations.

Pro-Enforcement Stance: Courts generally adopt a pro-enforcement approach to arbitration awards, reflecting the principles of the New York Convention.