Sanctions Language In Loan Agreements

The Court of Appeal accepted the High Court`s result, but accepted different considerations. In particular, the Court of Appeal pointed out that the clause in question was a standard concept and that, therefore, the actual context of interpretation played a much more limited role than that assigned by the High Court. While the High Court focused on the concrete intentions of the parties to the Facility Agreement, the Court of Appeal focused on the broader context of core capital agreements within the EU. Given that one of the main drivers of the conversion of the cash market to new risk-free interest rates (RFR) is not to create new LIBOR-related credits, RFRWG`s decision to delay this particular step is important, but unsurprisingly, given the pressure exerted by both lenders and businesses following COVID-19. PDVSA relied in particular on Executive Order 13850 (by President Trump, November 1, 2018, by imposing prohibition sanctions on people working in the gold sector of the Venezuelan economy and creating executive power for other sectors of the Venezuelan economy that will also be blocked in due course) and imposing Executive Order 13884 (August 5, 2019 by President Trump , a general freeze on the freezing of all assets held by the Venezuelan government, including the PDVSA), decreed. The case also raises an interesting point in the blocking regulation. In particular, following revisions to the blocking regulation resulting from the US exit from the Joint Comprehensive Action Plan (JCPOA), EU companies wishing to enter into contracts on terms requiring that the provision not be carried out in a subsequent sanctioned manner must combat ways of ensuring that such a contractual language is “Blocking Regulation”. There is concern that the awarding of contracts on such terms (by both parties) could amount to meeting a requirement or prohibition based on blocked laws. In this regard, the corresponding sanctions regime was the usual Russian regime and, therefore, the blocking regulation was not applicable. The court, however, appears to have considered that a contractual provision that required compliance with U.S. secondary sanctions and potentially other foreign laws – which must logically include laws blocked under the blocking regulation and U.S. and Russian sanctions – did not itself constitute a violation of the blocking regulations.

The applicability of the clause would undoubtedly have been compromised if it had been invoked in the context of secondary sanctions against Iran or Cuba, but it does not appear to have been alleged that the clause itself was illegal, not least because it was implicitly covered by the blocked laws. It does not appear that this point has been argued and, therefore, one should be careful if it is given an inappropriate weight, but it complements the growing number of judicial submissions that will be relevant to the interpretation of the blocking regulation if, ultimately, it is directly taken into account in a measure of litigation or application.

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