Update On Russian Sanctions In The BVI

• Published date: 23 November 2022
• Subject Matter: International Law, Export Controls & Trade & Investment Sanctions
• Law Firm: Maples Group
• Author: Mr Adrian Francis, Matthew Freeman and Carl Moran

Sanctions continue to apply against Russian individuals and entities in the British Virgin Islands ("BVI"). A number of recent developments provide insight on how law firms and litigants are navigating the sanctions regime.

Effect of the Sanctions

By way of recap, the UK's sanctions regime has been extended to the BVI by the Russia (Sanctions) (Overseas Territories) Order 2020 (S.I. 2020/1571) (the "OT Order"), as amended. Persons in the BVI are prohibited from dealing with any funds or economic resources owned, held or controlled by a designated person or entity. Since 22 February 2022, the British Government has introduced over 1200 new designations under the Russian sanctions regime.

The effect of the sanctions has meant that law firms are unable to charge designated persons for legal services. The Office of Financial Sanctions Implementation ("OFSI") has confirmed that payment for legal services, including payment for legal services provided on credit, requires a licence from OFSI. In the Virgin Islands, the Office of the Governor is responsible for the licensing regime.

In March 2022, in one of the first judgments ¹ published following the introduction of the OT Order, Jack J refused an application by a BVI law firm to come off the record for JSC VTB Bank ("VTB Bank"), a designated entity. Jack J found that it was incumbent on the legal practitioners to apply for a licence to continue acting. The Judge expressed his view that "even pariahs have rights". In that judgment, Jack J was faced with an application for the discharge of a receivership order made in favour of VTB Bank. The Judge held that the receivership order 'altered' the judgment debt and thus any discharge would amount to dealing with funds owned by VTB. Jack J held that it was not possible lawfully to discharge the receivership order, nor to allow the receivers to take steps to get in the assets for VTB. He concluded that both steps would require a licence from the Governor.

Licence to Receive Payment from Designated Persons

In order to obtain funds from a designated entity, a BVI law firm must apply for a specific licence from the Governor's Office. At least one such licence has been granted to BVI legal practitioners to enable a designated person to pursue legal proceedings. In Alfa-Bank v Kipford², an application for a licence was made to the Governor on 1 April 2022. Alfa-Bank's London-based leading counsel made an application for a licence to OFSI around the same time. The BVI...