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HFW Briefing – English Court of Appeal decision: US secondary sanctions are a “mandatory provision of law”
In Lamesa Investments Limited v Cynergy Bank Limited, the English Court of Appeal has confirmed that US secondary sanctions fall within the common wording “mandatory provision of law” and that Cynergy was complying with them when it withheld payment under a loan facility agreement.
Cynergy borrowed £30m for the provision of Tier 2 Capital under a loan facility agreement (LFA) with Lamesa. Shortly afterwards, the US designated the indirect owner of Lamesa as a specially designated national (SDN).
Under US secondary sanctions, the President may prohibit non-US persons identified to have conducted significant financial transactions with an SDN from maintaining US correspondent accounts. Concerned about the risk of being subject to US secondary sanctions and the implications of this for their business, Cynergy withheld interest payments.
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