UK Court Upholds OFSI’s Sanctions Licence Cuts VTB’s £205M Claim to £188M

Case Facts and Legal Findings

VTB Bank, majority-owned by the Russian government, was designated for UK sanctions in February 2022, which froze assets of its UK subsidiary, VTB Capital plc (VTBC). VTBC entered administration in December 2022 under Joint Administrators. [3]

OFSI originally issued a general licence allowing VTBC during the asset freeze to pay for routine maintenance, fees, and to facilitate its administration so that distributions could be made. Over time, that licence was amended to include deductions in any distribution to VTB reflecting assets under its control or assets that VTB had already enforced in Russian courts. These amendments meant VTB’s declared claim (proof of debt) of approximately £205 million would be reduced to an administrator-valued £188 million. [2][3]

VTB challenged the amendment under section 38 of thesanctions law, arguing improper purpose, irrationality, and a breach of fair procedure including Article 6 of the ECHR. The Administrative Court (Judge Collins Rice) dismissed all such challenges. The court held that OFSI acted within its statutory purposes, that the change was rational and lawfully made, and that the process was fair given VTB’s previous non-participation on certain scheme votes and the urgency of the matter.[3]

Strategic Implications

This ruling underscores that sanctions authorities in the UK have wide discretion to alter licensing when insolvency intersects with asset freezes. Sanctioned creditors can expect their claims to be reduced or reordered to protect unsanctioned creditors and to prevent duplication of recovery. The case also illustrates that claiming debt is one thing; enforcing recovery under sanctions constraints is another.

For investors or creditors in entities subject to sanctions, this case signals that legal claims—even when verified—may be substantially discounted or curtailed by regulators’ amendments to licensing regimes. Entities involved in cross-border financial activities must anticipate the interaction of foreign insolvency law, administrative licensing, and sanctions inversion risk.

Open Questions

• To what extent could VTB pursue further legal routes, such as an appeal or alternate jurisdiction or relief under other international law avenues?
• How much of VTB’s “trapped” assets in Russia or elsewhere are enforceable under these UK licensing deductions, and what clarity exists on valuation methodology for those assets controlled by VTB?
• What precedent does this set for other cases where sanctioned and unsanctioned lenders are creditors in structured insolvencies?