UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another [2026] UKSC 10

UniCredit Bank refused to pay under letters of credit issued for aircraft leases to Russian airlines, citing UK sanctions. The Supreme Court held that regulation 28(3)(c) prohibited payment until licences were obtained, as payments were 'in connection with' arrangements making aircraft available to Russia. Section 44 SAMLA provides protection for reasonable compliance beliefs.

Facts

The case concerned letters of credit issued by Sberbank and confirmed by UniCredit Bank GmbH’s London Branch in connection with civilian aircraft leases to Russian airlines Airbridge and Aurora. Following Russia’s invasion of Ukraine in February 2022, UK sanctions were amended on 1 March 2022 to extend regulation 28(3)(c) of the Russia (Sanctions) (EU Exit) Regulations 2019 to cover civilian aircraft as ‘restricted goods’.

The lessors (Celestial, Constitution 3, and Constitution 5 – Irish entities) terminated the aircraft leases and demanded payment under the letters of credit. Most aircraft remained in Russia without the lessors’ consent. The Bank refused payment, claiming the sanctions prohibited it from doing so until licences were obtained.

Issues

First Issue

Whether regulation 28(3)(c) prohibited the Bank from making payments under the letters of credit before obtaining licences.

Second Issue

Whether section 44 of SAMLA provides protection against actions to recover debt, interest awards, and associated costs when a person reasonably believes they are complying with sanctions.

Judgment

Lord Stephens delivered the unanimous judgment of the Supreme Court, dismissing the appellants’ appeals and allowing the Bank’s cross-appeals.

On Regulation 28(3)(c)

The Court held that the prohibition applies to funds provided ‘in connection with’ arrangements whose object or effect is making restricted goods available to persons connected with Russia. The Court rejected the argument that a causal connection between funds and prohibited supply was required:

“The structure of casting the net wide with a licensing system available to mitigate any unintended consequences serves the purpose of regulation 28(3)(c). The net is cast wide because vital public interests are involved and the arbiter of those interests should be public authorities involved in the licensing process.”

The Court found that the aircraft leases were ‘arrangements’ within the regulation regardless of when they were entered into or whether they had been terminated:

“The object of the leases is unchanged by their termination: it is and always has been the making available of aircraft for use in Russia or to a person connected with Russia.”

On Section 44 SAMLA

The Court held that section 44 provides protection against claims for debt, interest and costs:

“As the Bank’s liability is ‘in respect of’ its omission to pay upon receipt of a compliant demand under the letters of credit, the protection afforded falls within the language used in section 44(2).”

Implications

This judgment establishes that UK financial sanctions cast a deliberately wide net, with the licensing regime serving as the appropriate mechanism to address unintended consequences. Financial institutions must obtain licences before making payments connected to pre-existing arrangements involving sanctioned activities, even where there is no direct causal link between the payment and the prohibited activity. The decision confirms that section 44 SAMLA provides comprehensive protection for those who reasonably believe they are complying with sanctions, including against debt claims, interest and costs.

Verdict: The Supreme Court dismissed the appellants’ appeals, holding that regulation 28(3)(c) prohibited the Bank from making payments under the letters of credit until licences were obtained. The Court allowed the Bank’s cross-appeals, holding that section 44 SAMLA provides protection against actions to recover debt, interest awards, and associated costs.

Source: UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another [2026] UKSC 10