🌟 Editor's note

Editor’s Note | Week of 15 December 2025

By Carter Hoffman

It was an exciting week for the TTP, as we finally got the whole team together for our year-end off-site! Our colleagues in the Philippines met up in Manila, while the rest of us dialled in from around the world, and we spent four hours looking back on what we built in 2025 and talking strategy for 2026. We were also joined by a few familiar faces from our editorial board — Pamela Mar, Rebecca Harding, Richard Wulff, and Eleonor Treu — who dropped in to share insights and challenge our thinking. Finally getting the entire team together in the same (virtual) room left us excited for the year ahead.

We didn’t let a little bit of long-term planning stop us pushing out some updates from around the industry. Our coverage throughout the week looked at New York’s UCC Article 12 update for digital assets, the new ICC principles on social and sustainability-linked SCF, and Swift’s latest use of AI to support ISO 20022 adoption. Our Slow Read this week takes a look at the EuroChem ruling and what it means for sanctions and on-demand bonds. We released some new video conversations as well, including Mariya George’s perspective on how AI could finally help solve the industry’s data problem.

A quick reminder before the year gets away from us. Applications for the TTP Awards close on 24 December. If you’ve been meaning to put your name (or someone else’s) forward, now is as good a time as ever to do it!

We’re also hosting a webinar to launch our newest Exporter’s Guide on Tuesday, 16 December at 12:00 GMT. We hope to see many of you there.

Until next time — stay connected.

— The TTP Editorial Team

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Slow Read

The €212 million question: Russia sanctions, EuroChem, and the bonds that banks would not pay

The fertiliser business is rarely front-page news, yet it sits close to the centre of the war in Ukraine, global food security, and, in the past few months, our understanding of how sanctions regimes can be applied in practice.

At ITFA’s Year-end seminar Akshay Misra, Managing Associate, Penningtons Manches Cooper LLP, and Alexandra Shipulina, Legal Counsel, ABC International Bank plc, discussed the case and the implications arising from the court’s decision.

Russia is one of the world’s largest fertiliser exporters. Over the past decade, it has accounted for around 15 per cent of global exports of nitrogen fertilisers and close to one-fifth of trade in the three main fertiliser types. As a result of the sanctions placed on Russia by the West following the country’s invasion of Ukraine in 2022, one particular fertiliser company, EuroChem, found itself fighting a €212 million court case with a pair of European banks.

The EuroChem case

In 2020, EuroChem North-West-2, a Russian project company, hired Italian contractor Tecnimont to build a large fertiliser plant in Kingisepp, a town in Russia about 25km from the country’s border with Estonia. To secure Tecnimont’s performance, Société Générale and ING issued six on-demand bonds (governed by English law) with a combined value of just over €280 million. After Russia’s invasion of Ukraine in 2022, the EU placed EuroChem’s founder, Andrey Melnichenko (in March), and later his wife (in June), under asset-freeze sanctions.

Given the circumstances, Tecnimont suspended work, which EuroChem treated as a default, leading them, in August 2022, to demand payment under the bonds. The banks declined to pay, arguing that any payment would be prohibited under EU sanctions because it would make funds available to a listed individual. 

EuroChem sued in London, assigning the proceeds of the bonds to its Swiss holding company, EuroChem Group AG, under a pre-agreed assignment clause in December 2022. The claim value was around €212 million (note: different case summaries quote between €212-€217 million, depending on interest calculations). 

The case (EuroChem North-West-2 and EuroChem Group AG v Société Générale and ING) is already being treated as a landmark on how sanctions rules interact with on-demand bonds, how far courts will stretch the idea of “control”, and when foreign illegality makes an English law contract effectively unpayable.

At the heart of the dispute were three questions.

1. Is EuroChem “owned or controlled” by Mr or Mrs Melnichenko for EU sanctions purposes, even though the group itself is not designated?

2. If so, are the bonds “frozen” and is payment prohibited under EU law?

3. If payment would be illegal in France or Italy, can an English court still force French and Italian branches of the banks to pay under English law?

The Commercial Court answered all three in ways that will ripple through cross-border finance.

Ownership and control

A central question in the dispute was whether EuroChem should be treated as “owned or controlled” by Andrey or Aleksandra Melnichenko for the purposes of EU asset-freeze rules, even though the EuroChem group itself has never been designated. Under EU Regulation 269/2014, funds must be frozen if they belong to, or are controlled by, a listed person, and no funds may be made available to them, directly or indirectly.

EuroChem’s position was that the group was not a sanctioned entity and should not be treated as one. The company pointed out that ownership had been transferred into a trust structure and later to Mrs Melnichenko, and that the founder had stepped back from formal roles. They argued that these steps meant neither founder nor spouse exercised control in the sense required by the EU regime. EuroChem also noted that EU and UK authorities had never added the company to their sanctions lists, which, in their view, confirmed that the group operated independently.

Supporting the company’s case, the United States’ Office of Foreign Assets Control (OFAC), the agency that administers and enforces sanctions in support of US objectives, issued public guidance stating that EuroChem Group AG is not considered blocked property because it is not majority-owned by listed individuals. Under OFAC’s 50 per cent rule, EuroChem fell outside the scope of US asset-freeze measures.

The banks preferred the EU’s broader view of what classifies as a sanctioned organisation. They said that, in substance, Mr Melnichenko continued to control EuroChem despite the restructuring of ownership. They relied on evidence showing his ongoing influence over strategy, the speed with which ownership changed hands immediately after his designation, and that key decisions still appeared to follow his direction. In the banks’ view, the transfer of shares to his wife did not break that influence. As a result, any payment under the bonds would ultimately make funds available to a listed individual, which EU law prohibits.

The Commercial Court accepted the banks’ view. It took a purposive approach to the EU rules, meaning it applied them in the spirit of preventing sanctioned individuals from accessing funds through corporate structures. The judge examined how the business operated in practice, considering such things as who could influence decision-making, how ownership shifted after sanctions were imposed, and whether the arrangements genuinely limited the founder’s involvement.

On that evidence, the court found that Mr Melnichenko continued to exercise de facto control over the relevant EuroChem entities. As a result, the bonds were treated as funds controlled by a listed person, and paying them would breach the asset-freeze provisions of Regulation 269/2014, even though EuroChem itself had never been designated. 

Ultimately, the court decided that formal ownership structures and company registers may matter less than the reality of who directs the business.

Place of performance

A second issue focused on where the bonds were legally “performed”. Although the bonds were governed by English law, Société Générale and ING issued them through their branches in Paris and Milan. The text required demands to be delivered to those offices. Any payment would also have been processed from those locations.

French and Italian regulators had already informed the banks that the bond proceeds were frozen under EU sanctions and that payment would be unlawful. If France or Italy were the places of performance, the bonds could not be enforced since English law will not compel performance if doing so requires a party to break the law in the country where the act must occur.

EuroChem, therefore, had a strong incentive to argue that France and Italy were not the places of performance. Their position was that, unless the contract expressly fixes a place of payment, the obligation should be treated as performable wherever the beneficiary is located. Under the English law principle that “the debtor must seek the creditor”, payment could be made in Russia, where no local law prevented the banks from honouring the demand. If that were correct, the banks could not rely on French or Italian sanctions restrictions to avoid payment, and the bonds would remain enforceable.

The banks pointed to the wording of the bonds, which required demands to be sent to specified addresses in France and Italy, and to the fact that payment would be made from accounts in those jurisdictions. They also relied on guidance from the French and Italian authorities, who had already told them that any proceeds under the bonds were frozen and that payment would breach EU sanctions law. On that basis, the banks said the place of performance was France and Italy, and that performance there was illegal.

The court agreed with the banks. It held that, for on-demand bonds of this kind, the place of performance is where a compliant demand must be presented and where the bank is required to pay. Because those places were in France and Italy, and because payment there was prohibited under EU sanctions as interpreted by the local authorities, the bonds were treated as unenforceable under English law. Even though English law governed the contract, the court would not order performance that would require the banks to commit an offence in the jurisdictions where payment had to be made.

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Did You Know? 

Under EU sanctions, an entity does not need to be formally designated for restrictions to apply. If a listed individual is found to exercise de facto control over a non-listed company, funds owed to that company can be treated as indirectly controlled by the sanctioned person, meaning payment may be prohibited. The EuroChem ruling confirms that courts will look beyond legal ownership structures to the practical reality of influence and control, a precedent with significant implications for banks, guarantees, and on-demand bonds in cross-border finance.

Till next time,

Trade Treasury Payments (TTP)