UK Court of Appeal Dismisses VTB Bank’s Challenge to OFSI Sanctions Licence in Landmark Insolvency Ruling

The UK Court of Appeal has dismissed an appeal by Russian state-controlled lender PJSC VTB Bank challenging an amendment to a sanctions general licence issued by the Office of Financial Sanctions Implementation (OFSI) concerning the insolvency of its UK subsidiary, VTB Capital plc.

The judgment, handed down on 30 October 2026 in PJSC VTB Bank v HM Treasury [2026] EWCA Civ 1373, addresses the interaction between financial sanctions, insolvency law and the powers of regulatory authorities.

VTB Bank was designated under the UK’s Russia sanctions regime in February 2022, resulting in an asset freeze. Its UK subsidiary entered administration in December 2022, with VTB Bank claiming more than £205 million as a creditor.

Following disagreements over the proposed distribution of assets, the joint administrators requested that OFSI amend the existing general licence. The amendment introduced conditions relating to the treatment of the Bank’s claims, including deductions connected with assets recovered through enforcement proceedings in Russia and certain intra-group receivables.

VTB Bank challenged the amendment, arguing that OFSI had acted unlawfully and interfered with its rights as a creditor. Both the High Court and Court of Appeal rejected the challenge.

Importantly, the Court of Appeal clarified that a sanctions licence is permissive: it allows specified activities that would otherwise breach sanctions restrictions but does not extinguish or determine a designated person’s substantive rights under insolvency law. Those matters remain for the Insolvency Court to decide.

For compliance professionals, the ruling provides important clarification on the limits of sanctions licensing powers and the relationship between asset-freezing requirements and insolvency proceedings. It also highlights the need for financial institutions, insolvency practitioners and legal advisers to distinguish between regulatory permission and substantive legal entitlement.