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  • Force Majeure in the Middle East: Legal Risks and Practical Realities

    Force Majeure in the Middle East: Legal Risks and Practical Realities

    Force Majeure under English Law

    Force majeure clauses excuse contractual performance when events beyond a party’s control prevent fulfilment of obligations. Under English law, unlike many civil law systems, force majeure has no independent legal existence, it operates solely through express contractual terms. Courts interpret such clauses in a strict and narrow manner, requiring the triggering event to be both unforeseeable and outside the affected party’s reasonable control. The clause must also clearly cover the event in question and ambiguity is often construed against the party seeking relief.

    Key considerations for claiming Force Majeure

    A party seeking to rely on a force majeure clause must first establish that the conflict or related events are within the scope of the contractual clause.

    Foreseeability is also a critical factor. Where the relevant risk was ongoing or reasonably foreseeable at the time the contract was concluded, reliance on Force Majeure may be unsuccessful on the basis that the risk was effectively assumed.

    In addition, the affected party must show that it has taken reasonable steps to mitigate or overcome the impact of the event. Strict compliance with contractual notice provisions is equally essential. Failure to give timely notice, or to respond promptly to a counterparty’s notice, may prejudice a party’s position and, in some cases, be interpreted as acceptance of the claim. A passive “wait and see” approach is therefore not advisable.

    Impact on Energy Sector

    Disruptions in the Strait of Hormuz have led to vessel rerouting, delays, and increased operational risk. To support force majeure claims, parties should carefully document safety to crew and vessels, availability, or lack thereof, of alternative routes, and cost and time implications of rerouting. Many maritime contracts incorporate standardised BIMCO war risk clauses, which may permit shipowners to decline entry into hazardous zones and determine how additional costs arising from route deviations or elevated insurance premiums are to be allocated. The precise wording of these clauses frequently becomes a decisive factor in dispute resolution.

    Key state-owned companies, such as Kuwait Petroleum Corporation and Bahrain’s Bapco Energies, have invoked force majeure clauses, stalling shipments and lowering output following attacks on infrastructure and threats to shipping in the Strait of Hormuz.  Most recently, QatarEnergy declared force majeure on some of its long-term LNG supply contracts amid production and supply disruptions caused by the war between the USA, Israel, and Iran.

    Alternatives to Force Majeure

    If a contract does not have a Force Majeure clause, the doctrine of frustration might apply under English Law. Frustration allows for the agreement to be discharged, but only if performance becomes impossible, illegal, or fundamentally different from what was envisaged. The threshold for this is much higher than that of temporary disruption and/or inability to perform. The courts have applied this doctrine narrowly. In Tsakiroglou v Noblee Thorl [1962], the House of Lords held that a contract was not frustrated by the closure of the Suez Canal even though the only alternative route substantially increased costs, performance remained possible and the contract was not discharged. Similarly, in The Sea Angel [2007], the Court of Appeal reaffirmed that frustration is a doctrine of last resort, applicable only where the change in circumstances is so fundamental that it would be unjust to hold the parties to their contract. Increased costs or operational difficulties alone will not suffice.

    Companies should carefully document all disruptions and their mitigation efforts to substantiate future legal claims.

    Lessons for the future

    In light of recent disruptions, companies should take a proactive and structured approach to risk management by conducting a thorough review of their supply chains and sub-contractor arrangements to identify counterparties exposed to similar risks. Early engagement with these parties can help anticipate and mitigate potential disruptions before they escalate into disputes. It is equally important to ensure alignment and consistency of provisions across contractual frameworks, as gaps between main contracts and subcontracts may leave parties exposed. Attention should be given to strengthening the drafting of force majeure clauses to clearly define triggering events, establish the required causal link between the event and non-performance, and set out detailed procedural requirements, including notice obligations and evidentiary standards. Finally, meticulous record-keeping is essential; maintaining comprehensive documentation of disruptions, communications, and mitigation efforts will be critical in substantiating any future claims or defending against challenges.

    Post-crisis legal phase

    It is important to recognise that the resumption of navigation through the Strait of Hormuz following a period of tension does not bring the legal consequences of the crisis to an end. Rather, it may mark the beginning of a new phase of complex contractual disputes concerning delayed cargo deliveries, altered routes, and increased insurance and transportation costs. The manner in which such disputes are resolved will depend heavily on contractual wording, applicable law, and the chosen dispute resolution forum.

  • Kazakhstan Is Becoming The Go-To Arbitration Destination

    Kazakhstan Is Becoming The Go-To Arbitration Destination

    Kazakhstan is a serious player in international arbitration. The Astana International Financial Centre (AIFC) has built an independent court and arbitration centre that has genuinely attracted international business from across Central Asia, the Middle East, and China.

    I have been advising clients on commercial disputes in Kazakhstan and the surrounding regions for many years, and the pace of change at the AIFC has been striking. When the centre launched in 2018, it was an ambitious project. Today, the International Arbitration Centre (“IAC”) has handled nearly 5,000 cases, with around 90% of those cases having no direct connection to the AIFC itself. This means parties are actively choosing Astana as their arbitration seat.

    This article sets out how the AIFC arbitration framework works, what the interim measures regime looks like in practice, and the practical issues any legal adviser working on Kazakhstan disputes should understand before proceeding.

    The AIFC Framework in Brief

    The AIFC Constitutional Statute gives the AIFC Court exclusive jurisdiction over disputes between AIFC participants, disputes governed by AIFC law, and any commercial dispute that the parties agree to refer. That last category matters. Any two parties, regardless of whether they have any connection to the AIFC, can opt into the AIFC Court and IAC by contract. It is a deliberate feature of the system, designed to attract international business.

    The AIFC Court and IAC operate entirely in English. Proceedings are conducted under English common law principles, and where a moot point arises, the AIFC reverts to English law as its primary source of law. Most of the judges on the court have trained in English law, and that is the tradition they work within. The court will also take account of the law of other common law jurisdictions, including decisions from Singapore, Hong Kong, and Australia, which makes the AIFC’s jurisprudence genuinely familiar to international practitioners.

    The interest in English law is real and growing. Kazakhstan’s legal community has invested substantially in understanding it. This gives UK lawyers acting for parties in the region a practical advantage, as the procedural rules are the same or very similar.

    Availability of interim measures

    The AIFC Arbitration Regulations 2017 (the “Regulations”) contain an unusually clear and well-structured interim measures regime. Under Article 17, it is expressly stated to be compatible with an Arbitration Agreement for a party to apply to the AIFC Court for interim relief, before or during arbitral proceedings. The Tribunal’s constitution does not need to be complete before a party can seek protection from the Court. That is a meaningful difference from many domestic systems.

    Article 27 of the Regulations grants the Arbitral Tribunal the power to order interim measures. Those measures can cover four purposes:

    • Maintaining or restoring the status quo pending the outcome of the dispute
    • Preserving assets from which a future award might be satisfied
    • Taking action to prevent harm to a party or to the arbitral process itself
    • Preserving evidence relevant to resolving the dispute

    Where the Tribunal has already issued an interim order, a party can apply to the AIFC Court of First Instance to enforce it, provided that the Tribunal has given its written permission. Under AIFC Rules 27.30 and 27.31, the application must be made by Arbitration Claim Form, and the Court will not grant enforcement unless the applicant files written evidence of that permission. This is a sensible safeguard against parties using the court to bypass the Tribunal’s authority.

    In practice, the AIFC Court’s interim measures regime compares favourably with Kazakhstan’s domestic civil procedure rules. Under standard domestic practice, interim relief can only be obtained after proceedings have commenced, and a freezing order, once granted, may remain in place for six to eight months with little prospect of the respondent obtaining a discharge before then. The AIFC Court takes a different approach: it is required to schedule a review hearing at the point of granting relief, so the respondent’s position receives prompt consideration.

    The AIFC has developed a body of case law on interim measures. Cases include JSC Astana International Financial Centre Authority v Onyx Heavy Machinery Ltd (AIFC-C/CFI/2020/0004), Metallinvestatyrau LLP v Aksaystroy-2020 LLP (AIFC-C/CFI/2021/0013), LLP “TEMIR ZAT” v Joint Venture “Alaygyr” LLP (AIFC-C/CFI/2023/0046), and, most recently, Caspian Holding FZ-LLC v Gazexport Limited (AIFC-C/CFI/2025/0018). The 2025 energy sector case is particularly telling; it shows that the court is willing to grant relief in commercially sensitive disputes involving gas export arrangements.

    Enforcing Arbitration Awards In Kazakhstan

    The AIFC Court itself has an excellent enforcement record: 205 judgments delivered, with a 100% enforcement rate at the time of writing. AIFC Court orders carry the same legal force as judgments from Kazakhstan’s general jurisdiction courts. For disputes resolved within the AIFC system, enforcement has been reliable.

    The picture is more complicated when it comes to enforcing foreign arbitral awards in Kazakhstan’s domestic courts. Kazakhstan has acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which in principle means that awards made in other Convention states are enforceable in Kazakhstan. In practice, the position is more nuanced. A significant practical rule applies: in general, Kazakh courts will not enforce a foreign arbitration award if the debtor lacks an address or registered presence in Kazakhstan. Enforcement has occurred in some cases, but it is the exception rather than the standard outcome.

    There is also a structural tension in how the New York Convention operates in Kazakhstan. Kazakhstan joined the Convention by Presidential Decree in 1995 rather than by parliamentary ratification, and some Kazakh lawyers argue this means it does not automatically take priority over domestic law under the Kazakh Constitution. Others take the view that the decree still incorporates the Convention into national legislation, and it applies directly.

    Some argue that the mandatory public policy ground for refusal under Article 52(2) of the Law on Arbitration can be applied more broadly than the Convention’s permissive wording allows. From an international law perspective, Kazakhstan is bound by its accession obligations. From the perspective of a creditor trying to enforce in a Kazakh domestic court, that theoretical obligation may offer limited comfort.

    The AIFC is a genuine option for commercial dispute resolution, and for cross-border disputes with a Central Asian focus, it is increasingly the most practical one. The alignment with English law makes it accessible to UK-trained practitioners. The court’s independence, its interim measures framework, and its track record give clients reasonable grounds for confidence.

    That said, the domestic enforcement environment in Kazakhstan remains a distinct issue from AIFC enforcement. If a client’s strategy depends on recovering against a debtor whose assets are in Kazakhstan but who has no registered address there, the enforcement route will need careful planning. There is no automatic path from an arbitral award to a satisfied judgment.

    A few practical points worth keeping in mind:

    • Check whether the AIFC or IAC is specified in the contract. If it is, the AIFC Court’s jurisdiction and the arbitration framework apply directly.
    • For urgent asset protection, an application to the AIFC Court for interim relief before the tribunal is constituted has procedural advantages over domestic Kazakh courts.
    • If enforcement against a debtor in Kazakhstan is needed, investigate the debtor’s registered presence at an early stage. This will significantly shape the enforcement strategy.
    • Any matter involving Russian entities or judgments routed through Kazakhstan requires sanctions law review before any steps are taken.
    • The AIFC’s openness to other common law authorities means that English law arguments, properly framed, will be heard and understood.

    Kazakhstan’s Role in Enforcing Russian Judgments

    One development that deserves close attention is the volume of Russian judgments now being enforced in Kazakhstan. Since the imposition of Western sanctions following Russia’s invasion of Ukraine, Russian entities have found themselves unable to enforce judgments in most European jurisdictions. Kazakhstan has become a practical alternative. Russian companies with commercial relationships in Central Asia or with assets in the region have been seeking enforcement in Kazakh courts.

    For UK-based advisers, this creates a set of questions that require careful thought. Acting in connection with the enforcement of a Russian judgment can raise sanctions compliance issues depending on the identity of the parties, the nature of the underlying contract, and whether any relevant general licences or OFSI authorisations apply. The potential for conflict between Kazakhstan’s openness to Russian enforcement and the UK’s sanctions regime is an area where specialist legal advice is genuinely necessary.

    At Eldwick Law, we advise clients on exactly these types of cases: Kazakhstan arbitration procedure, AIFC enforcement strategy, and the sanctions law questions that often arise alongside them. If you are handling a matter involving Russian entities and Central Asian assets, or if you are instructed in a dispute where Kazakhstan is the enforcement jurisdiction, please do get in touch.

    Where Is Kazakhstan Headed?

    The IAC has signed 125 memoranda of understanding with arbitration institutions across Central Asia, the Middle East, China, and internationally. Those agreements are the mechanism through which the IAC is building the recognition and reciprocal enforcement relationships that give arbitration seats their long-term credibility. The direction of travel is clear.

    For the highest-value energy and infrastructure disputes, London, Geneva, and Stockholm remain the seats specified in legacy contracts, and they continue to attract the most complex cases. For example, the Kashagan oilfield arbitration, with claims now exceeding $160 billion, is registered with the Permanent Court of Arbitration and is being heard by a tribunal in Geneva, with hearings expected to continue into 2028. Kazakhstan also recently won the Karachaganak gas condensate arbitration before the Stockholm Chamber of Commerce, with the consortium of Eni, Shell, Chevron, and Lukoil potentially facing a payout of up to $4 billion.

    The disputes mentioned above concerned older contracts. New agreements, particularly those involving Chinese and Middle Eastern investors in the region, are increasingly selecting the IAC, DIAC, SIAC, or HKIAC. As the AIFC Court’s jurisprudence develops and its reputation outside Central Asia grows, there is every reason to expect the IAC’s share of mid-market and complex regional disputes to increase.

    Get in Touch

    If you are involved in a dispute with a Kazakhstan element, or if you are advising a client on a contract that may give rise to one, I am happy to discuss the legal and procedural options with you. You can reach the team at Eldwick Law by calling +44 (0) 203 972 8469 or emailing mail@eldwicklaw.com. We advise on AIFC arbitration, interim measures applications, enforcement strategy, and the sanctions law issues that frequently arise in Central Asian commercial disputes.

    Frequently Asked Questions

    Can any party use the AIFC Court, or is it restricted to AIFC members?

    Any party can opt into the AIFC Court by agreement, regardless of whether they have any connection to the AIFC or Kazakhstan. Article 13(4) of the AIFC Constitutional Statute expressly allows parties to transfer disputes to the AIFC Court by consent, making it accessible to international commercial parties as a chosen seat.

    How does the AIFC interim measures regime differ from domestic Kazakh courts?

    The AIFC Court allows a party to apply for interim relief before arbitral proceedings have even started, and it schedules a review hearing at the point of granting relief. Under the AIFC Arbitration Regulations 2017, Articles 17 and 27, this dual-track system is expressly preserved. Domestic Kazakh courts can only grant interim measures after proceedings commence, and freezing orders can remain in place for up to six to eight months without readily available discharge.

    Will a foreign arbitral award be enforced in Kazakhstan?

    Kazakhstan is a party to the New York Convention, so foreign arbitral awards are in principle enforceable. In practice, Kazakh courts generally require the debtor to have a registered address or presence in Kazakhstan before granting enforcement. This has been the prevailing approach, though enforcement has been achieved in some cases without it. The position should be assessed carefully based on the facts.

    What law does the AIFC Court apply?

    The AIFC Court applies English common law as its primary reference point. Where a legal question is not resolved by AIFC legislation or rules, the court turns to English law. It will also take into account decisions from other common law jurisdictions, including Singapore, Hong Kong, and Australia. Full details of the court’s legal framework are available at court.aifc.kz.

    How does the enforcement of Russian judgments in Kazakhstan affect sanctions compliance?

    Russian entities unable to enforce in European courts have been seeking enforcement in Kazakhstan. If a UK-based adviser or party is involved in such proceedings, they need to assess whether acting in connection with the Russian judgment or entity raises issues under the UK sanctions regime. Whether a relevant OFSI licence is required will depend on the specific facts, the identity of the parties, and the nature of the underlying transaction. OFSI guidance is available at gov.uk/ofsi.

  • What UK Businesses Need to Know About Secondary Sanctions on China

    What UK Businesses Need to Know About Secondary Sanctions on China

    The 2026 sanctions on China – update

    The UK’s approach to China sanctions has shifted significantly over the past two years. Where the UK once confined its China-related sanctions to a handful of entities linked to human rights abuses or cyber threats, it now regularly designates Chinese companies under the Russia sanctions regime for facilitating circumvention of export controls and supplying restricted goods. This represents a form of secondary-style sanctions: measures directed at third-country entities whose activities support a primary sanctions target.

    This approach sits within the Government’s broader “Protect-Align-Engage” framework for managing the UK-China relationship, articulated in the 2023 Integrated Review Refresh. That framework acknowledges China’s economic importance while committing to robust action against threats to national security. The February 2026 sanctions package is the clearest expression yet of how the “Protect” pillar operates in practice. The UK Government sanctioned 240 entities, seven individuals, and 50 ships on 24 February 2026, the fourth anniversary of Russia’s full-scale invasion of Ukraine. Among the designated entities were Chinese companies, including Xiefeng (HK) International Electronics, Yibin Vector Electronic Technology, Beijing Xichao International Technology, and Shandong Future Robot, each accused of supplying goods or technology to Russia’s defence sector.

    Sanctions framework and primary legislation

    The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) provides the statutory basis for UK sanctions regimes. It empowers ministers to make, amend, and revoke sanctions regulations by statutory instrument. The principal instrument relevant to China-related designations is the Russia (Sanctions) (EU Exit) Regulations 2019, as amended.

    A critical development came with the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2024, which came into force on 31 July 2024. These regulations materially broadened the criteria for designation. New regulation 6(4)(f) allows the Secretary of State to designate any person “providing financial services, or making available funds, economic resources, goods or technology” to a person already falling within the existing designation criteria. This expansion enabled the UK to designate foreign entities, including Chinese companies acting as supply chain intermediaries, without establishing a direct connection to the Russian state. It also captured those engaged in circumvention or facilitation of sanctions breaches, even where their activities took place entirely outside UK territory.

    Since 28 January 2026, the UK Sanctions List maintained by the Foreign, Commonwealth and Development Office (FCDO) is the sole official source for designations. The former OFSI Consolidated List of Asset Freeze Targets has been retired. Businesses must ensure their screening systems draw exclusively from the UK Sanctions List.

    Secondary sanctions on China

    The UK designates Chinese entities through asset freezes under the Russia sanctions regime. The mechanism operates by identifying companies acting as circumvention hubs for restricted goods, particularly dual-use electronics, machine tools, microprocessors, and components used in weapons systems.

    The trajectory of designations over 2025 and 2026 illustrates the acceleration. In February 2025, the UK designated eleven Chinese entities as part of its largest sanctions package at that time, including ACE Electronic (HK) Co Ltd, GSK CNC Equipment Co Ltd, and Poly Technologies Inc, for supplying machine tools, microelectronics, and dual-use technology to Russia’s defence sector. In December 2025, a separate set of cyber-related designations targeted Sichuan Anxun Information Technology Co Ltd (known as i-Soon) and Integrity Technology Group for carrying out indiscriminate cyberattacks against government and private-sector IT systems worldwide.

    Then came the February 2026 package, which added a further tranche of Chinese companies to the UK Sanctions List for their roles in supplying the Russian military-industrial complex.

    Beijing’s response has been consistent and sharp. The Chinese Ministry of Commerce stated in March 2026 that the UK has “repeatedly imposed sanctions on Chinese companies under the pretext of Russia-related issues” and described them as “unilateral sanctions that lack a basis in international law.” It warned that China would “take necessary measures to safeguard its business interests.” The Chinese Embassy in London issued similar protests in October and December 2025.

    Enforcement and regulatory bodies

    Two principal bodies enforce UK sanctions: OFSI and OTSI.

    The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, is responsible for implementing and enforcing financial sanctions in a civil capacity. It has the power to impose civil monetary penalties of up to the greater of £1,000,000 or 50 per cent of the estimated value of the breach. In January 2026, OFSI published a penalty notice imposing a £160,000 fine on Bank of Scotland for breaching regulations 11 and 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 by processing 24 transactions for an account belonging to a designated person. The bank benefited from a 50 per cent discount for voluntary disclosure.

    The new discount structure introduced by the Office of Financial Sanctions Implementation (OFSI) in February 2026 significantly reforms the calculation of civil monetary penalties. While the headline discount for voluntary disclosure has been reduced, the new framework allows for cumulative discounts that can reduce a baseline penalty by up to 70 per cent.

    The Office of Trade Sanctions Implementation (OTSI), part of the Department for Business and Trade (DBT), became operational in October 2024 and is responsible for the civil enforcement of trade sanctions. OTSI works in parallel with HMRC, which retains responsibility for criminal enforcement of trade sanctions and for export controls relating to physical exports and imports. OTSI’s regulatory reach extends beyond UK borders to UK businesses and traders operating abroad.

    Critically, the UK’s sanctions enforcement regime operates on a strict liability basis. Civil penalties can be imposed without requiring proof that the business knew, or had reasonable cause to suspect, that it was in breach of sanctions. This applies to both OFSI and OTSI enforcement.

    Case law and legal precedents

    Two recent legal developments are particularly relevant to businesses assessing their sanctions exposure.

    In Fridman v Agrofirma Oniks LLC EWCA Civ 139, the Court of Appeal held that the English courts lack personal jurisdiction over a sanctioned person who is indefinitely barred from entering the UK. Mr Fridman, designated under the Russia Regulations in March 2022, had his leave to remain cancelled, and the Court found that his absence from the jurisdiction could not be regarded as “temporary.” The claimants would need to apply for permission to serve proceedings out of the jurisdiction. This ruling has practical consequences for anyone seeking to bring claims against sanctioned individuals formerly resident in England.

    On damages for wrongful designation, the Economic Crime (Transparency and Enforcement) Act 2022 amended SAMLA to cap damages in designation challenge proceedings. The Sanctions (Damages Cap) Regulations 2022 set the cap at £10,000, and damages are only available where the claimant proves that the designation was made in bad faith. The cap may be disapplied where necessary to protect the individual’s Convention rights, but the threshold remains deliberately high. This significantly limits the Government’s financial exposure to claims arising from designation decisions.​

    How can UK businesses ensure compliance?

    Having spent many years advising clients on sanctions law, it is clear to me that sanctions compliance in 2026 demands more than periodic screening against the UK Sanctions List. Businesses with any exposure to Chinese counterparties, supply chains, or intermediaries should consider the following measures:

    • Conduct enhanced due diligence (EDD) on ownership and control structures. OFSI’s February 2026 call for evidence highlights that assessing whether a designated person exercises, or could exercise, control over an entity remains one of the most challenging areas for compliance teams. Firms should not rely solely on corporate registry data but should investigate the full chain of beneficial ownership.
    • Map supply chains to identify opaque intermediaries in third countries or overseas territories that may be routing goods or technology to China and onward to Russia. OTSI’s guidance on circumvention red flags provides a useful starting point for freight, shipping, and manufacturing businesses.​
    • Report suspected breaches to OFSI or OTSI “as soon as practicable.” For firms subject to mandatory reporting obligations, prompt disclosure carries material benefits: Bank of Scotland’s penalty was reduced by 50 per cent because it self-reported promptly.
    • Monitor the UK Sanctions List in real time. With designations issued at irregular intervals and sometimes with little advance notice, businesses cannot rely on monthly or quarterly screening cycles. Automated screening tools that draw directly from the FCDO’s UK Sanctions List are essential.​
    • Train staff at all levels to recognise sanctions risk indicators, particularly those working in procurement, trade finance, payments, and export compliance. The strict liability standard means that a lack of awareness is not a defence.​

    Wrapping up

    The UK’s willingness to designate Chinese entities under the Russia sanctions regime shows no sign of slowing. Designation volumes have increased markedly in each successive package, enforcement infrastructure through OFSI and OTSI is maturing, and the regulatory focus on ownership and control is intensifying. Businesses that trade with Chinese counterparties, source components from Chinese suppliers, or operate in sectors with complex international supply chains face a higher compliance burden than at any point since SAMLA came into force.

    My clients who have developed the most effective response view their compliance programme relating to sanctions risks as dynamic rather than static. They monitor the UK Sanctions List continuously, apply robust due diligence to ownership structures, and adapt swiftly to new designations.

    If you have a business with significant China exposure, taking specialist legal advice is the best way to ensure your commercial decisions remain lawful under an ever-expanding sanctions regime.

    Frequently asked questions

    Has the UK imposed direct sanctions on China as a country?

    No, the UK has not imposed a country-wide sanctions regime against China. The designations of Chinese entities have been made under the Russia sanctions regime (and, separately, the cyber sanctions regime). They target specific companies and individuals identified as facilitating Russia’s war effort or conducting hostile cyber operations, rather than Chinese commerce as a whole.

    Can a UK business be penalised for a sanctions breach it did not know about?

    Yes, the UK’s sanctions enforcement regime operates on a strict liability basis. OFSI and OTSI can impose civil monetary penalties without establishing that the business knew or had reasonable cause to suspect that a breach had occurred. This makes robust screening and due diligence essential for all UK businesses.

    What is the UK Sanctions List and how has it changed?

    Since 28 January 2026, the UK Sanctions List maintained by the FCDO is the sole official source for UK sanctions designations. It replaced the previous dual-list system, which included the OFSI Consolidated List of Asset Freeze Targets. Businesses must ensure that their compliance systems now draw exclusively from the UK Sanctions List.

    What should a business do if it suspects a sanctions breach?

    Report the suspected breach to OFSI (for financial sanctions) or OTSI (for trade sanctions) as soon as practicable. Prompt voluntary disclosure can result in a significant reduction in any penalty. Bank of Scotland received a 50 per cent discount on its penalty for self-reporting. Businesses should also seek specialist legal advice before taking any further steps in connection with the relevant transaction.

    How has China responded to UK sanctions on Chinese companies?

    China has consistently condemned the designations. The Chinese Ministry of Commerce described them in March 2026 as “unilateral sanctions that lack a basis in international law” and warned that China would “take necessary measures to safeguard its business interests.” China’s Anti-Foreign Sanctions Law of the People’s Republic of China also provides a legal framework for retaliatory measures against foreign sanctions. However, China has so far confined its response to diplomatic protests.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    This article does not constitute legal advice. For further information, please contact our London office.

  • Upcoming Event – How Arbitration Friendly is Kazakhstan?

    Upcoming Event – How Arbitration Friendly is Kazakhstan?

    Rashid Gaissin will be co-moderating the “How Arbitration Friendly is Kazakhstan?” event, hosted by Latham & Watkins in association with the CIArb London Branch and the British-Kazakh Law Association.

    This event will bring together leading practitioners to discuss the evolving arbitration landscape in Kazakhstan and its attractiveness as a dispute resolution hub. It promises to offer valuable insights for professionals involved in international arbitration and cross-border disputes.

    Invitation document on Linkedin

  • Drafting and Enforcement Jurisdiction Clauses in International Contracts

    Drafting and Enforcement Jurisdiction Clauses in International Contracts

    A jurisdiction clause is a contractual provision that specifies which court has authority to resolve disputes between the parties. In cross-border commerce, where multiple legal systems may claim a connection to a transaction, these clauses provide the certainty that commercial parties need. Without one, a party may find itself defending proceedings in an unexpected or hostile forum, facing unfamiliar procedural rules and high additional costs.​

    The risk of so-called “torpedo” litigation, where a party pre-emptively commences proceedings in a slow-moving court to frustrate the other side’s claims, makes careful drafting essential. The High Court of Justice and the Commercial Court in London enjoy a global reputation for judicial independence, procedural rigour, and expertise in complex commercial matters. For these reasons, parties to international contracts frequently choose England and Wales as their forum for dispute resolution.

    Types of jurisdiction clauses

    There are three principal forms of jurisdiction clause used in international commercial contracts, each with different consequences for enforcement.

    Exclusive jurisdiction clauses

    These require both parties to bring proceedings only in the courts of England and Wales. They provide maximum certainty and, critically, trigger the protections of the 2005 Hague Convention on Choice of Court Agreements. Under that Convention, contracting states must give effect to the parties’ chosen court and refuse jurisdiction where proceedings are brought elsewhere in breach of the agreement. In Donohue v Armco Inc [2001] UKHL 64, the House of Lords confirmed that where parties have bound themselves by an exclusive jurisdiction clause, effect should ordinarily be given to that obligation in the absence of strong reasons for departing from it.

    Non-exclusive jurisdiction clauses

    These allow one or both parties to bring proceedings in England and Wales, while preserving the right to commence proceedings in another competent court. They offer flexibility but, until recently, lacked a clear international enforcement framework following Brexit.

    Asymmetric (or unilateral) jurisdiction clauses

    These are common in finance transactions. They typically allow one party (usually a lender) to sue in any competent court while restricting the other to a specified jurisdiction. In Commerzbank AG v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm), the English Commercial Court upheld the validity of an asymmetric clause and treated it as an exclusive jurisdiction agreement for the purposes of the Brussels Recast Regulation. Practitioners should be aware, however, that some civil law jurisdictions have historically viewed asymmetric clauses with scepticism. The French Cour de cassation in Mme X v Société Banque Privée Edmond de Rothschild (2012) appeared to decide that such clauses were ineffective. However, the CJEU subsequently upheld their validity in EU law.

    The European Bank for Reconstruction and Development (EBRD) uses what is, in substance, an asymmetric dispute resolution clause in its standard loan documentation. The EBRD’s model provisions typically require the borrower to submit to a specified dispute resolution mechanism, such as LCIA arbitration seated in London, whilst reserving to the EBRD (or its co-lenders) the right, at their election, to refer disputes instead to the exclusive jurisdiction of the courts of England and Wales. The EBRD may also commence proceedings in any other court of competent jurisdiction and take concurrent proceedings in multiple jurisdictions. This structure, which mirrors the Loan Market Association (LMA) standard form, reflects the commercial reality of development finance: the lender requires maximum flexibility to enforce its rights wherever the borrower’s assets may be located, whilst the borrower accepts a single, predictable forum. Practitioners drafting jurisdiction clauses in EBRD-financed transactions should ensure that any asymmetric provisions are consistent across all finance documents, including intercreditor agreements and security documentation.

    Drafting best practices

    In my experience, precision in language is the single most important factor in drafting an effective jurisdiction clause. When I draft clauses, I ensure they refer to “the Courts of England and Wales” rather than vague formulations such as “UK Courts” or “a friendly jurisdiction.” This is important because the UK comprises three separate legal jurisdictions (England and Wales, Scotland, and Northern Ireland), and imprecise wording can create genuine ambiguity about which court system the parties intended.​

    I also ensure that the scope of the clause is broad enough to capture the full range of potential claims. A formulation such as “any dispute arising out of or in connection with this contract, including any question regarding its existence, validity, or termination” will cover both contractual and non-contractual claims, such as tortious or restitutionary claims arising from the same relationship.

    In addition, appointing a process agent in England is strongly advisable where one or more parties are domiciled abroad. Without a process agent, a claimant may face the expense and delay of seeking the court’s permission to serve proceedings overseas under the Civil Procedure Rules (CPR). Since April 2021, CPR 6.33(2B)(b) provides that permission is not required to serve a claim form out of the jurisdiction where jurisdiction is founded on any choice of court agreement in favour of the courts of England and Wales, but practical difficulties in effecting service abroad can still cause significant delay.

    Finally, all contractual terms relating to jurisdiction must be consistent. In multi-document transactions, conflicting jurisdiction terms in standard terms, purchase orders, or invoices can give rise to “battle of the forms” arguments. I ensure that any jurisdiction clauses are clearly identified and cross-referenced across all relevant documents.

    The enforcement framework post-Brexit

    The UK’s departure from the EU meant that the Brussels Recast Regulation and the Lugano Convention ceased to apply. This created uncertainty about how English judgments would be enforced in EU member states, and vice versa. The enforcement framework is now built on two international conventions and, where those do not apply, on common law rules.​

    The 2005 Hague Convention on Choice of Court Agreements is the primary vehicle for enforcing English judgments in contracting states where the underlying contract contained an exclusive jurisdiction clause concluded after 1 January 2021. It requires the chosen court to exercise jurisdiction and obliges courts in other contracting states to refuse to hear the case and to recognise the resulting judgment.

    The Hague Judgments Convention 2019, which entered into force in the UK on 1 July 2025, closes a significant gap. It applies to judgments arising from proceedings commenced on or after that date, and its scope expressly includes non-exclusive and asymmetric jurisdiction clauses, while excluding exclusive clauses to avoid overlap with the 2005 Convention. The Convention has been implemented into UK law through amendments to the Civil Jurisdiction and Judgments Act 1982. As of early 2026, contracting states include the EU (except Denmark), Ukraine, Uruguay, Albania, and (from March 2026) Montenegro.

    Where neither Convention applies, enforcement of English judgments abroad depends on the domestic law of the relevant foreign state. In some jurisdictions, this process is relatively straightforward; in others, it can be protracted and uncertain. Therefore, I conduct an enforcement risk assessment at the drafting stage, considering where the opposing party’s assets are located and which enforcement routes will be available in those jurisdictions.

    Practical challenges and remedies

    When a party commences proceedings in a foreign court in breach of a jurisdiction clause, the English courts have the power to grant an anti-suit injunction under section 37 of the Senior Courts Act 1981. This is an order restraining a party from pursuing or continuing foreign proceedings. In The Angelic Grace [1995]1 Lloyd’s Rep 87, Lord Millett stated that there is “no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.” Breach of an anti-suit injunction constitutes contempt of court and carries the risk of significant fines, asset freezes, or even imprisonment.

    The doctrine of forum non conveniens, as established in Spiliada Maritime Corp v Cansulex Ltd 1 AC 460, allows a court to stay proceedings if the defendant establishes that another forum is “clearly or distinctly more appropriate.” If the defendant discharges that burden, the claimant may still resist a stay by demonstrating a real risk of being unable to obtain substantial justice in the alternative forum. Where an exclusive jurisdiction clause is in place, however, the court will ordinarily give effect to the agreement unless the party seeking to depart from it can show “strong reasons” for doing so.

    The recent decision in Alimov v Mirakhmedov [2024] EWHC 3322 (Comm) illustrates the Spiliada principles in action. The dispute arose from an alleged oral agreement concerning a bitcoin mining joint venture in Kazakhstan. Although the claimant established a plausible case that the agreement was formed in London, the Commercial Court stayed the proceedings on forum non conveniens grounds, finding that Kazakhstan was “clearly and distinctly more appropriate” than England. The court emphasised that the claims were governed exclusively by Kazakh law, that the parties had substantial connections to Kazakhstan, that the location of the relevant events and assets was in Kazakhstan, and that the majority of witnesses and documents were in Russian or Kazakh. The claimant’s connections to England were found to be relatively slight and insufficient to outweigh Kazakhstan’s strong links to the dispute. The court also found no cogent evidence of a real risk of substantial injustice in the Kazakh courts. Alimov v Mirakhmedov reinforces the principle that a tenuous jurisdictional hook, such as the location of a single meeting, will not suffice where the overwhelming weight of connecting factors points to a foreign forum.

    English courts also provide a strategic advantage through interim relief. Freezing orders (Mareva injunctions) can prevent a party from dissipating assets before judgment, and disclosure orders can compel the provision of information about assets worldwide. These remedies can be obtained rapidly, often on a without-notice basis, and are available to support both English and foreign or arbitration proceedings.

    Action points for those entering into international contracts

    Parties entering into international contracts should treat the jurisdiction clause as a core commercial term. The following practical steps will help protect their position:

    • Take legal advice before signing any contract containing a jurisdiction or governing law clause, particularly where the counterparty’s standard terms may include a competing clause.
    • Review existing contracts to ensure jurisdiction clauses are enforceable under the current Hague Convention framework. Pre-2021 exclusive clauses that pre-date the UK’s accession to the 2005 Convention may face enforceability challenges in some EU member states.
    • Conduct an enforcement risk assessment at the outset: identify where the opposing party’s assets are located and confirm that an English judgment can be enforced there, either under a Convention or under local law.
    • Ensure consistency between the jurisdiction clause and the governing law clause. Specifying the courts of England and Wales but choosing a foreign governing law, or vice versa, can create unnecessary complexity.
    • Act quickly if proceedings are commenced abroad in breach of the clause. Delay weakens the prospects of obtaining an anti-suit injunction and may be treated as acquiescence.​

    The outlook for English jurisdiction clauses

    The entry into force of the 2019 Hague Judgments Convention has materially strengthened England’s position as a forum for international commercial disputes. The gap left by Brexit for non-exclusive and asymmetric clauses is now substantially closed, and the Convention’s membership is expected to grow. As courts in contracting states begin to apply the Convention, a body of case law will develop, providing further clarity on its practical operation.​

    England and Wales continue to offer a combination of qualities that few jurisdictions can match: an independent and expert judiciary, a mature body of commercial law, powerful interim remedies, and a well-resourced enforcement framework. Practitioners should ensure that every international contract contains a clearly drafted jurisdiction clause, paired with an express governing law clause. Those two provisions, working together, remain the most effective means of securing commercial certainty in cross-border transactions.

    Frequently asked questions

    What is the difference between an exclusive and a non-exclusive jurisdiction clause?

    An exclusive jurisdiction clause requires both parties to bring any dispute only before the specified courts. A non-exclusive clause gives one or both parties the right to sue in the specified courts, but does not prevent proceedings elsewhere. Exclusive clauses offer greater certainty and benefit from the enforcement regime under the 2005 Hague Convention.

    Are asymmetric jurisdiction clauses enforceable in England and Wales?

    Yes, the English courts have consistently upheld asymmetric clauses. In Commerzbank AG v Liquimar Tankers Management Inc EWHC 161 (Comm), the Commercial Court confirmed their validity. It gave them the protection of an exclusive jurisdiction agreement under the Brussels Recast Regulation. Some civil law jurisdictions have historically taken a different view, so practitioners should check the position in relevant foreign courts.

    How does the 2019 Hague Convention improve the enforcement of English judgments?

    The 2019 Convention, in force in the UK since 1 July 2025, provides a framework for the recognition and enforcement of judgments between contracting states that covers non-exclusive and asymmetric jurisdiction clauses. Previously, the 2005 Convention covered only exclusive clauses, leaving a significant gap following Brexit for other types of jurisdiction agreements.

    What can I do if the other party starts proceedings abroad in breach of our jurisdiction clause?

    An application for an anti-suit injunction from the English courts is the primary remedy. This will order the other party to cease or refrain from commencing the foreign proceedings. The application should be made promptly, as delay can be fatal. Breach of the injunction amounts to contempt of court.

    Should I always pair a jurisdiction clause with a governing law clause?

    Yes, a jurisdiction clause determines where disputes are heard, while a governing law clause determines which legal principles the court applies. Without an express governing law clause, the court will apply its own conflict-of-laws rules to determine the applicable law, which may yield an unexpected result. Including both clauses ensures the court applies the substantive law the parties intended.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    This article does not constitute legal advice. For further information, please don’t hesitate to get in touch with our London office.

  • Infinni Innovations SA v OFMS Ltd & Ors [2026] EWHC 470 (Comm)

    Infinni Innovations SA v OFMS Ltd & Ors [2026] EWHC 470 (Comm)

    Eldwick Law acted for the Defendants in Infinni Innovations SA v OFMS Ltd & Ors [2026] EWHC 470 (Comm), in which Mr Justice Saini handed down judgment on 3 March 2026 following a three-day hearing in the Commercial Court.

    The dispute arises from the OnlyFans creator economy and the use of customer relationship management platforms by agencies to manage communications with subscribers on behalf of creators. The Claimant alleges that information was unlawfully accessed and extracted from its platform. The Defendants contest those allegations, relying on the position that agencies authorised the transfer of relevant material in the context of platform migration.

    The Court continued interim relief until trial but accepted that the terms of the injunction required refinement. In particular, the Court narrowed the scope of the restraints, recognising the importance of the practical consequences for parties beyond the immediate litigation, including agencies and creators operating within the OnlyFans ecosystem. The Court also declined to order the broad disclosure affidavit sought by the Claimant and instead directed affidavit evidence in a more limited form.

    The claim will now proceed towards trial.

    The judgment can be accessed at Infinni Innovations SA v OFMS Ltd & Ors [2026] EWHC 470 (Comm)

    Barristers’ update: Judgment handed down in Infinni Innovations SA v OFMS Ltd & Ors | Maitland Chambers

  • Dubai International Financial Centre (DIFC) | Setup, Tax & Legal Framework

    Dubai International Financial Centre (DIFC) | Setup, Tax & Legal Framework

    The Dubai International Financial Centre (DIFC) is now considered one of the world’s top financial hubs, attracting multinational corporations, startups, family offices, and professional service firms from across the globe. The centre is home to major global banks, insurance firms, asset managers, fintech pioneers, law firms, and professional service providers. The DIFC now has over 6,150 active registered companies employing more than 43,800 professionals. As a specialist UAE dispute resolution firm with multilingual practitioners experienced in common law jurisdictions, we regularly act for clients in complex, high-value DIFC-related matters. In this article, we will explain why investors are choosing Dubai and the main legal factors to consider when setting up a DIFC company.

    Why investors choose the DIFC

    The DIFC has become a real international hotspot for commercial transactions. It operates as an independent free zone within the UAE that is governed by its own rules and overseen by its own regulator, the Dubai Financial Services Authority (DFSA). This means DIFC companies operate under a separate legal and regulatory framework (not the civil law system) of mainland UAE, but English common law principles.

    Unlike mainland UAE, which often requires a local sponsor or partner, DIFC permits 100% foreign ownership. Foreign investors retain full control of their company without a local equity requirement. Profits and capital can be repatriated without restriction.

    Companies incorporated in DIFC benefit from a 50-year guarantee of zero tax on corporate income and profits. There is no capital gains tax, no withholding tax on dividends or interest, and no personal income tax for employees.

    The DIFC also places no restrictions on repatriating earnings or capital, meaning that profits, dividends, and returns can be moved freely outside the UAE without additional government charges. This is important for multinational firms and investment funds managing capital across multiple jurisdictions. The UAE maintains an extensive network of double taxation treaties with countries across Asia, Europe, the Middle East, and Africa. This, combined with DIFC’s zero-tax, allows investors to structure easy and transparent cross-border investments. For family offices, asset managers, and holding companies, this creates considerable opportunities for tax-efficient wealth management and investment.

    Other benefits include:

    • Geography – Dubai’s geography makes it a natural point for doing business across the Middle East, Africa, and South Asia. Many investors use a DIFC company as a regional operating base rather than conducting all activities within the free zone itself. DIFC entities often serve as the coordinating hub, holding regional assets and managing cross-border transactions.
    • Banking – DIFC companies also typically have fewer obstacles opening accounts with international banks compared to entities in less-regulated jurisdictions. Banks recognise DFSA oversight as meeting their compliance standards. This matters practically for firms that need reliable international banking relationships.
    • Property – DIFC has a separate property law framework. Investors can hold real estate directly (office space, warehouses, investment properties) with transparent ownership rules and straightforward transfer processes. Mortgages and financing operate as in other common law jurisdictions. Alternatively, DIFC Real Estate Investment Trusts allow indirect property investment through a regulated structure.
    • Digital assets – The DIFC has developed regulatory frameworks for digital assets, tokenisation, and blockchain-based investment vehicles. Firms operating in these sectors can establish licensed operations with defined rules.

    The legal framework in the DIFC

    The DIFC Courts apply English common law principles and conduct proceedings in English. This means companies and investors familiar with English law find themselves on familiar ground when it comes to precedents, contracts, and dispute resolution. Indeed, the DIFC Courts have now become a preferred venue for complex cross-border disputes because of their pro-enforcement stance.

    In terms of regulatory oversight, the DFSA is the DIFC’s independent regulatory authority. All authorised financial services firms in DIFC are required to meet strict corporate governance standards, undergo regular supervision, and maintain robust systems and controls. This benefits all investors by ensuring stakeholders, service providers, and fund managers operating in DIFC are subject to robust regulations.

    Licensing frameworks in the DIFC

    The DIFC does not apply the same regulatory rules to every business. A holding company structure, for example, faces lighter oversight than a bank that manages client money and takes on credit risk. The regulator calibrates its approach based on what the business actually does and the risks that come with it. Examples of the different DIFC regulatory models include:

    Licence Type

    What it covers

    Banking

    Taking deposits, lending money, and providing core banking services

    Investment / Dealing in Investments

    Arranging, advising on, or trading shares, bonds, derivatives, and similar products

    Asset Management

    Managing investment portfolios for clients

    Fund Management

    Setting up and running investment funds

    Financial Advisory / Wealth Management

    Giving advice on investments and financial products

    Insurance / Reinsurance

    Providing insurance, reinsurance, or insurance intermediation services

    Brokerage

    Executing trades on behalf of clients

    Custody

    Holding and safeguarding client assets such as securities

    Islamic Finance

    Offering Sharia-compliant financial services

    Final words

    While there are many benefits of investing in the DIFC, establishing in this region requires careful planning in terms of business structure, licensing category, regulatory requirements, and ongoing compliance. These all depend on your specific business model and investment goals. Professional guidance from legal advisors familiar with DIFC law, tax specialists, and regulatory consultants is essential to maximise the benefits and avoid potential pitfalls.

    Eldwick Law advises on DIFC and UAE disputes, including cross-border enforcement, recognition of judgments and arbitral awards, freezing injunctions, and commercial litigation across the region’s financial centres. As a specialist dispute resolution firm with multilingual practitioners experienced in common law jurisdictions, we regularly act for clients in complex, high-value DIFC-related matters. If you are involved in a dispute connected to DIFC or require guidance on structuring investments in the UAE’s financial centres, contact our team.

    Frequently Asked Questions

    Do I need a local partner to establish a DIFC company?

    No, one of DIFC’s key advantages is that it allows 100% foreign ownership without requiring a local UAE sponsor or partner. This is different from mainland UAE, where many business activities require a local partner or agent.

    How long does it take to incorporate a DIFC company?

    The process typically takes 5 to 10 business days. For some entities like prescribed companies or innovation licenses, incorporation can be even faster. The exact amount of time depends on the license type, completeness of documentation, and any regulatory approvals required. Your corporate service provider or legal advisor can give you a precise estimate based on your business model.

    What are the minimum capital requirements for a DIFC company?

    Capital requirements vary by license type. For many general business licenses, there is no set minimum capital requirement. However, financial services licenses (banking, insurance, asset management) typically require capital deposits often in the range of AED 50,000 – 500,000 or more. Prescribed Companies have very low capital requirements.

    Can I operate my DIFC company from outside the UAE?

    The DIFC companies can be managed and owned by non-residents, and many international firms operate DIFC entities while conducting business from multiple jurisdictions. However, certain licenses (particularly financial services licenses) may have physical presence requirements or require office facilities within DIFC. Non-financial firms typically have more flexibility.

    How is a DIFC company taxed if I have operations in other countries?

    The DIFC itself imposes no corporate tax. However, your home country or any jurisdiction where you conduct business may tax you on worldwide income or branch profits. DIFC is not a tax haven in the sense of providing secrecy; it simply does not impose its own corporate tax. Tax planning should involve a specialist advisor familiar with your personal tax residency and the jurisdictions in which you operate.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    This article does not constitute legal advice. For further information, please contact our London office.

  • Deadlock, Valuation and Director Misconduct Disputes

    Deadlock, Valuation and Director Misconduct Disputes

    1. Deadlock and stalemate disputes

    Deadlock happens when equal shareholders cannot agree on key decisions, paralysing business operations. Disputes can arise in relation to major decisions, such as whether to pursue expansion, hire key personnel, approve significant expenditure, or sell the business. Without a controlling shareholder, day-to-day operations grind to a halt as neither party can force through their preferred strategy. In 50:50 joint ventures, neither party commands the 75% majority required for special resolutions, creating gridlock that can destroy company value.

    Possible resolution mechanisms

    Shareholders agreements often anticipate deadlock and provide contractual mechanisms to break the impasse.

    • Casting vote provisions grant the chairman a pre-determined casting vote in tied decisions.
    • Independent arbitration allows the shareholders to appoint a neutral expert to resolve specific disputes.
    • Russian Roulette clauses enable one shareholder to offer to purchase the other’s shares at a set price, with the receiving shareholder able to reverse the transaction and buy the offering shareholder’s stake at the same per-share price, ensuring the offer is fair.
    • Texas Shootout involves sealed bids from both shareholders, with the highest bidder acquiring the company at that price.

    Where no contractual mechanism exists or both parties reject settlement, shareholders can petition for just and equitable winding up under section 122(1)(g) Insolvency Act 1986. The courts will dissolve a solvent company with deadlocked ownership, allowing an independent liquidator to distribute proceeds according to shareholding. However, courts treat winding up as a last resort and will refuse the petition if alternative remedies exist or the petitioner has acted unreasonably. Additionally, the petitioner must have held shares for at least 18 months.

    2. Breaches of shareholder agreement disputes

    Shareholders agreements set out the ground rules for how shares can be transferred, how voting decisions are made, and what happens when a shareholder wants to exit. Breaches typically involve selling shares without offering them to existing shareholders first, voting against agreed terms, or ignoring agreed exit procedures.

    Pre-emption rights require that shares be first offered to existing shareholders before any external sale. Breach occurs when a shareholder attempts to sell to a competitor or outsider without following this procedure. Voting covenant violations arise when a shareholder votes against agreed reserved matters, such as major capital expenditures or changes to the business plan. Exit procedure failures occur when shareholders attempt to exit without following contractually-mandated timelines or negotiation steps.

    Possible resolution mechanisms

    • Damages – i.e. monetary compensation for quantifiable losses
    • Injunctions – preventing threatened breaches or compelling specific performance
    • Forced share transfer – if the breach has the potential to destroy the working relationship
    • Without prejudice negotiations – settlement discussions to avoid litigation costs

    It is important to bear in mind that pre-action protocols require parties to exchange letters of claim, documents, and consider mediation before starting court proceedings.

    Share valuation disputes

    When shareholders cannot agree on what their shares are worth, disputes can quickly become expensive and adversarial. The disagreement often centres on which valuation method should apply and whether the shares should be discounted because they represent a minority stake.

    The courts recognise several valuation approaches depending on the company’s circumstances. Discounted cash flow (DCF) values a business based on its projected future earnings, making it suitable for profitable companies with steady cash flows. EBITDA multiples compare the company to similar businesses that have recently sold or are publicly traded. Net asset valuation simply adds up what the company owns minus what it owes, which works best for property-holding or investment companies. Fair market value represents what a willing buyer would pay a willing seller in an arm’s-length transaction.

    Resolving valuation disputes

    In recent years, we have observed that parties are increasingly opting for expert determination rather than court battles. An independent accountant or valuer examines the company’s finances and provides a binding valuation, usually within weeks rather than months or years. This approach saves substantial legal costs and maintains greater confidentiality than public court proceedings. Courts increasingly favour expert determination over adversarial expert evidence as it provides faster, more cost-effective resolution.

    Director misconduct disputes

    Directors owe several statutory duties under the Companies Act 2006, including the fundamental obligation to promote the success of the company. When directors breach these duties, shareholders often seek remedies ranging from removal to financial compensation. Misconduct takes many forms:

    • Misuse of company assets occurs when directors divert business opportunities or funds to personal benefit, such as self-dealing transactions or competing ventures.
    • Breach of fiduciary duties happens when directors act in conflicts of interest without proper disclosure to the board or shareholders.
    • Fraudulent or wrongful trading involves continuing to trade the company while insolvent or with intent to defraud creditors, a particularly serious breach.
    • Poor governance includes failure to exercise reasonable care, diligence, and skill in decision-making.

    Possible resolution mechanisms

    Shareholders have multiple options for addressing director misconduct. The simplest and most direct is removal by ordinary resolution (51% vote) under section 168 Companies Act 2006. This requires no court involvement, a shareholder resolution at a general meeting can remove a director immediately, though the director is entitled to speak in their own defence.

    Beyond removal, shareholders can pursue damages claims, recovering losses suffered by the company or individual shareholders. These claims require proof of the breach and quantifiable loss, making them more complex than removal votes. Injunctions prevent directors from continuing wrongful conduct, such as misusing company assets or pursuing competing business ventures. For more serious breaches affecting the company as a whole, shareholders can also bring derivative claims on behalf of the company to recover losses.

    Final Words

    Shareholder disputes rarely resolve quickly or cheaply. The sooner you seek legal advice when warning signs emerge such as unresolved disagreements, breaches of agreement, or unexplained director conduct, the better the outcome is likely to be. Most disputes that reach commercial litigation could have been settled at a fraction of the cost through early negotiation or mediation. If litigation becomes unavoidable, understanding which remedy applies to your circumstances allows you to pursue the most efficient resolution. Well-drafted shareholders agreements with clear deadlock provisions, pre-emption rights, and exit mechanisms prevent many disputes from arising in the first place.

    FAQs

    What is the cheapest way to resolve a shareholder dispute?

    Early negotiation and mediation is almost always the cheapest and fastest way to resolve a shareholder dispute. Pre-action protocols require ADR consideration anyway. For valuation disputes, an independent expert can provide a binding decision in weeks rather than months of court cases.

    Can I force a director out without going to court?

    Yes, you can remove a director by ordinary resolution (51% shareholder vote) at a general meeting under section 168 Companies Act 2006. This requires no court involvement, though the director is entitled to speak in their own defence before the vote.

    What happens if I breach a shareholders agreement?

    The other party can seek damages for losses, obtain court injunctions forcing compliance, or pursue forced share transfer if the breach is serious enough. Courts enforce shareholders agreements as binding contracts. You will also be required to engage in pre-action mediation, and failure to do so results in cost sanctions against you in any subsequent litigation.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    This article does not constitute legal advice. For further information, please contact our London office.

  • When the Oil Sanctions Hit Home

    When the Oil Sanctions Hit Home

    How Sanctions Work in Three Moves

    The coordinated sanctions offensive operates across three dimensions, each carrying distinct legal implications.

    The first move is the direct designation of oil producers. When Lukoil was designated on 15 October 2025, any UK person or entity became prohibited from dealing with frozen Lukoil assets without specific authorisation from OFSI. The US followed on 22 October with OFAC blocking sanctions, whilst the EU imposed transaction bans. Wind-down general licences provided breathing room, but these have now expired (although some specific, tailored general licenses have been issued or extended for certain operations (e.g., specific oil projects, non-Russian retail stations, and certain EU-based subsidiaries) and these remain active into 2026 and, in some cases, beyond). December’s designation of Tatneft and other mid-tier producers extended the sanctions net further, signalling systematic targeting of Russia’s entire oil export infrastructure.

    The second move weaponises market access. The January 2026 refining loophole ban prohibits the import of refined petroleum products from any refinery that processes Russian crude oil. Indian refiners have become major buyers of Russian crude since 2022, purchasing at steep discounts and exporting refined products to Europe. The ban presents these refiners with a binary choice: continue processing Russian crude and lose European markets or abandon Russian supply chains to preserve EU and UK access.

    The third move targets logistics. Over six months, the UK has sanctioned 133 oil tankers that form Russia’s shadow fleet, the largest such action in Europe. Without access to insurance, port services, and mainstream maritime infrastructure, Russia’s export capacity is constrained by physical limitations.

    Together, these measures create what one analyst described as a “strategic vice.” Direct company sanctions cut demand. The refining ban closes third-country workarounds. Maritime sanctions restrict physical transport. For Russian oil producers, the result is seaborne storage of stranded crude, discounts of $25 or more per barrel against the Brent benchmark, and potential shut-ins of 1.6 to 2.8 million barrels per day.

    When Contracts Collide with Sanctions

    The High Court’s decision in Litasco SA v Der Mond Oil and Gas Ltd [2023] EWHC 2866 (Comm) provides a starting point in relation to contractual disputes, though the case predates Lukoil’s own designation. Litasco, a Swiss oil trading company wholly owned by Lukoil, sued Der Mond for non-payment under an oil supply contract. Der Mond invoked sanctions and force majeure defences, arguing that Litasco should be treated as an extension of its designated parent.

    The court rejected this reasoning. Mere ownership by a designated person does not, by itself, render a subsidiary designated by extension. There must be evidence that the designated person exercises routine control over the use of funds. This became known as the “control test.”

    Now that Lukoil itself is designated, the calculus shifts. Subsidiaries fall squarely within the asset freeze provisions unless covered by a specific general licence. OFSI has issued such licences for certain Lukoil entities: one covering Lukoil’s Bulgarian subsidiaries (valid for three months and renewable), and another for Lukoil International GmbH and its subsidiaries. These licences permit “continuation of business as normal” regarding UK financial sanctions, providing temporary relief whilst sales negotiations proceed.

    Yet the licences create their own complications. The three-month validity period introduces uncertainty. Parties negotiating long-term supply contracts face the risk that licences will expire mid-transaction. Renewal is not automatic. Each OFSI quarterly renewal decision becomes a pressure point.

    Wind-down licences have expired. Transactions initiated under those licences but not completed before expiry dates now require specific OFSI authorisation. This has left “stranded contracts,” agreements caught mid-performance when licences lapsed.

    Force majeure clauses face immediate pressure. Suppliers refuse delivery, citing illegality or sanctions-related impossibility. Buyers refuse payment, claiming sanctions prohibit processing payments to designated entities. The legal analysis turns on the precise wording of the clause and whether sanctions render performance illegal or merely more difficult and expensive.

    Price adjustment provisions are being tested with equal intensity. Many long-term oil supply contracts link pricing to benchmark rates, typically Brent crude. With Russian Urals crude trading at discounts of more than $25 per barrel to Brent, existing contracts are under severe pressure. Material adverse change clauses, renegotiation provisions, and hardship doctrines are all invoked.

    Arbitration Becomes the Terrain of Conflict

    Dubai Arbitration Week 2025 featured extensive discussion of how major oil company designations reshape arbitration strategy. Tribunals seated in Dubai can hear both sides, maintain procedural integrity, and preserve potential enforceability whilst dealing with sanctions restrictions that might complicate access to London or Paris seats.

    Yet UK practitioners must recognise that a Dubai seat does not eliminate UK sanctions risks. If a UK national serves as an Arbitrator or if a UK law firm represents a party, a UK nexus arises. The Arbitration Costs General Licence permits payments up to £500,000 per arbitration for Arbitrator and institution fees involving designated persons, but it does not cover legal services costs. These are governed by a separate “Legal Services” cap (often £1 million or a percentage of the dispute value), beyond which a specific OFSI licence is mandatory.

    The £500,000 cap creates planning challenges. Complex energy disputes routinely exceed this threshold in terms of costs. Once reached, parties require specific OFSI licences for additional payments.

    Barclays Bank plc v VEB.RF [2024] EWHC 2981 (Comm) illustrates how enforcement can be challenged. Barclays obtained an LCIA arbitration award against VEB.RF, a Russian state development bank, for $147.7 million. However, VEB.RF was designated under UK sanctions, so Barclays could not collect. VEB.RF subsequently breached the Arbitration Agreement by pursuing parallel Russian court proceedings.

    Sanctioned Russian entities, facing arbitration awards they cannot satisfy due to frozen assets, increasingly resort to Russian court proceedings in defiance of Arbitration Agreements. Russia’s Article 248.1 of the Arbitration Procedural Code claims exclusive jurisdiction over disputes involving Russian entities subject to “unfriendly state” sanctions.

    In Linde GmbH v RusChemAlliance LLC [2023] HKCFI 2409 and Renaissance Securities (Cyprus) Ltd v PJSC Prominvestbank [2023] EWHC 2816 (Comm), the courts upheld the Arbitration agreements and granted anti-suit injunctions restraining Russian court proceedings. For practitioners, when a sanctioned counterparty threatens or initiates Russian court proceedings in breach of an arbitration clause, the best route is to seek anti-suit injunctions promptly in arbitration-friendly jurisdictions.

    The Refining Ban and Cascade Disputes

    The January 2026 refining loophole ban introduces disputes rooted not in direct designation but in market exclusion. Indian refiners like Bharat Petroleum, Indian Oil Corporation, and Reliance Industries became significant buyers of Russian crude after 2022. The refining ban disrupts this equilibrium. Refiners importing refined products into the EU or UK must certify that the products were not derived from Russian crude oil.

    Supply contracts with Russian oil exporters are at risk of termination or renegotiation. Force majeure provisions are invoked, with refiners claiming that EU and UK bans constitute supervening events preventing performance. Russian exporters counter that the bans target refinery operations, not crude oil purchases.

    Buyers of refined products may pursue claims based on misrepresentation or breach of origin warranties. Trade finance disputes will follow: letters of credit involving misrepresented cargo origins, insurance claims, and documentary credit discrepancies will all lead to arbitration and/or litigation.

    Sanctions analysts predict that Russian oil exporters will attempt to disguise the origin of their oil through ship-to-ship transfers, forged documentation, and complex trading chains. Disputes over certificates of origin, cargo inspection reports, and chain-of-custody documentation will proliferate.

    Pricing disputes add another layer. With Russian Urals crude trading at discounts of more than $25 per barrel to Brent, existing long-term contracts are under pressure. Sellers receiving Urals-linked prices argue that the spread represents market reality. Buyers resist price adjustments, pointing to contractual terms.

    What Practitioners Must Do Now

    • Due diligence now extends beyond direct counterparties to entire supply chains. Lawyers must screen against the OFAC Specially Designated Nationals List, the EU Consolidated List, and the UK OFSI Consolidated List. For energy transactions, it is vital to examine shippers, insurers, refiners, and storage providers.
    • For existing contracts, sanctions clauses must address the designation of counterparties themselves, not merely underlying transactions. Build in payment alternatives, recognising that traditional USD-denominated, SWIFT-routed payments may become unavailable.
    • Arbitration clauses demand fresh analysis. Seat selection carries sanctions implications. Dubai offers procedural accessibility but may complicate enforcement in Western jurisdictions. London provides robust enforcement mechanisms but introduces UK sanctions compliance obligations.
    • For existing disputes, verify whether wind-down licences have been applied and confirm their expiry dates. If a counterparty is Lukoil or Tatneft, check whether specific general licences exist. These provide temporary safe harbours but introduce quarterly uncertainty.

    The October and December 2025 designations, combined with the January 2026 refining ban, mark a shift in enforcement strategy. Previous sanctions targeted specific transactions or individuals. Current measures dismantle the infrastructure of the Russian oil trade itself. For dispute resolution practitioners, this is not a future risk. The instructions are arriving now, reflecting contract breakdowns, arbitration triggers, and enforcement challenges across jurisdictions. Understanding the interplay between asset freezes, general licences, arbitration frameworks, and enforcement strategies has become an essential practice.

  • How to Enforce an Arbitration Award and Sanctions Law

    How to Enforce an Arbitration Award and Sanctions Law

    Recognition and Enforcement of an Arbitration Award

    The New York Convention (the “Convention”) has been widely adopted by most countries in the world. The Convention sought to ensure that arbitration was a viable international commercial dispute resolution mechanism. Article III of the Convention obligates contracting states to recognise and enforce foreign arbitral awards. This enabled successful parties in an international commercial arbitration to pursue the assets of the other party held in jurisdictions outside of the arbitration seat, thereby ensuring that recovery could occur. For a party to have their award recognised and enforced all they must do is to apply to the relevant court and obtain an order in their favour. For example, in England and Wales, Section 66 of the Arbitration Act 1996 permits an award to be enforced like a judgement or order.

    Although the Convention has significantly streamlined the ability to enforce awards in foreign jurisdictions, that still does not mean recognition and enforcement of an award is guaranteed. Article V(1) of the Convention allows domestic courts to refuse recognition and enforcement on various grounds. These includes problems with the original arbitration agreement, due process failures, the tribunal going beyond its mandate, irregular composition of the tribunal or that the award had been set aside by the court of the seat. Additionally, Article V(2) grants a discretion to the enforcing state as awards can be refused if it is not arbitrable within the country or contrary to its public policy. Therefore, even when an award is obtained, winning parties should remain cautious and diligent when proceeding to ensure that recovery can be eventually made.

    Enforcement and Sanctions Law: A Case Study

    We now turn our attention to the recent U.S. District Court decision by Judge Beryl A. Howell in which she recognised and allowed enforcement of three ICAC arbitral awards totaling almost $14 million. The awards had been made in favour of a sanctioned Russian media company which transferred its interests in the awards to a UAE based consultancy prior to its designation. This was recognised by the court as suspicious because it could have been done in anticipation of the company being sanctioned. Therefore, the primary question put to Judge Howell was whether the award could be set aside on public policy grounds. On this question, the Judge Howell deferred to the US DOJ, which did not take a position, and in those circumstances, the award was recognised. The question of sanctions was deferred to the Office of Foreign Assets Control (OFAC) to determine, at a future date, as to whether there any part of the enforcement would breach US sanctions.

    The recognition of the awards by Judge Howell reflects the general pro-enforcement attitude of not just U.S. courts but courts who are subject to Article III of the Convention. The public policy exception to recognising and enforcing awards is often construed narrowly meaning even politically sensitive, sanctions-related cases may not be sufficient in having an award set aside. Parties who have awards but are concerned regarding sanctions-related issues should remain confident regarding their prospects of receiving recognition from courts. However, they must remain vigilant during enforcement stages to ensure that they do not run afoul of sanctions and should seek guidance.

    Conclusion

    Arbitration can be a long and expensive process, so the final receipt of an award is often a satisfying one. However, recognition and enforcement of the award is not often a straightforward process. While the New York Convention has created a general rule in favour of enforcement, exceptions exist that can allow courts to refuse enforcement. The added dimension of sanctions only serves to further create confusion and uncertainty. Parties should therefore remain attentive and cautious while seeking further advice when enforcing their awards to ensure that recovery can occur.