Hong Kong Court Enforces €30M LCIA Award Against Canadian Bank Despite Sanctioned Ownership Claim
The Hong Kong High Court has ruled that an LCIA arbitration award against a Canadian bank, issued in favour of a Russian nickel producer whose majority shareholders are subject to Canadian sanctions, can be enforced in Hong Kong (A Company v The Bank [2026] HKCFI 3169).
Background. In 2021, an engineering company obtained bank guarantees from the Canadian bank, secured against a contract to carry out works at the Russian company's production facility. Canada subsequently sanctioned four individuals who collectively hold over 50% of the company's shares. When the engineering company refused to refund advance payments, the Russian company demanded payment under the guarantees. The bank refused, citing Canadian sanctions obligations.
Arbitration outcome. The company initiated LCIA arbitration in London. The tribunal found that the bank had not demonstrated that making payment would constitute a breach of Canada's Special Economic Measures Act (SEMA), as the individual shareholdings could not be aggregated to establish deemed ownership of the company under section 2.1 of SEMA. The tribunal awarded €30 million plus interest. Hong Kong enforcement proceedings. The company sought to enforce the award against the bank's Hong Kong assets. The bank resisted, arguing that Canada's sanctions authority (GAC) had refused to grant a licence for payment — assessing the company as being in the deemed ownership of a sanctioned person — and that enforcement therefore created a real risk of criminal prosecution for the bank and its staff.
The Court applied the "real risk of prosecution" test from the English High Court's judgment in O v C and ordered enforcement, holding that:
GAC's licence refusal did not establish a real prosecution risk, as it did not override the tribunal's conclusion that payment was lawful under SEMA
Enforcement could be achieved through court orders directing third parties to pay directly from the bank's Hong Kong accounts, without requiring any voluntary act by the bank, and would therefore be unlikely to trigger Canadian criminal liability
The bank's own efforts to obtain GAC approval made actual prosecution in Canada unlikely in any event
Canadian sanctions have no application in Hong Kong and therefore do not engage Hong Kong public policy