Asset freezes and the application of UK sanctions in an insolvency context

In Denali Corp-FZCO (incorporated in Dubai) v Manson & Others [2026] EWHC 2287 (Ch), the English High Court considered whether an assignment of economic rights in relation to a designated entity would breach UK sanctions regulations.

The Background

Following the voluntary liquidation of Petropavlovsk plc, an English company operating in the Russian gold-mining sector, Atlas JSC (Atlas), a Russian company, purchased the company's assets under a share sale deed in April 2022. As part of this, Atlas acquired contractual rights to receive any surplus from the liquidation of Petropavlovsk plc.

In April 2025, Atlas agreed to assign these rights to Denali Corp FZCO (Denali), an act which required the consent of the liquidators of Petropavlovsk plc. Before the consent of the liquidators was obtained, Atlas was designated under the Russia (Sanctions) (EU Exit) Regulations 2019 (the Regulations) in June 2025 due to its involvement in the Russian mining sector. Following this designation, the liquidators of Petropavlovsk withheld their consent to the assignment because of a concern that their consent would amount to dealings with a designated entity's frozen assets and breach the Regulations. Denali therefore applied to the Court under Section 112 of the Insolvency Act 1986, for a direction that the liquidators give consent to the assignment and that this assignment would not breach the Regulations. The liquidators took a neutral stance and said they would consent to the assignment if the Court confirmed it would not breach the Regulations.

Were the rights 'funds' or 'economic resources'

Much of the judgment focused on determining whether, properly analysed, the rights intended to be assigned were 'funds' or 'economic resources' for the purposes of Sections 60(1) and 60(2) of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).

As previously analysed in Mints v PJSC National Bank Trust,[1] this distinction is significant since the restrictions on the use and transfer of 'funds' are materially more stringent than in respect of 'economic resources':

• Under Regulation 11(4) of the Regulations, a person deals with a 'fund' if the person: (a) uses, alters, moves, transfers or allows access to the funds; (b) deals with the funds in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination; or (c) makes any other change, including portfolio management, that would enable use of the funds.

• Under Regulation 11(5), by contrast, a person deals with an 'economic resource' only if the person (a) exchanges the economic resources for funds, goods or services, or (b) uses the economic resources in exchange for funds, goods or services (whether by pledging them as security or otherwise).

As established in Mints, one factor used to distinguish between the two is whether the assets in question are for a definite or liquidated amount, which points towards them being 'funds,' or uncertain and/or contingent, which points towards them being 'economic resources'.

In this case, the Court found that the rights to receive any future surplus in Atlas's liquidation were economic resources because the level of future surplus (if any) was highly uncertain and dependent on inter alia claims submitted by other creditors and the level or recoveries made by the liquidators.

Would any assignment constitute prohibited 'dealing'

Having determined that the rights were an 'economic resource', the Court then considered whether the assignment would breach Regulation 11(5). The Court held that any giving of consent by the liquidators would not involve exchanging the economic resources for funds, goods or services. By giving their consent, the liquidators were not placing anything into the hands of a designated entity; since the assignment had already been agreed between Atlas and Denali, Atlas had already received the benefits of its transaction with Denali, and the contractual rights it had agreed to assign would benefit Denali not Atlas. The Court therefore found that the liquidators' consent would not constitute prohibited 'dealing' under Regulation 11(5) of the Regulations.

Key takeaways

The ruling provides greater certainty around the distinction between 'funds' and 'economic resources' for the purposes of the Regulations, building on the earlier ruling in Mints and applying it to an insolvency context for the first time.

However, the judge noted that the question of whether the assigned rights in this case were 'funds' and 'economic resources' was less clear than in Mints, which had considered whether a cause of action constituted a 'fund'. It is clear that the distinction between 'funds' and 'economic resources' is fact sensitive and will require a case-by-case analysis. Given the potentially serious consequences associated with any breach of sanctions regulations, the specific fact pattern of any transaction involving a designated entity should be carefully analysed.