What happens to a lender’s acceleration and enforcement rights under a loan agreement where sanctions imposed by the UK government prevent a borrower from making payments under a loan agreement?
The High Court considered that question in West One Loan Limited v Anna Okroyan [2026] EWHC 1428 (Ch). The case is particularly interesting when read alongside the Supreme Court’s judgment in UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another; UniCredit Bank GmbH, London Branch v Celestial Aviation Services Ltd [2026] UKSC 10, handed down while judgment in West One was reserved.
For lenders, West One demonstrates why the precise contractual basis for acceleration matters. The lender relied on a number of defaults arising from the borrower’s designation under UK sanctions. Some worked and others did not. Most significantly, an objective material adverse change warranty ultimately provided an independent basis on which the lender could enforce its security.
What happened?
In October 2022, West One Loan Ltd provided Anna Okroyan with a £4.55m short-term bridging loan secured by a first legal mortgage over Dorchester House in Virginia Water, Surrey. The original nine-month term was subsequently extended by 12 months, making the final repayment date 13 July 2024.
In December 2023, before the loan matured, Ms Okroyan was designated under the Russia (Sanctions) (EU Exit) Regulations 2019. In practical terms, her assets were frozen and she could not make payments to West One, nor could West One receive them, unless an exception applied or the Office of Financial Sanctions Implementation (OFSI) granted a licence permitting an otherwise prohibited transaction.
West One alleged that the designation triggered a number of breaches under its loan agreement and accelerated the loan. It subsequently brought proceedings seeking possession of the mortgaged property. West One later obtained an OFSI licence which, subject to obtaining a court order, permitted it to take possession of, market and sell the property.
Non-payment
West One relied first on the borrower's failure to pay interest and ultimately to repay the loan on maturity.
At trial, the High Court concluded that those payment obligations had not been suspended by the borrower’s designation. On that analysis, the failure to repay the loan at maturity amounted to a breach capable of supporting West One’s claim for possession.
There was, however, an unusual timing issue.
The West One trial took place on 18 and 19 March 2026. On 25 March, before judgment in West One was handed down, the Supreme Court gave judgment in Constitution Aircraft/Celestial. That decision was not brought to the High Court's attention before its judgment in West One was handed down on 11 June.
Constitution Aircraft/Celestial concerned payments due by UniCredit under letters of credit supporting leases of civilian aircraft to Russian airlines. The Supreme Court held that the relevant sanctions prohibited UniCredit from making the payments until the necessary licences had been obtained. It also considered the protection provided by section 44 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), which applies where a person acts or omits to act in the reasonable belief that doing so complies with applicable sanctions. Although the point did not need to be decided given the finding that payment was in fact prohibited, the Supreme Court held that section 44 would have protected UniCredit against claims for the unpaid debt, interest and associated costs while it held the requisite reasonable belief.
At the consequential hearing, Ms Okroyan sought permission to appeal, arguing that the intervening Supreme Court judgment undermined the grounds on which West One had established its right to possession. Mr Justice Edwin Johnson accepted that he could “follow the argument” that the Supreme Court's judgment affected his conclusions concerning non-payment of principal and interest. However, he did not accept that it affected the separate contractual ground on which West One had succeeded: breach of the ‘no material adverse change’ (no MAC) warranty. As Ms Okroyan would have needed to overturn all three grounds for possession, permission to appeal was refused.
That distinction is central to the practical significance of West One. Even where sanctions affect the consequences of a failure to make payment, that does not necessarily answer whether a different Event of Default (EOD) has been triggered.
Did sanctions trigger a separate EOD?
West One also relied on an EOD which applied if the loan agreement or another relevant finance document became “invalid, unlawful, unenforceable, terminated, or ceases to have full force and effect”.
The Court held that this EOD had not occurred. The sanctions restricted what the parties could do under the finance documents, including making and receiving payments. As Mr Justice Edwin Johnson put it, that was “not the same thing as rendering the actual loan agreement or mortgage deed invalid or unlawful”. The position may be different under a facility agreement on Loan Market Association (LMA) standard terms. For example, the LMA leveraged and real estate finance forms include an “unlawfulness and invalidity” EOD which can apply where it becomes unlawful for an obligor to perform any of its obligations under the finance documents. That wording is wider than the provision considered in West One, which focused on whether the loan agreement or mortgage deed had themselves become unlawful.
Material adverse change
The more significant part of West One for finance parties is the Court's treatment of two provisions dealing with material adverse change. Both addressed broadly similar underlying circumstances. West One’s arguments on one failed, but the Court held that the other ultimately provided West One with an independent basis for enforcement.
The “lender-opinion” material adverse change (MAC)
One EOD applied where circumstances existed which “in the reasonable opinion of the lender” were likely materially and adversely to affect the borrower's ability to perform its obligations.
Sanctions designation was capable of having that effect and so the issue was not the substance of the test. Rather, it was proving that West One had actually formed the contractual opinion required by the clause.
West One’s January 2024 notice asserted that, in “our reasonable opinion”, the designation was likely materially and adversely to affect Ms Okroyan’s ability to perform her obligations. But simply stating that opinion in the notice was not enough. The Court could not establish who had formed the opinion, when it had been formed or whether that person had authority to form it on West One’s behalf. The judge described this as a “fatal gap” in the evidence and the EOD was therefore not established.
The practical point is straightforward. Where an EOD depends upon the lender forming a “reasonable opinion”, it is not enough for the circumstances objectively to justify that opinion. The lender must actually form it.
That does not require a board decision. The Court accepted that the function could be delegated to an appropriate officer or employee. But lenders seeking to rely on such a provision should be able to establish who made the decision, when it was made, their authority to make it and the contractual test they applied.
The no MAC Warranty
The position was different under the borrower's repeated warranty that there had been no MAC in her business or financial condition.
This provision contained no requirement for West One to form an opinion. The Court could therefore consider objectively whether the warranty was true. The Court held it was not, finding that designation had materially and adversely affected Ms Okroyan's ability to repay the loan and perform her obligations. The no MAC warranty had accordingly been breached.
That mattered because the breach provided an independent basis on which West One's security became enforceable. More significantly, when the possible implications of the subsequent Supreme Court judgment were raised at the consequential hearing, Mr Justice Edwin Johnson considered that they did not undermine his finding on breach of the no MAC warranty.
In other words, even if Constitution Aircraft/Celestial undermined West One's ability to rely simply on sanctions-driven non-payment, the lender had another contractual route to enforcement.
Operation of retained interest mechanism is not necessarily outside the sanctions restrictions
West One also considered the loan's unusual interest arrangements.
The loan used a “retained interest” structure. Part of the gross loan amount was set aside to cover the interest due over the term, with West One applying the relevant amount against the interest due each month. This was an accounting exercise, i.e. no money actually moved when each monthly interest payment was recorded. The question was whether West One could continue making those internal accounting entries after Ms Okroyan had been designated.
The Court held that it could not. The fact that applying the retained interest involved a book entry rather than a new transfer of cash was not enough to take the arrangement outside the sanctions restrictions. The contractual controls attaching to the money meant that Ms Okroyan retained sufficient ownership or control over it for the sanctions restrictions to apply.
What should finance parties take from West One?
Neither West One nor Constitution Aircraft/Celestial suggests that lenders need make wholesale changes to their facility agreements. They do, however, show the need to identify precisely which contractual right a lender is relying on where sanctions affect performance.
In particular:
- Do not treat sanctions-driven non-payment as an ordinary payment default without further analysis.
Where sanctions prevent payment, the effect of the applicable sanctions regime and section 44 SAMLA must be considered alongside the contractual non-payment EOD before acceleration or enforcement. - Check the precise wording of any unlawfulness EOD.
In West One, sanctions prevented particular dealings but did not make the loan agreement or mortgage deed themselves unlawful. Standard LMA documentation is drawn more widely, including an EOD where it becomes unlawful for an obligor to perform any of its obligations under the finance documents. - If an EOD requires a lender opinion or belief, make and record the decision properly.
West One shows that it is not enough that the circumstances could objectively justify the relevant conclusion. LMA MAC provisions similarly contemplate a decision being made by the majority lenders, making the evidential trail important if the EOD is subsequently relied upon. - Do not overlook repeating representations.
An objective representation may operate differently from an Event of Default covering similar subject matter.
