Introduction
In a decision dated 2 October 2026, the High Court of Justice, Commercial Court, in case number CL-2024-000583 (GTLK Malta Four Limited v Pola Maritime Limited & Ors [2026] EWHC 2514 (Comm)) rendered a judgment on the enforcement of joint guarantees supporting finance bareboat charters affected by EU, UK and US sanctions.
Ms Lesley Anderson KC, sitting as a Deputy Judge of the High Court, held that the defendant guarantors had no real prospect of establishing that the charters had been frustrated or validly terminated. The court also held that the guarantees responded even if the charterer’s underlying obligations had become unenforceable, invalid or illegal, and found no compelling reason for the dispute to proceed to trial.
Factual background
The vessels, charters and guarantees
GTLK Malta Four Limited was the registered owner of seven vessels: the Maltese-flagged floating cranes LUFT 1 and LUFT 2; the Belize-flagged tugboats SEA GULL, ORION and HERCULES; and the Belize-flagged barges BARGE 1905 and BARGE 1906. Its immediate parent was the Irish company GTLK Europe Designated Activity Company. The group was ultimately owned by JSC GTLK, a transport business wholly owned by the Russian Federation.
The claimant chartered each vessel to Pola Logistics Limited, a Cypriot company, under separate amended BARECON 2001 bareboat charters. The charters ran for ten years from dates between February 2018 and April 2020.
The defendants guaranteed and indemnified Pola Logistics’ obligations under twelve materially identical Joint Deeds of Guarantee and Indemnity. All four defendants guaranteed the LUFT 1 charter, while the first three defendants guaranteed the other six vessel charters. Their obligations were joint and several.
The vessels were delivered under the charters. The contractual structure required quarterly hire payments and provided for the charterer to acquire the vessels through the agreed purchase mechanism. The claimant described the transactions as finance leases under which it financed the vessel purchases and Pola Logistics repaid that finance through hire and the purchase arrangements.
Sanctions and competing termination notices
On 8 April 2022, following Russia’s invasion of Ukraine, JSC GTLK and associated entities were designated under EU Regulation 269/2014. The claimant was also treated as caught by the regulation. Pola Logistics immediately stopped paying hire.
On 19 April 2022, the Shipowners’ Club informed Pola Logistics that the vessels’ insurance cover had automatically terminated on 8 April. JSC GTLK was subsequently designated under the United Kingdom’s Russia sanctions regulations on 21 April 2022 and under US Executive Order 14024 on 2 August 2022.
On 17 May 2022, Pola Logistics informed the claimant that the sanctions had placed it in breach of the charters because Pola Logistics could not use the vessels, pay hire, maintain insurance or comply with several charter provisions.
On 1 September 2022, Pola Logistics served notices purporting to terminate the charters. It relied on the EU and UK sanctions and alleged, among other matters, a repudiatory breach of the quiet enjoyment covenant in clause 42. Alternatively, it maintained that the charters had been frustrated. The claimant rejected those notices on 7 February 2023 and asserted that the charters continued.
GTLK Europe entered liquidation in Ireland on 31 May 2023. The Irish High Court subsequently declared that the presumption of control under the EU sanctions regime had been rebutted by the liquidation.
The United Kingdom’s Office of Financial Sanctions Implementation issued a general licence on 1 August 2023 permitting GTLK Europe and its subsidiaries, including the claimant, to make and receive payments and take steps connected with the insolvency. The US Office of Foreign Assets Control granted a specific licence on 18 September 2023, which was later extended. The parties disputed the precise effect of the sanctions and licences, including whether payments could be made into blocked accounts.
On 28 February 2024, the claimant served its own termination notices for non-payment of hire and invoked the contractual purchase mechanism. Pola Logistics did not pay the applicable Purchase Option Prices. On 10 October 2024, the claimant demanded payment from the guarantors within three business days. No payment was made.
The claimant sought summary judgment under CPR Part 24 for USD 12,902,156.02 plus interest against all four defendants and USD 29,134,156.98 plus interest against the first three defendants.
Separately, Pola Logistics had commenced LMAA arbitration against the claimant on 30 September 2024 concerning whether the charters had already been terminated or frustrated and whether the Purchase Option Prices were payable.
Legal considerations
The summary judgment standard
The court applied CPR 24.3. The question was whether the defendants had a realistic, rather than fanciful, prospect of succeeding and whether there was another compelling reason for trial.
A summary judgment application is not a mini-trial. However, a court may decide a short point of law or contractual construction where it has the necessary material and the parties have had a fair opportunity to address it. Speculation that further evidence might emerge was insufficient.
The charters were finance charters
The parties disagreed about the proper character of the arrangements. The claimant said the bareboat charters were finance charters forming part of a wider financing package. The defendants emphasised the characteristics of a conventional bareboat charter: delivery and quiet enjoyment in exchange for hire, followed by redelivery or purchase.
The court accepted the claimant’s characterisation. The agreements were finance charters and had to be construed in the commercial context of the complete suite of transaction documents. In that setting, the owner had financed the vessels and had no ordinary operational or reversionary interest in them. This characterisation informed the allocation of the risk of loss of use.
The absolute payment obligation
Clause 38.10, described as the “hell or high water” clause, stated:
“Obligation absolute. The Charterers’ obligation to pay Charter Hire in accordance with the requirements of this Charter shall be absolute irrespective of any contingency whatsoever, including (but not limited to) (i) any set-off, counterclaim, recoupment, defence or other right which any party hereto may have against any other party hereto, (ii) any unavailability of the Vessel for any reason, including (but not limited to) condition, design, operation, performance, capacity or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade or for documentation under the laws of any country or of any damage to the Vessel, (iii) any failure or delay on the part of any party hereto or thereto, whether with or without fault on its part, in performing or complying with any of the terms or covenants hereunder (iv) any insolvency, bankruptcy, reorganisation, arrangement, readjustment of debt, dissolution, liquidation or similar proceedings by or against the Owners or the Charterers or the Guarantor or any other person or any change in the constitution of the Owners or the Charterers or the Guarantor or any other person, (v) any invalidity or unenforceability or lack of due authorisation of or other defect in the Charter, or (vi) any other cause which would or might but for this provision have the affect of terminating or in any way affecting any obligation of the Charterers under the Charter.”
The defendants argued that clause 38.10 did not expressly refer to sanctions and did not apply after the charters had been discharged. The court rejected both arguments.
The wording was deliberately broad, while the charters separately defined “Sanctions and Export Controls”. Clause 38.10 allocated to Pola Logistics the entire risk that the vessels might be unavailable or incapable of use. That allocation was consistent with the finance nature of the transactions.
The quiet enjoyment covenant
Clause 42.1 provided:
“The Owners hereby covenant and undertake that so long as they shall have not lawfully commenced the exercise of any of their rights under or pursuant to Clause 28(a) of the Charter, neither the Charterers (nor any permitted sub-charterers) shall be disturbed or interfered with in their quiet and peaceful use, possession and enjoyment of the Vessel.”
The court held that this covenant did not extend to matters whose risk Pola Logistics had assumed elsewhere in the charters. Reading clause 42 together with clause 38.10, the defendants had no real prospect of showing that sanctions-related unavailability constituted a breach of the quiet enjoyment covenant.
The guarantees covered illegality and unenforceability
Clause 2(c) of the LUFT guarantee stated that each guarantor:
“agrees with the Beneficiary that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify the Beneficiary promptly and in any event within three (3) Business Day of written demand against any cost, loss or liability it incurs as a result of the Charterer not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under the Transaction Document on the date when it would have been due.”
Clause 5(f), under the heading “Waiver of Defences”, further provided that the guarantors’ obligations would not be affected by:
“any unenforceability, illegality or invalidity of any obligation of any person under any Transaction Document or any other document or security.”
The claimant submitted that these provisions imposed an independent primary indemnity and prevented the guarantors from relying on defects in Pola Logistics’ underlying liability.
The court accepted that construction, relying in particular on IDBI Bank Ltd v IDH International Drilling Holdco Ltd [2021] EWHC 1908 (Ch) and Gulf Bank K.S.C v Mitsubishi Heavy Industries Ltd [1994] 2 Lloyd’s Rep 145. The language was broad enough to apply whether illegality, invalidity or unenforceability existed from the outset or arose later.
The defendants also sought to distinguish between accrued and unaccrued obligations. The court found no support for that distinction in the charters, guarantees or authorities. Clause 38.10 was intended to keep hire accruing, clause 2(b) required payment as if the guarantor were the principal obligor, and clause 2(c) created an independent and primary obligation.
Clause 46.2 began:
“Upon termination of this Charter as a result of a default of the Charterers under Clause 28(a), but not later than 15 (fifteen) Business Days from the date of such termination, the Buyers shall pay the Purchase Option Price to the Sellers applicable as at the month of such termination.”
The court held that, once hire was not paid, the claimant was entitled to terminate under clause 28(a). The guarantors then stood in Pola Logistics’ position for the obligation to pay the Purchase Option Price under clause 46.2.
Frustration and supervening illegality
The defendants argued that the charters were frustrated when the EU, UK or US sanctions were imposed in 2022. They said the vessels could not be used, insured, flagged or serviced; that the deprivation of use could be indefinite; and that performance had become impossible, illegal or radically different.
The claimant accepted for the summary judgment application that the factual question whether the vessels could in practice be used was not suitable for final determination. Its case was that, even assuming those factual matters in the defendants’ favour, frustration could not be established.
Applying National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 and The Sea Angel [2007] 2 All ER (Comm) 634, the court assessed the contractual terms, risk allocation, nature of the event and remaining duration. When the sanctions were imposed, between five and eight years remained on the ten-year charters. The charterer also retained a purchase option.
This was a “wait and see” case. The sanctions did not radically alter performance at the time when frustration was alleged. The court also relied on decisions concerning long-term aircraft and helicopter leases containing comparable absolute payment clauses, including Salam Air SAOC v Latam Airlines Group SA [2020] EWHC 2414 (Comm).
As to foreign illegality, it was common ground that payments in US dollars by telegraphic transfer would pass through US intermediary banks. The limited Ralli Brothers principle was therefore potentially engaged.
However, following Banco San Juan Internacional Inc v Petroleos de Venezuela SA [2020] EWHC 2937 (Comm) and Celestial Aviation Services Ltd v UniCredit Bank GmbH [2024] 1 Lloyd’s Rep 215, the legal effect of supervening illegality on a payment obligation was suspension, not frustration of the entire agreement.
The court considered the detailed disputes about the precise effect of the EU and US measures largely academic in light of its construction of the charters and guarantees.
Termination for alleged repudiatory breach
The defendants maintained that the September 2022 notices lawfully terminated the charters because sanctions interfered with the vessels’ use and breached the quiet enjoyment covenant.
The court held that this construction did not reconcile clause 42 with the contractual allocation of risk in clause 38.10. The risk of unavailability had been assumed by Pola Logistics, except where the charters specifically provided otherwise.
The court further held that amendments to the standard BARECON wording in clause 28(b) had removed the relevant common-law termination right for owner default and replaced it with an indemnity. The defendants therefore had no real prospect of establishing a valid termination for repudiatory breach.
Disposition
The court concluded that the defendants had no real prospect of establishing frustration or termination and no real prospect of avoiding liability under the guarantees as properly construed.
It rejected as remote or speculative the suggestion that better evidence might emerge at trial concerning the duration of the sanctions. There was no other compelling reason for a trial, and the parties were invited to reflect the judgment in an order.
The ruling was based on the contractual wording and transactional structure before the Commercial Court. The court did not finally determine every factual question concerning the practical use of the vessels or every disputed aspect of the sanctions regimes.
KDB.legal Koch Boës advises in litigation and arbitration matters on maritime disputes, especially when sanctions are affected.
