Sanctions are among the most powerful tools governments use in these times of international conflict. Yet while designed to target states and political actors, they can also leave unintended casualties in the corporate world. Few cases illustrate this more starkly than CargoLogicAir (CLA), the UK’s only British all-cargo main deck freight airline.
Based at Heathrow and once highly profitable, CLA became collateral damage in the wake of Russia’s invasion of Ukraine in 2022. The company’s majority shareholder – a Cypriot national of Russian birth – was designated under the UK’s Russia (Sanctions) (EU Exit) Regulations in June of that year. Although neither CLA nor its parent company was itself sanctioned, the law treated the airline’s assets as controlled by the shareholder. Overnight, £13m of CLA’s funds were frozen and the business was rendered cash-flow insolvent.
By the time Buchler Phillips was formally engaged in October 2022, the situation was dire. Aircraft leases had been terminated, staff had gone unpaid, and attempts to restructure ownership via an employee trust had been rejected by regulators. Left with only one bank account – about to close – CLA faced imminent collapse.
Administration in a sanctions environment demands far more than standard insolvency practice. The Buchler Phillips team quickly opened dialogue with the Office of Financial Sanctions Implementation (OFSI), built a detailed plan for administration, and secured an OFSI licence to proceed. They advised directors on fiduciary duties, obtained court appointment as administrators in November 2022, and won permission to operate through the UK Insolvency Service Account (ISA) – a relatively rare step that provided a lawful channel for managing frozen funds.
Efforts also focused on safeguarding key assets and value: working with the Civil Aviation Authority to preserve CLA’s Air Operator Certificate, negotiating access to records, and retaining a core employee team to support administration and redundancy processes. The administrators sought to explore a business sale but, with banking barriers seemingly insurmountable, pivoted the focus towards asset recovery and creditor returns.
Progress was hard-won. An Administration Licence and updated Basic Needs Licence were secured in early 2023, enabling limited operations. Employees could finally expect to receive salaries once banking hurdles were cleared. Claims for tax refunds, deposits, and receivables were initiated, though access to digital records and funds remained constrained – even prompting consideration of legal action against service providers.
The CLA experience demonstrates the extraordinary complications of administering a company indirectly caught in sanctions. It shows that insolvency practitioners must operate at the intersection of law, regulation, and geopolitics, balancing creditor interests with strict compliance.
What have been the key lessons?
· Early and open engagement with regulators is essential.
· A tightly integrated team with specialist legal expertise improves decision-making.
· Close coordination with banks, the Insolvency Service, and regulators mitigates risks.
· Addressing employee concerns must be a priority throughout the process.
Sanctions will almost certainly remain a feature of international relations for the foreseeable future. For businesses and advisers, the CLA experience offers a sobering reminder that even healthy companies can be paralysed overnight – and that navigating sanctions requires creativity, persistence, and specialist experience.
Read our full case study on CargoLogicAir HERE.
Buchler Phillips is a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring, insolvency.