County Court Rejects Discrimination Claim On Procedural Grounds But Finds Refusal Of Financial Services Because A Company Is Russian Owned Would Amount To Direct Discrimination

The decision provides guidance on how sanctions compliance interacts with equality law

The County Court has dismissed a discrimination claim brought against an accountancy firm, based on its refusal to provide payroll services to a Russian-owned company, shortly after the introduction of UK and international sanctions against Russia in 2022: XTX Markets Technologies Ltd v Mazars LLP [2025] 10 WLUK 244 (HHJ Bloom).

Although the claim was dismissed on a procedural point - because a UK entity of the accountancy firm had not itself refused to provide services - the court held (obiter) that if the UK entity had refused to act for a client solely because the client's owner was Russian, that would have amounted to direct discrimination under s.13 of the Equality Act 2010 on grounds of nationality.

Importantly, the court rejected the accountancy firm's argument under Schedule 23(1)(c) of the Equality Act that its refusal was "reasonably necessary" to comply with the Russia (Sanctions) (EU Exit) Regulations 2019 (the 2019 Regulations). In the court's view, a blanket embargo on Russian nationals was not reasonably necessary under the 2019 Regulations.

The court also rejected the accountancy firm's defence under s.44 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), on the basis of a reasonable belief that it was acting in compliance with the sanctions regime. The court rejected this defence, finding no evidence that those who made the decision actually held such a belief (or that such a belief could reasonably have been held), since the 2019 Regulations do not prohibit dealings with individuals solely on the basis of nationality.

The decision is a useful reminder that sanctions compliance does not provide a blanket reason to refuse services. Financial services firms must ensure that any refusal to act is narrowly tailored to genuine legal requirements and supported by clear evidence of sanctions risk, rather than by general caution or firmwide policy.

We consider the decision further below.

Background

XTX Markets Technologies Ltd (XTX) is part of the XTX group, a global fintech business headquartered in London. Its ultimate beneficial owner (UBO) is Dr Alexander Gerko, who at the relevant time held dual British and Russian citizenship, although he was not, and has never been, a designated person under UK sanctions.

In early 2022, XTX decided to outsource its global payroll function and approached the Mazars group (now known as Forvis Mazars), a global provider of tax, advisory and accountancy services, for a proposal. Following initial discussions, Mazars provided a quote for payroll services in five jurisdictions: the UK, US, France, India and Singapore.

On 24 February 2022, Russia invaded Ukraine. In response, the UK, EU and US introduced extensive sanctions against Russian individuals and entities. The Mazars group issued internal guidance tightening its client-acceptance procedures, advising partners to take a cautious approach to any potential new clients with Russian ownership, control or links, and in some cases recommending that no new Russian clients be accepted.

In April 2022, XTX informed Mazars that it wished to proceed initially with local payroll contracts for France and the US, with a view to expanding to other jurisdictions at a later stage. XTX provided corporate structure charts for those entities, showing Dr Gerko as the 75% voting shareholder through a chain of Cayman Islands companies.

Mazars subsequently refused to provide the services, stating that it would not accept new clients with Russian ownership or owned by Russian nationals.

XTX then issued proceedings against the UK entity, Mazars LLP (UK), seeking a declaration (but no damages) that Mazars had discriminated on the grounds of nationality, contrary to s.29(1) of the Equality Act, which prohibits service providers from refusing services for discriminatory reasons. Mazars denied any discrimination, maintaining that its decision was driven by sanctions-compliance obligations and not by Dr Gerko's nationality.

Decision

The court dismissed XTX's claim.

It found that by the end of April 2022, XTX had decided to proceed only with local payroll contracts for its US and French entities, and any potential agreement with Mazars UK had therefore "fallen off the table". At the time of the alleged refusal, no UK services were being sought, and any refusal related instead to prospective engagements with Mazars France and Mazars US.

As the Equality Act applies only where a UK service provider refuses to provide services it offers to the public, the court concluded that Mazars UK was not the relevant decision-maker and had not refused any services to XTX within the meaning of s.29(1). On that basis, the claim was dismissed.

Nevertheless, the judge went on to consider (obiter) whether, had the claim not failed on this point, Mazars' conduct would have amounted to direct discrimination under the Equality Act and whether its sanctions-related defences could have succeeded.

Direct discrimination

Under s.13 of the Equality Act, direct discrimination arises where a person is treated less favourably than others because of a protected characteristic. The relevant protected characteristic in this case was race, which under s.9 includes nationality.

The court found, based on contemporaneous correspondence and witness evidence, that Dr Gerko's nationality was the reason Mazars refused to provide services, and that this was clearly communicated to XTX.

Mazars argued that the real reason for its refusal was the sanctions regime, not nationality. Mazars also argued that the refusal was due to the opaque corporate structure of the XTX entities and their links to the Cayman Islands, which raised compliance concerns. The judge accepted that such matters might have been legitimate reasons for caution - and could have been addressed had they been raised with XTX - but they were not the reasons given at the time.

The court held that where, as here, the express reason for the decision was nationality, other factors such as sanctions compliance or reputational caution "go to motive and are irrelevant" when assessing direct discrimination.

Accordingly, the judge concluded that if Mazars UK had in fact refused to provide services to XTX, that refusal would have amounted to direct discrimination on the grounds of nationality.

Sanctions-related defences

Mazars sought to rely on two statutory defences to justify its position.

Schedule 23(1)(c) of the Equality Act

Mazars first relied on s.196 and Schedule 23(1)(c) of the Equality Act, which provide that an act is not discriminatory if it is done to comply with a requirement imposed by law.

Mazars argued that its refusal to act for XTX was reasonably necessary to comply with the 2019 Regulations, given the perceived risk that providing services to companies with Russian ownership or control could breach those Regulations. While accepting that Dr Gerko was not a designated person, Mazars emphasised that the 2019 Regulations are broad in scope. In particular, Regulations 7(4) and 11(7) extend "ownership or control" beyond shareholdings to include circumstances where a person may appoint or remove a majority of directors or otherwise influence a company's affairs. Mazars submitted that, given XTX's complex corporate structure and the involvement of Cayman Islands entities, it was difficult to verify the group's ultimate ownership and control.

The court rejected this argument. It found that the reason actually given to XTX was not concern about ownership or control, but that Mazars would not accept new clients who were, or were connected with, Russian nationals. A blanket embargo on Russian nationals, the judge held, was not reasonably necessary to comply with the 2019 Regulations.

Even if Mazars' genuine concern was the opacity of the Cayman Islands structure, a reasonable and compliant approach would have been to explain those concerns to XTX and request further information to verify that no designated persons were involved. Had Mazars refused services only after making such enquiries and finding XTX unwilling to cooperate, the defence might have had some validity. However, in this case no such opportunity was given, and nationality remained the operative reason for refusal. Accordingly, the Schedule 23(1)(c) defence failed.

S.44 of SAMLA

S.44 of SAMLA protects a person from civil liability where they act in the reasonable belief that their conduct complies with sanctions regulations, including the 2019 Regulations.

Mazars argued that it held the necessary subjective belief that its refusal to provide services to XTX was intended to comply with the 2019 Regulations, and that this belief was objectively reasonable in the circumstances. It invited the court to consider the wider context: that the sanctions regime was rapidly evolving, that breaches could attract criminal as well as regulatory consequences and that there was a perceived lack of transparency in XTX's corporate structure.

The court rejected the defence. It held that it did not "get off the ground" because there was a complete absence of evidence as to the belief of those who made the decision to refuse services. None of the relevant decision-makers gave evidence, and there were no documents indicating that they believed the refusal was necessary to comply with the 2019 Regulations.

The judge also found it difficult to accept that refusing services because of nationality could amount to a reasonable belief that Mazars was acting in compliance with the 2019 Regulations. The Regulations do not prohibit dealings with individuals solely on the basis of nationality.

Accordingly, the s.44 defence failed.

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