VTB wants to limit the lawsuit activity of the former subsidiary VTB Bank (Europe) SE through the court
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VTB filed a second lawsuit against its former subsidiary, VTB Bank (Europe) SE. A Russian bank, trying to recover more than €112 million from its former subsidiary, has now asked the court to impose a ban on filing claims in foreign courts. Despite the fact that, according to a previously signed agreement between the banks, all proceedings must take place in Hong Kong, VTB says that, under the conditions of sanctions restrictions, it is trying to use the available tools to protect its rights.
VTB filed a claim with the Arbitration Court of St. Petersburg and the Leningrad Region against VTB Bank (Europe) SE with a request to impose a ban on initiating or continuing proceedings in a foreign court or international commercial arbitration located outside Russia. This is stated in a document published in court file from October 30. This is the second lawsuit against the former subsidiary bank. Previously, VTB filed a lawsuit to collect debt from it in the amount of €112.6 million (see “Kommersant” dated September 18).
However, as follows from the document, VTB Bank (Europe) SE notified VTB that, according to the “agreement for the purpose of terminating mutual rights and obligations” concluded in April 2022, any arising dispute or claim should be submitted to and finally resolved through arbitration, administered by the Hong Kong International Arbitration Centre. Because of this, no claims can be presented to Russian state courts, noted VTB Bank (Europe) SE. The latter, in turn, appealed to the Hong Kong court with a request to prohibit VTB from initiating or continuing proceedings in the case of recovery of funds in the amount of €112.6 million.
Under such circumstances, failure to take urgent interim measures may result in “deprivation of the plaintiff’s right to trial on the territory of Russia and cause significant damage to the plaintiff due to the sanctions imposed against him,” the document notes. As a result, the court granted VTB’s request for interim measures, prohibiting VTB Bank (Europe) SE from initiating proceedings in Hong Kong. After a statement from VTB Bank (Europe) SE, the case for the recovery of €112.6 million was sent to the appellate court on October 24.
VTB lost its voting rights in VTB Bank Europe SE in April 2022 after EU sanctions were imposed against the Russian bank. Subsequently, the subsidiary bank was written off from its balance sheet, as a result of which VTB showed a significant loss.
Regarding the filing of the second claim, VTB explained to Kommersant that “in the context of sanctions restrictions and the illegal decision of the German authorities to liquidate VTB Europe and introduce external management to protect its rights, the bank uses the tools available under the current Russian legislation.”
Andrey Kostinhead of VTB, on the sidelines of SPIEF June 16, 2022:
“In general, I think that we need to be honest: the banks were taken from us, and the banks need to be taken away from them, to ‘nullify’ the topic.”
The current version of the APC provides that if sanctions are introduced, then disputes with such persons should be considered in the Russian legal framework, notes Igor Dubov, partner at Iontsev, Lyakhovsky and Partners.
Currently, this is already a common practice when Russian companies and banks submit similar applications to Russian courts.
“Most likely, they are pursuing the goal of prohibiting the execution of negative decisions of various foreign courts on the territory of the Russian Federation, if there are any,” says Mr. Dubov. For example, if VTB Europe has to execute some negative decision of another court on the territory of the Russian Federation (for example, a hypothetical recovery of funds from VTB, etc.), the lawyer argues. Russian courts issue such banning acts, but so far there are no examples of how this works in practice, he clarifies.
As banking lawyer Nina Semina explains, VTB is obviously guided by Article 248.2 of the Arbitration Procedure Code of the Russian Federation, which prohibits initiating or continuing proceedings in disputes involving persons in respect of whom restrictive measures have been introduced. “This article was introduced back in 2020, but began to be more or less actively used only last year,” she points out.
Both banks – VTB and VTB Europe – are under blocking sanctions from the American OFAC, which prevents them from fulfilling the above agreement.
“But if the Russian court satisfies VTB’s claim, the court decision that has entered into legal force may, in my opinion, protect VTB’s subsidiary from the application of European supervisory measures to it for failure to go to arbitration in accordance with the agreement,” she believes. On the other hand, VTB gets the opportunity to make demands on its subsidiary bank exclusively on the territory of the Russian Federation, notes Ms. Semina. “However, here the question arises of the enforceability of adopted judicial acts, which, unlike arbitration decisions, are not enforced everywhere and not according to a simplified procedure,” the expert concludes.
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