Can a Dutch-based company of two disgraced Russian oligarchs be obliged under European sanctions to pay money to the Russian state? That question was at the center of a lawsuit Friday between the sanctioned Russian Promsvjazbank (PSB) and the company of its former owners, Promsvjaz Capital (PSC). It is one of the first lawsuits to be conducted in the Netherlands in which the implementation of the sanctions plays a role.
Dmitri and Aleksey Ananev (according to business magazine Forbes worth 1.4 billion dollars in 2016) owned one of the largest private banks in Russia until the end of 2017. In December 2017, the Russian central bank nationalized PSB because it had too many bad loans and limited buffers.
Read more about Dmitri Anaev here: How a Russian Oligarch Lost His Empire
In recent years, the brothers have been involved in lawsuits in various places in Europe. PSC, with a letterbox company, is located in Amsterdam, among other places. And where the oligarchs try to get their assets back, the Russian government and bondholders are actually filing lawsuits against them. They want back hundreds of millions of euros that the Ananjevs would have funneled away around the nationalization.
The case was supposed to go to court in the spring but was postponed due to the Russian invasion of Ukraine and the sanctions that were introduced at the time. The Promsvjazbank was placed on the sanctions list because it partly finances the Russian defense industry. The law firm that assisted the bank, the Rotterdam Beaufort Litigation initially refused to lay down the defense of the Russian state, but later did so. But because the bank is entitled to a defense, the Dutch Bar Association appointed a lawyer to assist the bank. “My position is a rather special one. I am here because I have no other choice”, said Quirijn Bongaerts of the Birkway office at the start of the session.
European Sanctions Regulation
Due to the European sanctions, the case regarding the account of the nationalization has not yet been dealt with substantively. Friday was mainly about the question of whether PSB can be declared admissible. In other words: can the court oblige a party to make a payment to the Russian state against the sanction rules?
Under European sanctions it is prohibited to transfer money to entities and persons on the sanctions list. And so no statement can actually be made about whether the Ananjevs have to pay hundreds of millions of euros to the Russian state, Jurjen de Korte argued on Friday on behalf of the oligarchs. “Under the sanctions it is forbidden to make any payment to PSB.”
The bank itself disagrees. Lawyer Bongaerts acknowledges “the limitation of the sanctions regulation” but wants the court to reach a decision on whether and how much PSB is still owed from the Ananjevs. “Then the Ministry of Finance would have to grant an exemption for the payment or the money would have to be deposited into a frozen account of PSB.” The bank would then be able to access that money as soon as the sanctions are lifted. “If the judge declares PSB inadmissible, it actually loses access to justice.”
A verdict in the case could have consequences for other sanctioned persons. They can then claim possible claims against other parties and have them temporarily deposited into their frozen account.
It is unclear when the judge will rule in this case. In Cyprus, PSB has previously filed two similar cases about repayment after nationalization. Under European law, the first case filed takes precedence, which means that the Dutch court cannot consider the case. During the hearing, however, PSC lawyer De Korte reported that it had become known on Friday morning that PSB had withdrawn those cases. The Dutch lawyer of PSB, who was not aware of this, will now first have six weeks to find out whether that is correct.
A version of this article also appeared in the newspaper of October 15, 2022