Moscow court orders Euroclear to pay damages for blocking Russian bank assets
A Moscow court has ordered Belgium-based Euroclear Bank to pay damages to Russian state-owned DOM RF Bank for blocking the bank’s securities after the European Union imposed sanctions on Russia’s banking sector.
DOM RF is a state-owned Russian bank specialising in mortgage and construction financing. The Russian Federation, represented by the Ministry of Finance, owns DOM RF.
The Moscow Commercial Arbitration Court ordered Euroclear to pay DOM RF a total amount of approximately $4.85 million, to be paid in rubles at the official exchange rate on the day of payment.
The bank’s assets were effectively blocked following the EU’s imposition of blocking sanctions on 3 June 2022 against the National Settlement Depository.
Euroclear stopped executing NSD’s orders and blocked NSD’s accounts on 28 February 2022, depriving DOM RF of the ability to use and dispose of its assets.
DOM RF applied to the Belgian Treasury in December 2022 for a general licence to unblock the assets; the Treasury refused the request to transfer funds. DOM RF appealed the refusal and filed an appeal with the Belgian Council of State, but it said a response from the Belgian Council of State has not been received.
Euroclear argued the case was not within Russian court jurisdiction, Russian law was not applicable, and the fact and composition of losses were not proven by DOM RF. The court rejected Euroclear’s arguments, finding that Russian courts have jurisdiction under Article 248.1 of the Russian Arbitration Procedural Code because the dispute contains a sanctions element that determined the defendant’s actions.
The court stated that Russian law applies to tort obligations where the action or circumstance that served as the basis for a claim for compensation occurred in Russia, or where harm occurred in Russia if the wrongdoer foresaw or should have foreseen the occurrence of harm in Russia.
‘All persons complying with the sanctions regime against Russian residents are aware of the place where the alleged harm will occur and the purpose of the economic sanctions imposed,’ the court stated.
It found that Euroclear is the entity on whose accounts the money owed to DOM RF is blocked, and Euroclear’s actions led to DOM RF suffering losses.
‘Euroclear blocked NSD’s accounts, so the Bank cannot receive its assets or dispose of them, and therefore suffers losses in the amount of the value of the assets,’ the court stated.
It rejected arguments that Euroclear was obliged to comply with EU and Belgian sanctions law, stating that ‘applying Russian substantive law, the court cannot assess the defendant’s behavior on the basis of foreign sanctions norms and rules’.
As Euroclear battles a rising tide of lawsuits in Russia for complying with Western sanctions, it is simultaneously placed at the core of the European Union’s most ambitious financial maneuver: a proposed reparations loan to Ukraine of €140 billion, about $163 billion, underwritten by the principal of the nearly €210 billion, about $244 billion, in frozen Russian Central Bank assets it holds.
