Russian investors have filed a class-action lawsuit against Clearstream, an international settlement depository based in Luxembourg, seeking to recover funds that were blocked due to Ukraine-related Western sanctions against Russia. The lawsuit was filed on August 17 at the Arbitration Court in Moscow, with the plaintiffs aiming to recover approximately 200 million rubles ($2.14 million) in compensation for the value of their blocked assets, as well as accrued but unreceived dividends and other payments. The first court hearing is expected to take place in October.
This is not the first legal action taken by Russian investors regarding blocked funds. Earlier this year, they also took legal action against Belgium-based Euroclear, the EU’s largest depository. Euroclear had revealed that it had accrued nearly $2 billion in profit from frozen Russian assets in the first half of 2023. At least 18 lawsuits, including two class actions, have been filed against Euroclear in Russian courts. The Russian investors are seeking approximately 200 billion rubles ($2.1 billion) in compensation from Euroclear.
The funds in question were held by private investors within European clearing houses through Russia’s National Settlement Depository (NSD). Both Euroclear and Clearstream ceased transactions with NSD and blocked its accounts amid sanctions against the Russian depository in mid-2022. As a result, Russian investors were unable to retrieve their assets. In January, the Bank of Russia estimated that Russian assets stuck at Euroclear and Clearstream amounted to about 5.7 trillion rubles ($60.9 billion).
Late last year, EU regulators authorized the release of “certain” frozen Russian funds by granting temporary general licenses to NSD at Euroclear and Clearstream. However, it was later reported that the licenses could not be enforced because NSD could not fulfill their requirements.
There is optimism among experts that the investors will be successful in recovering their funds through legal action. In a precedent-setting case in February, the Arbitration Court in Moscow ruled against Euroclear in a case filed by Bank St. Petersburg. The bank demanded the recovery of $107 million held at the depository, and in April, the Belgian Treasury issued a license for the bank to unblock its assets frozen on NSD’s account with Euroclear.
The legal action taken by Russian investors against Clearstream and Euroclear highlights the ongoing consequences of Ukraine-related Western sanctions against Russia. It also sheds light on the challenges faced by investors who have had their funds blocked and are seeking compensation. As the cases progress and court hearings take place, the outcome will have significant implications for both the investors and the depositories involved.
In conclusion, the class-action lawsuit filed by Russian investors against Clearstream is the latest legal action seeking to recover funds that were blocked due to Ukraine-related sanctions. The investors are also pursuing similar legal action against Euroclear. The outcome of these cases will have important implications for both the investors and the depositories involved, as well as provide insight into the challenges faced by investors in retrieving their blocked assets.
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