The Supreme Court of the Russian Federation (SC) continues to develop a practice that allows for the prosecution of a Russian organization within its group for violations by a foreign company related to the implementation of foreign sanctions. The findings of the Economic Collegium in the case of Sovcombank versus the British J.P. Morgan Securities and the Russian J.P. Morgan Bank International introduce new criteria for departing from the principle of the separateness of a legal entity’s property from its participants.
The SC published its ruling on the dispute between Sovcombank (replaced by Sodeystvie Mezhdunarodnykh Settlementam LLC in November 2023) and J.P. Morgan Securities PLC and J.P. Morgan Bank International LLC. Under a 2016 general agreement, Sovcombank and J.P. Morgan Securities conducted repo transactions. As a result, the British company incurred a debt of $13.9 million, but after the imposition of foreign sanctions against Sovcombank, it became impossible to transfer funds to it.
Anna Zabrotskaya, Managing Partner at Nordic Star in Russia, generally considers the economic panel’s approach balanced:
“The court supports the idea of protecting Russian residents under sanctions, but also insists on strict adherence to the principles of civil and corporate law. Participation in a foreign holding company should not automatically entail liability for the actions of the parent company”.
More details in the Kommersant article.