The former British subsidiary of Sber allowed the loss of control over $105 million

The manager of the British Sberbank CIB UK warned the company's creditors about the risk of transferring $105 million belonging to it to the former parent structure - the Russian Sberbank. This will become possible if Sber wins in a Russian COURT

Sberbank may gain access to the money of its former subsidiary, the British Sberbank CIB UK, control over which was lost due to sanctions. This is stated in the report of Teneo Financial Advisory - management of Sberbank CIB in the UK passed to it in the spring of 2022 . We are talking about the amount of $105 million in the form of funds that are stored in various correspondent accounts in Sberbank, as well as in the National Russian Depository (NRD). This will become possible if Sber wins the dispute in Russian arbitration, which was initiated in March 2024 , warn the managers of Sberbank CIB UK.

Sberbank did not respond to RBC's request.

How Sber lost its subsidiary in Britain

The British division of Sberbank CIB specialized in investment banking, securities trading and financial advisory services.

In the spring of 2022, after Sberbank fell under blocking Western sanctions , Sberbank CIB UK had difficulties with settlements on transactions with counterparties. The company also faced blocking of correspondent accounts in British, American, and French banks and the suspension of transactions with securities in a large depository - the Belgian Euroclear. Against this background, the British regulator decided to transfer Sberbank CIB UK under the control of a temporary administration. A month later, the managers launched bankruptcy proceedings for the company, which has still not been completed.

How Sber's claims against its former daughter arose

The main “trading corridor” of Sberbank CIB UK was in RUSSIA. Therefore, at the time of the announcement of sanctions, the parent and subsidiary structures had a large volume of mutual demands on each other. In the spring of 2022, Teneo Financial Advisory and Sberbank negotiated the offset of non-performing assets for $107 million, RBC wrote. Most of this amount was formed from cash balances in correspondent accounts of the British subsidiary in Sberbank, as well as in accounts in the National Settlement Depository.

The parties developed a settlement agreement that suggested that the British entity's obligations to the Russian parent bank could be repaid using money in accounts in Russia, according to one of the external manager's reports. This would allow Sber to withdraw from the list of creditors, and the rest to count on “optimal income” after the sale of assets.

Teneo Financial Advisory tried to obtain permission for the asset swap from the British station regulator OFSI, but was refused in August 2023.

At the end of March 2024, Sberbank filed a lawsuit against Sberbank CIB UK in a Russian court with the intention of collecting debt on loans issued to its British subsidiary. According to the file of arbitration cases, Sber filed claims for four loans - in euros, pounds sterling, Canadian dollars and rubles, the total amount of claims is 12.1 billion rubles, or $134.6 million.

This lawsuit may affect the ability of external managers to make payments to other creditors using Sberbank CIB UK funds, Teneo Financial Advisory points out. Sber's total claims against its former British subsidiary reach £259 million, or $284 million. This is almost three times the amount of the former subsidiary's net obligations to the Russian parent ($95 million), which were determined by external managers.

What are the chances of Sberbank getting money from its ex-subsidiary?

Experts interviewed by RBC highly assess Sber's prospects in a dispute with its former British subsidiary in a Russian court.

“Given the prevailing position of the Russian courts regarding the operation of the sanctions regimes, as well as the administrative refusal received in the “unfriendly” jurisdiction, the bank has a good chance of satisfying its claims. Moreover, the standard of proof for this category of cases—debt collection under credit transactions—is sufficiently known. Probably, Sberbank CIB UK, as part of its defense, will have to prove the absence of its violation or the presence of circumstances excluding liability,” says Vladislav Bedrosov, a lawyer in the special projects practice of Vegas Lex. It recalls a similar lawsuit by VTB against VTB Bank (Europe) SE.

“Since there is a political confrontation, the legal fabric is now such that everyone, both in Russia and abroad, is trying to sue for their own on their own territory, where they can not only win, but will almost certainly win,” agrees the partner of the legal company "Orlova and Ermolenko" Alexander Ermolenko.

Sber’s chances of winning in court are still not absolute, warns Artem Kopylov, project manager at the Pen & Paper Bar Association: “The significant discrepancy between the amount of the stated claims and the data of foreign auditors on the size of Sberbank CIB’s net liabilities to the parent company raises suspicions. We must not forget that Sberbank CIB, as a defendant, has independent procedural rights, including the right to make counterclaims against Sberbank.” But the lawyer also notes that judicial practice in similar cases against structures from “unfriendly” countries is so far developing in favor of Russian plaintiffs.

According to Ermolenko, although claims against the former “daughter” were formally filed on other grounds, they will open up the opportunity for Sberbank to receive funds from its correspondent accounts. “To receive funds from a subsidiary located in correspondent accounts in Russia, you still need some kind of legal basis. You can’t just say, “We have your money and we like it.” We need some kind of legal decision about what the “daughter” owes to the mother’s structure, and by the will of fate, the mother’s structure has the money. They first tried to offset the claims, but OFSI did not allow it. Perhaps Sberbank made a second attempt to approach this money,” the lawyer argues.

If Sber's claim is satisfied by the court in Russia, receiving the blocked funds is a matter of time, agrees Kopylov. “Consequently, fulfillment of obligations to creditors of Sberbank CIB will be possible at the expense of other assets of the company, which will be extremely difficult for Sberbank to foreclose on. At the same time, the company has relatively few other unsecured creditors, besides Sberbank,” he argues.

What the managers of the former Sber subsidiary managed to unfreeze

As noted in the managers' report, completion of the procedure for settlements with creditors and winding down the business of Sberbank CIB UK is hardly possible before March 2025. So far, Teneo Financial Advisory has been obtaining licenses from regulators in the UK, usa , Belgium and CANADA necessary to return assets frozen due to sanctions. This was only partially successful. For example, managers obtained £1.37 million denominated in euros, which were held in the Belgian depository Euroclear. However, the money in DOLLAR accounts in the amount of £10.2 million has not yet been returned, since the American division of the US Treasury Department dealing with sanctions - OFAC (Office of Foreign Assets Control) - has not yet given permission for this operation in Belgium.