Russia Pushes Back On Ukraine's Move To Seize Its Assets

Law360 (May 12, 2022, 3:58 PM EDT) -- Russia's largest financial institution, Sberbank, said Thursday that it will pursue an investor-state claim against Ukraine after the country adopted a decree allowing it to seize Russian assets.

The bank's press office confirmed the news to Law360 on Thursday. Sberbank, which holds about a third of all bank assets in Russia, is majority owned by the Russian government.

"Sberbank is initiating investment arbitration against Ukraine with a claim for damages on the basis of the Agreement Between the Government of the Russian Federation and the Cabinet of Ministers of the Ukraine on the Encouragement and Mutual Protection of Investments, dated Nov. 27, 1998," the bank said in a statement.

The move comes after the Ukrainian Parliament, the Verkhovna Rada, this week adopted a decree called On Compulsory Seizure of Property in the Russian Federation and Its Residents on a vote of 334-0.

VEB.RF, Russia's economic development institution, has also reportedly initiated an investor-state claim. The bank, which describes itself as non-profit, could not immediately be reached for comment on Thursday outside normal business hours in Russia.

Additional details about the decree were not available on the Verkhovna Rada's website, but local news media have reported that its targets include 99.8% of shares in Prominvestbank owned by VEB.RF and 100% of shares in International Reserve Bank owned by Sberbank.

Sberbank did not respond to a request seeking more information about the claim.

According to a copy of the Russia-Ukraine treaty on a website maintained by the United Nations, the two countries have six months to attempt to resolve a dispute by negotiation before it can be submitted to arbitration.

At that point, disputes will be resolved either by "a competent court or an arbitration court of the contracting party, on whose territory the investments were carried out," the Arbitration Institute of the Chamber of Commerce in Stockholm, or through ad hoc arbitration under the "arbitration regulations" of the U.N. Commission for International Trade Law.

Representatives for Ukraine could not immediately be reached for comment on Thursday.

This is not the first time that Russia has had its assets seized since invading Ukraine in February. Last month, Germany announced that it had seized control of Gazprom Germania, a unit of the Russian state-owned energy company Gazprom, until at least Sept. 30.

Russia has itself threatened to nationalize foreign assets in recent months, advancing a bill to nationalize the assets of any company that is more than 25% owned by foreigners from "unfriendly" countries, including the U.S., Canada, the U.K. and those in the European Union, to the Russian State Duma in April.

Additionally, the Kremlin has been found liable multiple times in international arbitration for expropriating Ukrainian assets in Crimea after Moscow annexed the peninsula in 2014.

--Editing by Dave Trumbore.

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