Nikita Deynega has commented to Finam.ru on the EU`s position and Clearstream’s plans for blocked Russian assets

In early October, Clearstream depository announced the resumption of conversion of Russian depositary receipts (DRs), while the EU announced conditions for unfreezing the assets of Russian investors. Nikita Deynega, Senior Associate, Head of Tax & Administrative Law practice at Maxima Legal, explained Finam.ru how this news may affect Russian investors.

In particular, Clearstream has informed that it will again start processing DR conversion instructions for which the DR agent’s books are open for censorship. At the same time, the depositary indicated that, given the possibility of compulsory conversion of receipts into Russian shares via the procedure introduced by Russian Federal Law № 319-FZ, Clearstream Banking’s settlement of depositary receipts for Russian shares remains closed.

According to Nikita, Clearstream’s actions will likely result in many of the depositary receipts of Russian companies being converted into shares and then freely tradable in the perimeter of the Russian financial market and capable of being redeemed.

The terms under which the release of assets of Russian investors is possible, which were published in the EU’s official journal, were also seen by the expert as positive. “In practice, these decisions are important because they are evidence that, despite the increasing sanctions pressure on Russia, European institutions do not rule out the possibility of unblocking the assets of private investors. Moreover, the decisions in question point to concrete ways out of the current situation,” Nikita explained.

In particular, the latest decision of the EU Council has confirmed the possibility of using the mechanism of licences (authorisations) of the EU member states as the main way to obtain exemptions from sanctions and, in this case, to unblock the assets of private investors frozen due to NSD’s inclusion in the sanctions list. “Obtaining approvals from European regulators (Belgian for assets blocked at Euroclear and Luxembourg for securities held with Clearstream) was initially seen by us as one of the easiest and most effective mechanisms to resolve the freezing of private client assets. It also seems promising to join NSD’s lawsuit against the EU Council before the EU General Court, as well as to file separate claims before that court (to exclude the effect on individuals of the EU Council decision to include NSD on the sanctions list or to recover the damages caused by that decision),” commented Nikita Deynega. As the expert stressed, if a Russian investor is not in any way connected with the events taking place in Ukraine (directly or indirectly), is not personally included in the sanctions lists and is not connected with defence activities in Russia, the probability of obtaining permission to unfreeze assets is assessed as high.

“At the same time, there are two confusing aspects in the published decision: the deadline for applying for permission until 07.01.2023, set in the absence of obvious justification, and the reference to the fact that assets owned by NSD (while all securities accounted at NSD do not belong to it, but are in depository safekeeping) are subject to unblocking. And while the second aspect is most likely due to the unfortunate wording of the decision, with regard to the deadline the indication is mandatory, from the EU Council’s point of view. Compliance could be a problem for investors, for whom even now, in some cases, it is problematic to obtain sufficient documents from the broker and the depositary promptly,” added Nikita Deynega.

To read the full article (in Russian) please visit  Finam.ru website >>>