Yamalo-Nenets Autonomous District Commercial Court rules in Favor of Maxima Legal’s client in recovery of unpaid eurobond coupon income from JSC “GTLK” for bonds held in foreign depository

Sergei Bakeshin, Senior Counsel and Head of Dispute Resolution & Insolvency Practice at Maxima Legal, convinced the court that JSC “GTLK” as a Russian legal entity with obligations related to eurobonds issued by its foreign subsidiary must fulfill these obligations not only to holders whose rights are recorded in Russian depositories, but also to holders in foreign depository infrastructure.

Russian counter-sanctions legislation establishes mandatory procedures and timelines for fulfilling obligations to eurobond holders in Russian infrastructure (in particular, Russian corporations were required to issue replacement bonds by July 1, 2024 for those keeping eurobonds in Russia). For holders in foreign infrastructure, no such “regulations” are provided. Despite this, most Russian corporations continue fulfilling their obligations to those holding eurobonds abroad in one way or another. JSC “GTLK” is one of the exceptions, avoiding obligations to “foreign” holders despite the facts that the eurobonds were issued by its subsidiaries, that the placement proceeds were used to finance JSC “GTLK” and its group’s activities, and that JSC “GTLK” itself acts as guarantor for these eurobonds.

To our knowledge, this is the first ruling on a claim by a “foreign” eurobond holder against JSC “GTLK”, and indeed the first decision in such disputes with any Russian corporation. Moreover, JSC “GTLK” is also failing to meet its obligations to “Russian” holders. Since June 2023, consideration has been ongoing of a lawsuit to protect the rights and legitimate interests of a group including holders of JSC “GTLK” eurobonds whose rights are recorded in Russian depositories and who are not receiving coupon income or bond redemption amounts. The existence of this group lawsuit prevents consideration of individual cases of “Russian” holders, with proceedings suspended until completion of the group lawsuit review. Thus, the “foreign” eurobond holder represented by Maxima Legal has a chance to obtain satisfaction of its claims against JSC “GTLK” sooner than “Russian” holders.