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On 29/06/2022 the State Arbitration Court of the City of Moscow concluded the widely-publicized trial for recovery of damages from ex-shareholders and top-managers of PJSC “Promsvyazbank” (PSB). The team of attorneys supervised by Alexander Linnikov represented a person that, up to December of 2017, worked as a member of the Executive Board of the bank. Leader of the Bankruptcy & Subsidiary Liability practice Tatiana Tsepkina and Head of the Litigation & Commercial Arbitration practice group Leonid Karpov acted as co-lead counsel on behalf of the L&P team. The aggregate subsidiary liability claim to the client of LINNIKOV & PARTNERS amounted to over 117 billion Rubles (roughly 2.1 billion Euros).
The PSB trial attracted particular public attention due to the fact that the bank allegedly belonged to the so-called Moscow Banking Ring, an informal group consisting of Financial Corporation “Otkritie”, Binbank, Credit Bank of Moscow and PSB. According to the allegations of the Bank of Russia, these credit institutions practiced “circular loaning” – an arrangement consisting of mutual transactions that technically complied with the prudential supervision requirements, but, at the same time, allowed for purely formal re-distribution of financial risks, incongruent with the actual level of risk assumed by each member-bank of the “Ring”.
PSB, attributed by the Regulator to the category of credit institutions of critical importance, for many years was considered one of the most slid and financially stable. However, by the end of 2017 the Bank of Russia has discovered ground for application to the bank of mandatory supervisory measures, significantly limiting its business. It must be noted that in 2017 the Regulator was already involved in the “projects” of financial sanitation of Financial Corporation “Otkritie” and Binbank. In December, 2017 the Bank of Russia announced the appointment of temporary administration to PSB. Subsequently the bank was nationalized and, after a year of temporary administration, the Bank of Russia filed a claim for the recovery of its alleged losses from the Promsvyaz Capital B.V. holding company, the bank’s UBOs, the Ananiev brothers, and several members of PSB’s Executive Board for an amount, unprecedented in the history of corporate Russia – 243 million Rubles (roughly 4.4 billion Euros).
The subsequent trial – a centre of attention of the whole Russian legal and corporate community for over three and a half years – culminated with the decision of the court to recognize signs of illegal conduct of the PSB management alleged by the plaintiff only in the actions of the bank’s beneficiaries, the brothers Alexei and Dmitry Ananiev, and its holding company – Promsvyaz Capital B.V., and to award to the plaintiff the recovery of losses in the aggregate amount up to 91.2 million Rubles (roughly 1.6 billion Euros). At the same time, the court has denied claims to the L&P client and several other defendants. Therefore, upon the entering of the judicial act into force, ex-top managers of the bank will not be brought to unlawful and unjustified liability for alleged losses. The court has also ruled to release the property of the defendants from the arrest enacted in May, 2020 upon the entering of the decision into force.
“One must specifically note the highest professionalism of the Judge and impeccable guidance of the trial from the prospective of both, procedural law and technical legal skill. Despite stubborn attempts of the Bank of Russia to abridge the principle of public execution of justice by filing repeated petitions for closed hearing of the case, His Honor Judge Khudobko ruled in favor of public hearings and, in doing so, upheld the constitutional principle of public justice and assured additional guarantees for an eventual lawful decision. Upon thorough review of the case file, the Court decided to support the motivation put forward by defense counsel and upheld the position of the Supreme Court of the Russian Federation by ruling that the insolvency laws do not provide for the presumption of guilt for intentional bankruptcy of an organization based solely on the criterion of participation of the defendant in the management bodies of the company. The LINNIKOV & PARTNERS team presented non-rebuttable evidence to the effect that actions of our client during his work as a member of the Executive Board of PSB have not extended beyond the limits of reasonable business risk and transactions, labeled “contestable” by the plaintiff, were part of the ordinary banking activity. It was inspiring to witness the Court’s objective and balanced approach to the examination of case materials, thorough reviewed of all relevant circumstances and an eventual arrival at a ruling that takes into account the actual degree of personal responsibility of each of the defendants. Quite regretfully, in the modern-day Russian justice system such a professional and detached approach of the Court to the review of cases is more of an exception than a common practice”, – comments Tatiana Tsepkina.
Alexander Linnikov and Leonid Karpov state in full agreement: “We sincerely hope that the Court of Appeals will completely uphold the ruling of the Arbitration Court of Moscow and the “PSB Case” will become a part of the history of Russian justice as a trial marking the end of the corrupt and vicious practice of persecution and uncontrolled subsidiary lability for alleged losses and damages non only of members of management bodies of credit institutions, but of entrepreneurs in general! In any case, the LINNIKOV & PARTNERS team, reinforced by the international experience and global legal expertise of the GRIMALDI ALLIANCE, will do its best to make it happen”.
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