On 25/01/20233 the LINNIKOV & PARTNERS team has once again proved its reputation as one of undisputed leaders in mastering subsidiary liability cases on the national scale by winning the high-profile dispute arising out of attempted recovery of alleged losses of the Moscow Industrial Bank from its top-managers in the court of appeals.
In January, 2019 the Bank of Russia has appointed the Temporary Administration to MInBank. As the bank at the time played a key role in providing financial services to the public in several regions and Russia and was involved in the financing of significant development and industrial projects, the regulator has decided not to revoke its license to carry out banking operations. Furthermore, the Bank of Russia took measures aimed at financial sanitation of the credit institution and contributed additional funds to the capital of the bank to support its liquidity.
The regulator was unable to find sufficient grounds for criminal charges against managers of MInBank for illegal disposal of its assets and instead took the path of filing lawsuits for the recovery of alleged losses against all persons that held positions on the Executive Board of the credit institution within three years prior to the introduction of the Temporary Administration. The claim for damages to be recovered form 18 individual defendants was defined according to a controversial novella in the Russian legislation on insolvency of credit institutions that came into force on 08/06/2018 as the “sum of expenses of the Bank on Russia on financial sanitation” and amounted to over 198 billion Rubles (close to 3 billion Euros). In course of the long and stressful trial, two of the defendants passed away.
“Regretfully, with the MInBank case the court of first instance immediately took an accusatory stance and applied the new provision of the law to a prior period in which it hadn’t existed at all, which, most obviously, led to a gross violation of the constitutional principle that prohibits retrospective application of laws that aggravate the position of a person comparing to what it was at the time when an alleged offence was committed. The court of first instance never bothered to provide a sensible justification for qualifying the conduct of the defendants as illegal, as well as to assess the degree of their guilt and individual involvement in allegedly unlawful activities. As the result, the defendants were held liable only for having held executive positions with the bank over a specific period of time”, – says the leader of the L&P Bankruptcy and Subsidiary Liability practice group Tatiana Tsepkina.
During the hearing of the case by the court of appeals the panel of judges agreed with the arguments of the defense that showed significant violations of material and procedural law allowed by the Arbitration Court of the City of Moscow in the trial of first instance and modified the initial judgements by relieving the client of L&P and several other defendants of unlawful and unjustified liability for alleged losses of the bank.