Update on Russian case law regarding forced transfer and unpaid dividends

In this post we provide a first update on recent Russian court decisions. These court decisions were kindly provided by Irina Sibirina from the legal firm Itlektis.ru. More case law on Sberbank securities will follow soon.

Case 1: Forced transfer of Rosneft shares and unpaid Rosneft dividends The first case involves an investor, mr. Gubaev, that bought Rosneft shares via the Swiss CBH Bank (the case materials speak in one section about directly buying ordinary shares but refer to converted depositary shares in another section). He applied to get his ordinary shares forcefully transferred from CBH Bank to his Russian brokerage account with ATON. According to the court materials, the chain of custody involved The Belgian Branch of Bank of New York Mellon and Citibank Russia. The Russian appellate court ruled in October 2023 that Citibank Russia had wrongfully denied the request for a forced transfer and ordered Citibank Russia to carry out the forced transfer. The full case materials can be found here: https://kad.arbitr.ru/Card/1cc1f615-c31d-4c06-93e1-0c901dd26fdc. Mr. Gubaev then requested the payment of dividends from Citibank Russia. Citibank Russia noted that the procedure for the payment of dividends that was set out by the Central Bank of Russia wasn’t followed by its account holders. Therefore, it transferred about 1 billion Rubles in dividends back to Rosneft. Then mr. Gubaev requested the unpaid dividends from Rosneft. Rosneft refused, because according to Rosneft it wasn’t fully established that the dividends that were returned by Citibank Russia included the dividends of mr. Gubaev. The court did not accept this argument and ruled that it is sufficient to establish that Citibank did not pay the dividends to mr. Gubaev and that Citibank had returned dividends to Rosneft. The court then ordered Rosneft to pay the unpaid dividends to mr. Gubaev. The full case materials can be found here: https://kad.arbitr.ru/Card/4039a05c-f2f0-4df1-9ddd-5eb8fd15ec10. Both cases were brought to appellate courts and cassation. The decisions above were confirmed in cassation. Why is this case interesting? Rosneft has generally been very non-cooperative when it comes to claiming unpaid dividends. This case shows 1) that forced transfer can still be carried out when the request for a forced transfer was unlawfully denied and 2) that Rosneft has unlawfully refused to pay unpaid dividends and that going through court can help to get a court to order Rosneft to pay the unpaid dividends.