Update on Russian case law regarding forced conversion: Russian court orders Raiffeisenbank to carry out forced conversion.
In this post we provide a fifth update on recent Russian court decisions.
Case 5: Forced conversion in 2025 as a result of an unjustified rejection of the request for forced conversion in 2022
The fifth case involves mr. Pelevin who owned GDR's and ADR's (depositary receipts) of NLMK (8,600 GDR's) and Surgutneftegas (17,469 ADR's that represented preferred shares) via the broker Citibank NA London. Citibank NA London refused to carry out a request for standard conversion.
Mr. Pelevin therefore applied for forced conversion. Raiffeisenbank rejected this request because the documents did not meet the standards set by Raiffeisenbank to execute the request for forced conversion.
Mr. Pelevin then went to court and lost the initial cases. Eventually the Russian Supreme Court ruled in favour of mr. Pelevin and ordered that Moscow court had to reconsider the case.
On 4th of June 2025 the full judgement from the court of Moscow became available. The court ruled in favour of mr. Pelevin and considered that the execution of forced conversion is still possible in 2025 and that the law did only limit the application for forced conversion to the period set in 2022. The court also rejected the arguments by Raiffeisenbank that it cannot remove the underlying shares from the type-C account of the depositary bank responsible for the depositary receipt program and the argument that Raiffeisenbank had exercised administrative powers and that therefore a stricter regime for statute of limitations applied. As a result Raiffeisenbank was ordered to carry out the forced conversion for the depositary receipts held by mr. Pelevin.
Raiffeisenbank did not agree with the decision and has since appealed the ruling. We expect that this case may again end up with the Russian Supreme Court. Given the previous decision by the Russian Supreme Court we feel that it will be difficult for Raiffeisenbank to get this decision overturned.
All the case materials can be found here: https://kad.arbitr.ru/Card/e3fdc07d-b385-43c8-8663-e63b4c659017
Why is this case interesting?
This case shows that investors can successfully file a claim against Russian custodian banks that have unjustly rejected requests for forced conversion. A successful claim may result in forced conversion to be carried out even in 2025.