Russia Initiates Legal Action Against Euroclear Over Frozen Assets

Russia’s central bank has initiated a lawsuit against Euroclear, the Brussels-based financial depository that holds a significant portion of frozen Russian assets. This legal action, filed on March 1, 2024, in the Moscow Arbitration Court, arises amidst ongoing discussions among European Union leaders regarding the use of these assets to provide financial support to Ukraine.

The lawsuit comes ahead of a crucial European Council summit where EU leaders are expected to urge Belgium to release billions of euros in Russian assets. These funds are intended to bolster a substantial loan package aimed at aiding Ukraine. The Bank of Russia claims that Euroclear’s actions have caused financial losses and asserts that the European Commission is considering mechanisms to utilize Russian assets without the bank’s consent. In a statement, the central bank indicated, “Due to the unlawful actions of the Euroclear depository that are causing losses to the Bank of Russia… the Bank of Russia is filing a claim… to recover the losses incurred.”

Valdis Dombrovskis, the European Commission’s Economy Commissioner, addressed EU finance ministers, stating, “We can expect that Russia will continue to launch speculative legal proceedings to prevent the EU from upholding international law.” He emphasized that the EU’s proposal is both legally sound and compliant with international law, underscoring the ongoing tension between Russia and European authorities.

Belgium has expressed reservations about utilizing sovereign Russian assets due to the potential legal ramifications, including the possibility of being compelled to return these funds to Moscow. Currently, approximately €185 billion in frozen Russian assets is managed by Euroclear, with an additional €25 billion held across the EU in private bank accounts.

As discussions about the future of the loan package continue, EU ambassadors have granted emergency powers to the European Commission to ensure that Russian state assets remain frozen indefinitely. This measure would keep the funds inaccessible until the Kremlin fulfills its obligations for post-war reparations to Ukraine. Such actions would likely diminish the chance that pro-Russian states, such as Hungary or Slovakia, would consider returning the frozen assets to Russia.

While Russian courts have limited authority to compel Euroclear to return assets held in Belgium, they do possess the ability to take retaliatory measures against Euroclear’s balances within Russian financial institutions. Nevertheless, the European Commission’s introduction of a legal framework in 2024 to compensate Euroclear for losses incurred due to compliance with Western sanctions aims to mitigate the effects of any potential retaliation from Russia.

Euroclear has chosen not to comment on the legal proceedings initiated by the Bank of Russia. As this situation unfolds, the implications for both Russia and the EU remain significant, particularly in the context of ongoing geopolitical tensions and the pressing needs of Ukraine.