In a significant legal development, the Moscow Region Arbitration Court recently froze funds held by two major U.S. banks, the Bank of New York Mellon and JP Morgan Chase, in Russia. The funds, amounting to around $372 million, are tied to the Russian branches of Citibank and Morgan Chase Bank. This decision came after a legal action initiated by Russia’s deputy prosecutor, aimed at protecting the interests of the Russian Federation.
Background of the Dispute
The legal case revolves around the Ukrainian central bank’s decision to withdraw the license of MR Bank, a subsidiary of Russia’s largest bank, Sberbank. The Ukrainian authorities plan to wind up MR Bank by 2025, and this move sparked the dispute. The Russian prosecutor’s office launched a case against Ukrainian regulators and the two U.S. banks, accusing them of “expropriating” MR Bank’s property.
Details of the Frozen Funds
According to the court’s decision, the prosecutor’s office demanded that $121 million held by JP Morgan Chase on behalf of MR Bank and $251 million in the Bank of New York Mellon be recognized as the rightful property of Sberbank. The total amount in question is $372 million. The prosecutor argued that this money should belong to Sberbank and that the Ukrainian regulators’ actions infringed on the state’s legal rights.
Impact on Sberbank
The court documents indicate that as a result of this legal action, Sberbank lost control over its subsidiary, MR Bank, and the right to manage its income. This has led to financial losses for the Russian state, as it can no longer benefit from MR Bank’s international activities.
Response from the Banks
So far, both Sberbank and JP Morgan Chase have declined to comment on the court’s decision, and it remains to be seen how this legal battle will evolve.
Conclusion
This case is part of the broader tension between Russia and Ukraine, with financial institutions now being drawn into the conflict. The freezing of these funds could have serious financial implications for both the Russian state and the involved banks as the legal dispute unfolds.
