Euro Deposits and Securities Frozen - That's What You Can Do

Since the beginning of the war between Russia and Ukraine, several Russian nationals and companies got negatively affected by freezings of their euro bank deposits and securities, such as shares or bonds, even though they are not sanctioned themselfes by the EU sanctions regime.

The reason of such freezing often has its cause in a custody chain of the Russian bank to a German bank or financial institution and the Russian bank itself or an intermediary is subject to EU sanctions.

This article shall give you some information on the legal background and what you can do, if your money or securities have been frozen.

Background Information

The key regulation of account freezings is Article 2 of Regulation (EU) No 269/2014. It says that all funds and economic resources belonging to, owned, held or controlled by any person, entity or body, as listed in Annex I, or any person, entity or body associated with it, shall be frozen. Such funds and economic resources shall not be made available, directly or indirectly, to or for the benefit of such person, entity or body.

Among the list of sanctioned entities are several Russian banks and financial institutions such as the National Settlement Depository (NSD) (Russian: Национальный расчетный депозитарий) or VTB Bank (Russian: ВТБ/Внешторгбанк).

Expand list of banks sanctioned under Article 2 of Reg. (EU) No 269/2014

Russian banks generally do not hold Euro and European securities themselfes and therefore rely on correspondent relationships to European banks in order to have access to the European financial market. In this way, siplified, each Euro or European security that is held by a customer of a Russian bank is effectively held by the Russian bank at a European bank or financial institution. Several Russian banks have/had correspondent relationships to German banks such as Deutsche Bank, Commerzbank or J.P.Morgan Germany. So, if a Russian bank is subject to EU sanctions, their customers are affected as well.

What Affected Persons Can Do

There are several rules in Regulation (EU) No 269/2014 that grant an excemption from Article 2's freezing obligation. One important rule is Article 6(1):

By way of derogation from Article 2 and provided that a payment by a natural or legal person, entity or body listed in Annex I is due under a contract or agreement that was concluded by, or under an obligation that arose for the natural or legal person, entity or body concerned, before the date on which that natural or legal person, entity or body was included in Annex I, the competent authorities of the Member States may authorise, under such conditions as they deem appropriate, the release of certain frozen funds or economic resources, provided that the competent authority concerned has determined that: (a) the funds or economic resources shall be used for a payment by a natural or legal person, entity or body listed in Annex I; and (b) the payment is not in breach of Article 2(2).

But there are also other exemption rules that might be applicable dependend on the circumstances of the individual case.

Persons seeking their funds to be un-freezed that are finally held at a German bank or financial institution will need to apply at Deutsche Bundesbank to grant an exemption. If the prerequisites of the respective exemption clause are met, the German bank is allowed to transfer the un-freezed funds to a designated account at a bank or financial instiution that is not subject to the sanctions regime. However, Bundesbank's requirements are not allways easy to meet and often give rise to legal disputes.

Kronsteyn's Services

Kronsteyn advises and represents you in legal matters in connection with EU financial sanctions. The German law firm stands for legal excellence and is your partner in protecting and enforcing your rights. Contact Dr. Hendrik Müller-Lankow for any matters in EU sanctions law.