Commercial Arbitration Court of Moscow District Upholds Quorum’s Position in Enforcement of USD 10 mn. from a Foreign Bank

Commercial Arbitration Court of Moscow District has finally resolved a year-long USD 9,988,499 worth dispute involving VP-Schweiz, a Swiss private bank, in favour of IntrustBank entered into insolvency proceedings.

On September 21, 2016, a bankruptcy manager of the bank – the Deposit Insurance Agency – filed a claim in the bankruptcy case to recover USD 10 m which were unlawfully debited by the Swiss bank in violation of the priority of creditors claims.

A Quorum’s associate Igor Mikheev represented IntrustBank at all judicial levels.

The case materials show that VP-Schweiz provided a USD 10 mn. line of credit to an unknown company from Tortola; IntrustBank undertook to be liable for the obligations with its assets. Security provided by the Russian bank was thoroughly covered up, it was not reflected in accounting statements and was structured is such a way that the Russian Central Bank believed that IntrustBank kept almost USD 10 mn. in liquid assets in the Swiss bank.

The Swiss bank directly (without acceptance) debited all funds of IntrustBank in favor of the offshore company 13 days before the Russian bank’s license was revoked.

This sort of transactions is known as “fiduciary” transactions. Their idea is to defraud the regulator and depositors by making them believe that the credit institution has sufficient funds that are kept in a reliable correspondent bank, when in fact they are encumbered.

Unscrupulous chief officers of Russian credit institutions, by entering into such transactions and acting in bad faith, think that claims against foreign banks may be brought only in a jurisdiction of their registered offices, which will render impossible to recover the lost funds.

However, despite a prorogation agreement providing that all disputes must be brought before Zurich (canton) courts and the Swiss Federal Court in Lausanne, the DIA filed a claim in IntrustBank bankruptcy case to recover funds with the Commercial Arbitration Court of Moscow.

A representative of VP-Schweiz sought to avoid application of special substantive and procedural provisions of Russian bankruptcy (insolvency) law and to refer the case to Swiss courts.

Igor Mikheev, a Quorum lawyer who was representing IntrustBank, insisted that the final judgment should be rendered in Russia and proved that claims of the Swiss bank were preferred above other creditors’ claims and that material abuses of rights were committed.

Courts at all levels supported IntrustBank’s claims and ruled to recover USD 10 m from the Swiss bank in its favour.

For more information, see commercial arbitration case files: http://kad.arbitr.ru/PdfDocument/2537a428-3599-41b8-983d-f1bbf4999b96/A40-155329-2014_20170919_Reshenija_i_postanovlenija.pdf

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