Supreme Court ruling on the Bank's unlawful refusal to forcing conversion

In this article we will discuss the recent ruling of the Supreme Court of the Russian Federation No. 305-ES24-7267, in which the Court sided with the ADR holder and overturned the decisions of previous instances on the issue of unlawful refusal of forced conversion.

Individual EntrepreneurDenishenko A.Y. filed a lawsuit against Gazprombank to declare illegal the refusal in forcing conversion of securities belonging to her, to carry out forced conversion of depositary receipts into shares of the public joint stock company «Gazprom» and to credit them to the depo account in the credit organization.

Following Denishenko’s cassation appeal to the Supreme Court of the Russian Federation, the Judicial Board for Economic Disputes was involved in the consideration of the case. The appealed judicial acts were canceled, and the case was sent for reconsideration to the court of first instance. Grounds:

• The Bank illegally refused to force conversion to the Plaintiff under Article 6 of Federal Law No. 114;
• A notarial inspection was conducted on 01.08.2023, i.e. before the deadline under Federal Law No. 114, accordingly, the Bank could not make a decision to refuse forced conversion;
• All the documents on the part of the Claimant were in compliance with the legal requirements;
• The existence and recognition by the Court of objective difficulties in obtaining the necessary documents and information by a person;
• The bank itself established biased requirements for documents for conversion.

The Judicial Board of the Supreme Court of the Russian Federation determined that it is necessary to send the case for a new consideration in the first instance in the Arbitration Court of Moscow. In our opinion, the position of the Supreme Court is important for future law enforcement practice within the framework of interaction with depositories on issues not only of conversion, but also on issues of providing supporting documents from foreign brokers.