Frozen billions: how Russian investors are looking for new ways to unlock assets

For more than three years, only 55 Russians have been able to unblock their assets in European depositories. In total, the funds of 5 million retail investors were blocked. Now the return of funds has become even more difficult. And two investors from Russia are trying a new way of unfreezing: through international arbitration. Will it help?

In early September, two private investors (names withheld) from Russia decided to recover their assets blocked in the Belgian depository Euroclear through international investment arbitration. Lawyers of Dyakin, Gortsunyan and Partners, representing their interests, sent the Belgian authorities a notice of dispute, Vedomosti reported . The company declined to comment on Oninvest.

Russian investors lost access to their investments in late February and early March 2022, after the outbreak of hostilities in Ukraine. At that time, the "bridge" between Europe's Euroclear and Clearstream and Russia's National Settlement Depository (NSD) was destroyed. The EU legally formalized the blockage in the summer of 2022 by imposing sanctions on NSD. In the summer of 2024, it was still on the US SDN list.

Appealing to international investment arbitration is a new way to unblock assets. The two Russians are probably now trying to take advantage of the discrepancy between Belgian and international law. The legality of blocking assets in Belgium does not mean that this can be done under international law, explains Artem Kasumyan, a lawyer at the Delcredere Bar Association.

In court, Russian investors may also refer to the agreement on mutual promotion and protection of capital investments, which in 1989 was concluded with the USSR by the authorities of Belgium and Luxembourg, where Euroclear and Clearstream depositories are based. Under this agreement, Belgium and Luxembourg cannot take away investors' assets and are obliged to reimburse their real value if they are lost. Since Russia is the legal successor of the USSR, this document allows Russian investors to point out in court that Belgium's actions violate this agreement, explains Gleb Boyko, a lawyer in NSP's sanctions practice.

"Lawyers, including myself, have been telling their clients about the option of international arbitration since 2022, but there are no precedents of unfreezing by this method, so it is difficult to assess the chances of success. Investors were waiting to see who would dare to take the first step," BGP Litigation partner Sergey Glandin told Oninvest.

Belgium now has six months to settle the matter with the two Russians in pre-trial proceedings or to enter into arbitration. In the second case, the case will be considered by Stockholm Arbitration or by an arbitration court through the UN Commission on International Trade Law (it is assembled specifically for a particular case).

If the arbitration takes the side of investors, the country should fulfill its decision voluntarily, but in practice this is not always the case. "Investors are forced to recover assets of states (that have frozen assets - ed.) in different jurisdictions, where they often enjoy immunity from recovery," Kasumyan points out.

Sergey Glandin believes that arbitration should take at least 6-9 years. He cites two cases as an example: the case of former Yukos shareholders against Russia, which has been going through international arbitration for more than 10 years. The second is Mikhail Fridman's lawsuit against Luxembourg. Since the summer of 2024, Fridman has been challenging the freezing of his assets through the Hong Kong Arbitration Center on the basis of the same 1989 investment treaty. But there have been no significant developments, says Glandin.

In theory, an appeal to the International Investment Arbitration Tribunal is suitable for all investors who are trying to unblock assets - both those who have already received a rejection from the Belgian Treasury and those who are just waiting for a decision. And even those for whom the Belgian Treasury has approved unblocking, but they still have not been able to recover assets due to the US sanctions against NSD.

In practice, however, resorting to arbitration is advisable only for large private investors who "have a lot of free money and a desire to strike a symbolic blow against the institution of European sanctions," summarizes CLS partner Pavel Karpunin.

Sergey Glandin believes that investors have a chance to get their way in pre-trial proceedings. According to Gleb Boyko, the investment arbitration is "a certain way to put pressure on the Treasury," because the very fact of its launch may affect Belgium's credit rating.

But Belgium's official position is that the 1989 agreement is worthless for unblocking Russian assets. The country's Finance Minister Vincent Van Petegem said this back in early 2024. According to him, Belgium's obligations under European law take precedence, besides, the Belgian Treasury complies with European sanctions. According to Pavel Karpunin, this reduces to almost zero the chances of success in unblocking the assets through international arbitration in Belgium and Luxembourg.

Currently, according to the Bank of Russia's estimates, 5.7 trillion rubles (more than €58 billion) worth of Russian assets are blocked in Euroclear and Clearstream. Of these, 20% are the funds of 5 million retail investors. The main part - 72%, according to the European Parliament, is blocked in the EU (more than 62% - in Euroclear, and 3.5% - in Clearstream). Other assets are blocked in France, Switzerland, the UK, Germany, Canada, Japan and the US.

Russian investors, in order to get their assets back, can send an application to national regulators for a special license for unblocking or go to court with a civil lawsuit in the countries where assets are frozen (however, Gleb Boyko calls this option "expensive and unnecessary"). There is also an option to go to a Russian court: arbitration courts in Russia can resolve disputes involving persons whose rights have been restricted by foreign states.

All of these methods have been tried by Russians by now.

In practice, it turned out that the main option that worked was to obtain individual unblocking authorizations from the Belgian Treasury. According to Gleb Boyko, in 2024 and 2023 it issued about 250 such decisions each. But only those who received authorizations in 2023 and returned them before U.S. sanctions were imposed on NSD were actually able to unblock their assets, he adds.

According to Glandin's calculations, we may be talking about only 55 investors - as of the end of Ma 2024, that is how many licenses had been executed. Afterwards, investors had to obtain authorizations from the US Office of Foreign Assets Control (OFAC) to unblock the assets. No investor in Russia has received an OFAC license since then, according to Glandin.

"OFAC has not set benchmark regulatory deadlines for reviewing investor applications. The very issuance of licenses by OFAC may be tied to a political settlement on Ukraine," he says.

Many investors who unfroze assets met Euroclear's formal requirements: they had an EU residence permit or European passport, a brokerage or bank account in the EU or in any other country that has imposed sanctions on Russia, and an EU guarantor - a person with a special status (e.g. a lawyer) who would confirm that the investor had complied with sanctions legislation.

But there have also been precedents when actual unblocking was achieved by Russians without a European residence permit. Assets were either transferred to a European broker who was prepared to accept them and prevent their withdrawal to Russia, or they were sold to a professional market participant who was prepared to buy them. The latter would then settle accounts with the investor.

But now it is becoming increasingly difficult to obtain authorization. The Belgian Treasury has become stricter with regard to the choice of guarantor: if earlier these functions could be performed by brokers from the UK and Switzerland, which are not members of the EU, now they are being rejected, Elena Ryazanova, deputy director of the legal department of investment bank Sinara, told RBC. In addition, investors who have received a refusal cannot challenge it in a pre-trial procedure or resend documents - the Belgian Treasury sends investors to the national court.

By the end of this year, the situation may become even more complicated. The European Commission must determine whether the states whose membership in FATF, the international organization that develops standards for combating money laundering and terrorist financing, are considered high-risk. The country in question is Russia, whose membership in FATF has been suspended since February 2023. If European officials decide that Russia is not complying with anti-money laundering rules, they will add it to their equivalent of the FATF black or gray list.

It is highly likely that Russia will end up on one of these lists, but it will only be valid in the EU, says Gleb Boyko. Then Russian investors, to whom the Belgian Treasury has already approved the return of their assets, will face even more serious checks in European banks, Boyko warns.

Another option is to try to obtain reimbursement within Russia. But there are problems here as well. Investors have been trying to gain access to the assets of foreigners whose accounts Russia froze in response to the blocking of its reserves and investors' assets. But as of January 2024, this scenario is closed due to Russian Presidential Decree No. 8.

In addition, in the summer of 2025, the Russian Supreme Court prohibited courts from recovering assets of non-residents frozen in Russia as damages, recalls Sergey Glandin. For example, in June 2025, the Supreme Court refused to hear the case of investor Stanislav Ananyev - the court considered the blocking a temporary measure that does not lead to the loss of assets, and compensation for their value - unlawful enrichment. Ananiev filed an appeal against the court's refusal, and acting chairman of the Supreme Court Yury Ivanenko reacquired the materials of the case. So far there is no decision.

Investors still have the opportunity to sell their assets on the OTC market: for this purpose, in the spring of 2025, Moscow Exchange launched special trades. Unqualified investors can only get rid of their securities, "quals" have the right to both sell and buy. From the data of Moscow Exchange on April 28, it follows that on the first day, the leader in trading volume were the securities of Nvidia (131 transactions for 3.5 million rubles at a weighted average price of 4801 rubles per share, which at the rate of the Central Bank on that day was equal to $58), Apple (114 transactions for 2.5 million rubles at 9725 rubles, or about $118 per share) and Coca-Cola (105 transactions of 1.42 million rubles at 3622 rubles, or about $44 per share). On the same day in the U.S., Nvidia shares closed at $108.73, Apple at $210.14 and Coca-Cola at $71.79.

"According to the results of several days of trades we did not see a miracle. Deals are few. Discounts ... on the most liquid securities (for example, Apple) about 40%, on less liquid ones about 70%," wrote Elena Ryazanova in May in her Telegram channel. September 22, investors traded in Nvidia securities for Br5 million (52 deals), Apple for Br1.14 million (42 deals). AT&T shares became the leader in trading (60 deals for Br273 thousand). That is, if at the start the volume of trades in popular securities exceeded a hundred deals, now it is measured in tens.

Several circumstances hinder investors' activity. The Russian Tax Code considers transactions with such a discount to be a material benefit - buyers of such shares will pay tax at a rate of 13% to 30% depending on their tax residency and the fact of dividend payments. The Federal Tax Service has already started to charge such tax to buyers. At the same time, according to Ryazanova, such buyers will not be able to get a license to unlock them in the future. After all, these transaction records are fixed in the sub-sanctioned NSD, and for European depositories the owners of securities remain the same.

Another option is to exchange foreign securities blocked abroad into rubles for a maximum of Br100 thousand. Investment Chamber is engaged in this, it has already exchanged assets worth Br10.64 billion, while the total pool for exchange is estimated at Br35.3 billion. It has already conducted two rounds of exchange. At the end of 2024, Russian Deputy Finance Minister Alexei Moiseyev said that there were no plans for a third stage of the exchange.

This article was AI-translated and verified by a human editor