In a significant legal maneuver, the Bank of Russia has initiated a lawsuit against Euroclear in the Moscow Arbitration Court, although no specific damages have been publicly detailed. The Kremlin has warned of further actions should they find that their assets have been misappropriated.
Although filing this lawsuit within Russia may initially seem like a weak strategic move, it relies on established procedures grounded in international treaties. This method has had variable success in other cases involving challenges against sanctions imposed on Russia. Long-time observers may recognize this from previous discussions on investor-state dispute settlement (ISDS) processes, which we highlighted extensively when covering the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership negotiations. While former President Obama made significant strides in advancing these treaties before his term ended, the subsequent administration did not pursue them.
These treaties, intended to safeguard investors by superseding national laws, raise serious concerns regarding national sovereignty. ISDS cases are often managed by a limited circle of arbitrators who were involved in crafting these treaty provisions, and proceedings are conducted behind closed doors without the possibility for appeal. The increasing awareness that these rules undermine labor rights and environmental standards played a pivotal role in halting further expansion of ISDS in the United States, but existing provisions remain intact.1
Therefore, Euroclear finds itself entangled in the complexities of ISDS regulations.
This lawsuit also brings to light the concerns expressed by Euroclear and the Belgian government regarding their liabilities. It could fortify their resolve, alongside other EU member states like Hungary, which oppose the European Commission’s efforts to implement legislation aimed at utilizing frozen Russian assets to fund ongoing support for Ukraine. Russia may be proceeding in this manner due to its agreement with Euroclear.
The Financial Times outlined the European strategy prompting this legal action:
This lawsuit marks Russia’s initial response to Europe’s plans to indefinitely immobilize assets to facilitate a significant €90 billion loan to Ukraine. The Belgian government, which holds the majority of these assets, has voiced opposition, citing fears of potential retaliation from Russia.
The European Commission asserts that no courts outside the EU hold jurisdiction over this matter. However, the Bank of Russia has stated it will “unconditionally challenge” any attempts to immobilize its assets through international courts in both “friendly and hostile countries.” The central bank is seeking damages based on the total value of its frozen funds, the worth of blocked securities, and anticipated earnings that could have been realized. They emphasize that Kyiv’s Western allies froze approximately $300 billion in Russian reserves shortly after President Vladimir Putin ordered the full-scale invasion of Ukraine in 2022. Currently, these funds are immobilized every six months, contingent upon the unanimous agreement of all 27 EU members, including those against such action.
The European Commission’s proposal aims to use emergency powers to indefinitely immobilize €210 billion to support the €90 billion loan, intending to strengthen Ukraine’s defense against the Russian invasion and facilitate the continent’s role in future peace talks led by the US. EU countries agreed to this proposal in anticipation of a debate among EU leaders scheduled for next week concerning the loan.
The Financial Times also reported that Euroclear manages €185 billion out of the €210 billion total earmarked for this initiative. However, it remains unclear whether this total reflects solely central bank assets or includes holdings belonging to Russian corporations and individuals.
The Bank of Russia has formally filed a lawsuit against Euroclear in the Moscow Arbitration Court for damages that arise from the illegal actions of the depository affecting the Bank of Russia. The regulator’s press service noted…
“Due to the unlawful actions taken by Euroclear, which are causing losses to the Bank of Russia—especially in relation to mechanisms assessed by the European Commission for the direct or indirect use of the Bank of Russia’s assets without its consent—the Bank of Russia is pursuing legal action in the Moscow Arbitration Court,” the statement indicated.
The regulator emphasized that Euroclear’s actions have resulted in damages stemming from the inability to control cash and securities owned by the Bank of Russia. Most of Russia’s sovereign assets, valued at over €200 billion, are frozen on Euroclear’s platform located in Belgium. The depository has consistently opposed attempts to expropriate these assets, cautioning that such actions could provoke Russia to seize European or Belgian assets globally through legal channels.
President Vladimir Putin has remarked that if the West persists in seizing Russia’s frozen assets, it would lead to the collapse of the global financial order and escalate economic separation. Kremlin spokesperson Dmitry Peskov has reiterated that Moscow will take decisive action in response to what it perceives as the theft of its assets in Europe.
A favorable ruling in Moscow could position Russia to take compensatory action against Euroclear should their funds remain unfrozen, potentially immobilizing Euroclear’s assets in Russia, estimated to be around €15 billion. Such a scenario could lead to litigation from relevant parties against Euroclear.
Furthermore, if a legal judgment is not honored, parties often seek to garnish accessible assets. Thus, if Russia prevails—likely given the choice of venue and the pro-investor nature of ISDS provisions—it could pursue Euroclear in other jurisdictions such as Hong Kong and Singapore, where Euroclear has significant operations and assets. This would be necessary, as the existing Euroclear holdings in Russia are insufficient to compensate for a victory.
While the practical implementations of these strategies remain unclear, similar scenarios have unfolded in past financial disputes, such as the Lehman Brothers bankruptcy, where jurisdiction conflicts arose. This situation has also been observed in cases involving vulture investors like Paul Singer, who purchased claims against Argentina at low values and successfully had them enforced in US courts. However, specifics about Singer’s strategies may not directly translate to the Russia-Euroclear context, as agreements differ significantly.
It is likely that we will acquire more detailed information in the future, especially if the proceedings are made public, allowing legal experts to analyze and provide insight. Recent discussions on social media have not significantly added to the current facts.
A previous report highlighted that Singapore offers discovery provisions, which could be advantageous for litigants. Commenters on the Financial Times noted:
ABgk
It serves as a warning shot. Real escalation would occur in a Singapore court—Euroclear has substantial assets there, and judges have historically favored the notion that sovereign assets are off-limits. This concern underlines Euroclear’s apprehension; they face considerable exposure outside the EU, where protections are limited. Should a Singaporean court assert claims on those assets, nations like France and Germany may choose to distance themselves, leaving Belgium vulnerable.
According to a recent VoxEU article, Russia has already frozen certain Euroclear assets2 within its territory, and some Euroclear clients have managed to secure recoveries:
The Financial Times reported that Russia has seized around €33 billion in assets belonging to Euroclear clients. Additionally, Euroclear is contending with over 100 lawsuits related to immobilized and frozen assets. In reaction, EU Council implemented a loss recovery provision along with a no liability clause in December 2024. This loss recovery provision permits Central Securities Depositories (CSDs) to request that competent authorities in EU member states unfreeze cash balances necessary to meet their legal obligations to clients.
Furthermore, Euroclear has utilized this regulation to recover €3 billion in Russian assets to compensate clients whose holdings were seized in Russia. Euroclear’s financial results reflect a €1 billion decline in Russian assets between the second and fourth quarters of 2025, indicating a partial unblocking of these funds. This precedent highlights the ramifications of asset confiscation and its consequences for clients as these proceeds were utilized to cover Euroclear’s obligations, effectively shifting the financial burden onto the client base.
An article from Le Monde dated December 10 discussed the potential for arbitration in recovering sanctions-related losses:
Russia’s legal threats extend beyond aggressive military maneuvers and hybrid tactics, as it increasingly resorts to litigation. By leveraging longstanding commercial treaties established during the Cold War, Russian entities are increasingly resorting to arbitration to contest the EU’s sanctions policy, posing significant financial risks to member states.
A coalition of European NGOs, including the Veblen Institute for Economic Reforms, Friends of the Earth Europe, and PowerShift, generously provided a report on December 9 entitled “Frozen Assets, Hot Claims: How Russian oligarchs and other investors sue over sanctions.” They estimate that sanctioned individuals and entities have lodged claims amounting to at least $48 billion (€41 billion) against the EU and its allies, the UK, Ukraine, and Canada—an estimate that is likely low given the number of undisclosed claims.
Following the freezing of their luxury assets post-invasion of Ukraine, numerous oligarchs have responded via legal channels, with varying degrees of success. Notably, in 2024, Piotr Aven and Mikhail Fridman won a judgment in the EU court, determining that their contributions to the war effort were insufficient to justify the associated sanctions.
Beyond these high-profile cases, a range of other Russian individuals and entities are engaging in more discreet arbitration proceedings based on investment treaties formed during the late 1980s with the Soviet Union. These bilateral agreements offer protections for investors and have fostered a parallel justice system referred to as ISDS. This mechanism allows investors to present their cases before private international arbitration panels rather than standard courts, seeking compensation for any alleged state overreach, such as expropriation or unfair treatment.
In one example, Fridman invoked the 1989 treaty between Luxembourg and Russia to demand the return of his frozen assets in Luxembourg, along with financial reparation for the extensive damage inflicted on his business, seeking a staggering €14.5 billion, equivalent to half the annual budget of Luxembourg.
Although these initiatives have yet to yield results, participants believe they possess a greater likelihood of success compared to pursuing claims in European courts. ISDS arbitration requires determination of whether the state has unlawfully seized assets—an action explicitly prohibited by bilateral treaties, even when sanctions are enacted. The European Court of Justice warned of this vulnerability as early as 2009; however, “EU member states…have neither renegotiated their treaties to incorporate protective measures nor rescinded them,” as indicated by the Veblen Institute.
From the Frozen Assets, Hot Claims report (emphasis theirs):
Our analysis reveals that:
- To date, known ISDS claims and potential claims from sanctioned entities have reached approximately 62 billion USD, closely approaching the 70 billion USD in military assistance the EU has supplied to Ukraine since 2022. The actual amount is likely higher as, in more than half of the cases, the claim amounts are undisclosed.
- More than half of ongoing, sanctions-linked ISDS cases are being pursued against Ukraine. Meanwhile, others target various European nations (including Belgium, France, Lithuania, Luxembourg, and the UK) as well as Canada.
- Seven ISDS claims against Ukraine’s sanctions and security policies arise from investment treaties with EU member states, and an additional two are based on the Ukraine-UK investment treaty. This highlights how these investment treaties permit sanctioned individuals and entities to directly challenge Ukraine’s national security measures.
- Russian oligarch Mikhail Fridman has filed five claims concerning sanctions-related actions and has hinted at a sixth. Three of these cases target Ukraine—two based on investment treaties between Ukraine and Belgium/Luxembourg, and another from a treaty with the Netherlands.
- Thirteen of the twenty-four cases challenging sanctions were initiated in 2025 alone, underscoring a growing trend of investors leveraging ISDS mechanisms to contest the sanctions imposed on Ukraine and its allies.
The tension between EU nations’ investment treaties and EU sanctions policies was highlighted in 2009 by the European Court of Justice. In rulings against Austria, Sweden, and Finland, the court noted that capital transfer clauses in their investment agreements conflict with the Council’s authority to unilaterally impose sanctions on third-party nations. Yet, subsequent years have seen no remedial measures, with countries failing to renegotiate their treaties for necessary safeguards or to rescind them altogether.
Another recent piece from IIDS expresses concern over “unintended consequences” of ISDS mechanisms, indicating that they might serve as effective tools for Russia to challenge these dynamics and complicate EU decision-making processes. For instance:
The looming investment arbitration claims from Russian stakeholders opposing the EU’s proposed new support package for Ukraine exemplify the risks posed by outdated investment treaties that could hinder governmental responses to crises.
Moreover, the reluctance of Belgian policymakers to back this crucial Ukraine initiative due to fears of possible arbitration claims underscores entrenched concerns regarding the misuse of these treaties. Over recent decades, they have often been applied in contexts not originally envisaged by their drafters, jeopardizing public health strategies and environmental policies. Reforming these provisions has become increasingly urgent.
Persistent worries about these issues did not seem to surface as emphatically when discussions focused on environmental destruction in the Amazon rainforests.
In any case, the situation is poised for significant developments. The long-standing erosion of national rights in favor of international capital is now being turned against those who originally championed these ideals.
___
1 A mini-recap from a 2023 post, Even Rich Nations Now Worried About ISDS:
Public Citizen deserves considerable credit for influencing policymakers to reassess the pro-corporate, national-law-undermining nature of ISDS. These disputes, adjudicated by secretive panels with no recourse for appeal, have faced increasing scrutiny. The organization has exposed significant problems with ISDS, bringing attention to cases where countries have faced financial consequences due to claims initiated by foreign investors. In Germany, for instance, the situation surrounding the Swedish company Vattenfall’s litigation against the German government exemplifies the complexities and potential repercussions stemming from ISDS provisions.
Further issues have been highlighted concerning investor claims from Latin American countries. As the situation evolves, it remains clear that while ISDS is waning in support, it is far from obsolete.
2 Additionally, the complexity of Euroclear’s role as a Central Securities Depository is vital for understanding asset management:
Central Securities Depositories (CSDs) form a critical component of the post-trade infrastructure. Each securities issuer is required to select a CSD for recording newly issued securities; upon trading, the CSD updates ownership records—a process termed settlement. Beyond settlement, CSDs ensure the efficient distribution of cash flows such as dividends and bond redemptions. Their functionalities are essential for maintaining the integrity of securities issuance, ownership records, and finalizing settlements, making it implausible for European authorities to permit Euroclear or any other CSD to fail.
International CSDs, such as Euroclear, serve as pivotal nodes in global financial networks. States exercising jurisdiction over these infrastructures hold significant power to disrupt adversaries’ access to the network.
