UniCredit faces hearings in case over Russia sanctions, guarantee claims

By Thomson Reuters Mar 12, 2024 | 8:32 AM

MILAN (Reuters) – UniCredit faces court hearings in Britain and Russia in the second quarter after a Russian energy company sued the Italian bank for failing to honour guarantee payments because of international sanctions, UniCredit said on Tuesday.

Italian lenders Intesa Sanpaolo and UniCredit still have businesses in Russia, as Western sanctions following the Ukraine conflict curtailed the number of potential buyers and Moscow then passed laws that restrict divestments.

Intesa in September secured approval from Russia’s President Vladimir Putin to sell or dispose of its assets in the country, but it is yet to finalise its exit.

Highlighting the risks of doing business in a sanctions-hit country, UniCredit said in its 2023 financial report that it had been sued in August in a St. Petersburg court by an unidentified Russian energy firm over guarantee claims totalling 444 million euros ($485 million).

The bank said it had issued part of a guarantee package for the Russian company on behalf of a German client.

“The Russian company had drawn down the guarantees by making payment claims to UniCredit Bank, which UniCredit Bank could not fulfil under the applicable EU sanctions,” it said.

UniCredit said the guarantees were governed by English law and that the English Court of Appeal told the Russian company on Jan. 29 to withdraw the Russian proceedings.

However, in February the UK Supreme Court granted the Russian company permission to appeal that decision, though it kept in place the injunction stopping it from taking steps to progress the Russian proceedings.

“A hearing before the Supreme Court is expected to take place in April. The Russian court has rejected UniCredit Bank’s jurisdictional defences and scheduled the next hearing for the second quarter of 2024,” UniCredit wrote in the report.

Under a renewed push by Washington on sanctions enforcement, a U.S. Treasury official last week visited Austria to talk about money laundering and sanctions, indirectly piling pressure on Raiffeisen Bank International, the biggest Western bank in Russia.

UniCredit’s Russia business yielded a return on allocated capital (ROAC) of 21.7% last year, following a negative 14.4% ROAC in 2022 when UniCredit booked hefty loan loss provisions, the report showed.

With customer loans more than halved in the course of 2023, the capital allocated to the business was 1.9 billion euros in 2023 from 2.3 billion the year before, the report said.

($1 = 0.9146 euros)

(Reporting by Valentina Za; Editing by Mark Potter)