On 30 August 2017, the Ninth Arbitration Court of Appeal in Moscow published the full text of its ruling on the suit of Transneft against Sberbank about invalidation of the deal with derivative financial instruments. The court is known to repeal the ruling of the Moscow Commercial Court and to dismiss the suit of Transneft after a short 10-minute deliberation.
The Court of Appeal’s ruling totally negates the deep-rooted Russian and international forensic practice in similar disputes, “standing out” for its brevity and the speed of issuing a verdict on the case detailed in 60 volumes and thousands of documented pages.
Transneft has to state that the Court of Appeal either silenced or distorted the Company’s stance in this dispute, actually narrowing it to selective quotes from one document and neglecting to analyze other documents as well as the Company’s strong case.
With that in mind, the Company lays out its position on this dispute: any Bank offering complex financial instruments to its client must act in good faith, considering the client’s best interests and fully disclosing the entire information on the product on offer during negotiations, also when transaction documents are signed and executed. As a financial advisor, Sberbank must be liable to Transneft as its client for inexpert advice.
Transneft prepared and attached to the materials of the case a presentation on the main aspects of the suit; yet the Court of Appeal did not find it necessary to respond to any of these.
What’s the gist of the appeals-court ruling?
Banks and other financial institutions have the right to impose certain needless instruments upon their clients, manipulating the client’s interests under the canopy of “good purposes”.
Banks are not liable for their professional advice to the client if they mention between the lines prior to signing a bulky document that they do not act as their advisor.
Banks have the right to shift the risks involved in their games on financial markets to clients.
Banks are not bound to discuss transaction risks with their clients in good time.
Banks do not have to stick to any ethic code in the market, except the one formulated in the Hollywood movie The Wolf of Wall Street: “move the money from your client’s pocket into your pocket.” Sberbank moved one billion US dollars from the pocket of the state-owned company to Cyprus. Judging by the court’s ruling, this is now lawful.
The Court of Appeal’s verdict gives free rein to the “wolves of Vavilov Street”. Perhaps for this very reason the ruling was hailed and celebrated by Deputy Director of Sberbank Bella Zlatkis.