On June 27, 2023, Clearstream announced the suspension of processing new client instructions for the conversion or cancellation of ADRs and GDRs into shares of Russian companies. The Luxembourg-based clearing center justified its decision with the amendments made by the EU Council on June 23, 2023, to Article 6b(5a(a)) of EU Regulation No. 269/2014.
Following the inclusion of the National Settlement Depository (NSD) in the EU sanctions list, as clarified in the Frequently Asked Questions (FAQs) published on October 27, 2022, the EU Council stated that the NSD could continue its activities as long as it did not directly or indirectly benefit from the transactions, including receiving commissions from third parties.
In response to the EU Council's clarifications, the NSD introduced "marketing periods" during which it set "zero tariffs" for certain services (https://www.nsd.ru/tariffs/). The NSD's latest decision extended these marketing periods until December 30, 2023.
According to the amendments in Article 6b(5a(a)) of EU Regulation No. 269/2014, he competent authorities of EU member states have been granted the right to issue permits to EU citizens or residents, as well as companies established in the EU, for the conversion of depositary receipts for Russian shares, with rights to these shares being held by NSD, until December 25, 2023, for the purpose of selling the shares obtained through the conversion and providing funds related to the conversion of the depositary receipt and the sale of shares directly or indirectly to this person in Russia, on such terms as the competent authorities deem necessary, subject to the following conditions:
- The depositary receipt was issued before June 3, 2022 (the date when NSD became subject to EU sanctions);
- The corresponding request for permission is submitted before September 25, 2023;
- The owner of the depositary receipt is able to demonstrate that such conversion is necessary for the sale of shares obtained through the conversion;
- The sale of shares complies with the prohibitions established by Regulation No. 833/2014 of the EU Council of July 31, 2014, concerning restrictive measures in relation to actions by Russia that destabilize the situation in Ukraine, including Articles 5 and 5f;
- The funds will not be provided to any other organization subject to EU sanctions.
Based on this amendment, Clearstream concluded that the conversion of depositary receipts into shares of Russian companies is prohibited until permissions from the competent authorities of the EU member states are obtained.
Clearstream announced that it suspended operations on instructions received after June 23, 2023, and submitted requests to the competent authorities of the EU member states to seek guidance on further steps.