Unlocking Euroclear and ClearStream securities

In March 2022 Euroclear and Clearstream imposed restrictions on transactions with securities held with the National Settlement Depository ("NSD"), as a result of which Russian holders of foreign securities, and foreign holders of Russian securities lost the ability to trade (sell), receive dividends and coupon payments on them.

On 3 June 2022 the EU imposed sanctions on the National Settlement Depository (NSD) as the largest securities depository in Russia as part of the sixth EU sanctions package. As a result, over €72bn worth of Russian assets were frozen at Euroclear and Clearstream.

On 16 August 2022, the European Commission indicated its willingness to resume operations with NSD if two conditions are met: 

• NSD must not benefit from the transactions;
• The transactions must be subject to additional approval by the countries' regulators.

On the same day, NSD abolished fees for transfers of Russian securities from foreign securities depositories to the Russian infrastructure.

On October 6, 2022, amendments were made to EU Regulation 269/2014 of March 17, 2014.

5. By derogation from Article 2, the competent authorities of a Member State may authorise the release of certain frozen funds or economic resources belonging to an entity listed under number 101 in Annex I or the provision of certain funds or economic resources to that entity under such conditions as the competent authorities consider appropriate and after they have determined that such funds or economic resources are necessary to terminate before 7 January 2023 transactions, contracts or other agreements

6. The Member State concerned shall inform the other EU Member States and the EU Commission of any authorisation granted pursuant to this Article within two weeks of the issuance of such authorisation".

Thus, investors whose securities, dividends and coupons held at NSD (National Settlement Depository) have been frozen at Euroclear and Clearstream have until 7 January 2023 to apply to the national competent authorities of the Belgian and Luxembourg states for permission to withdraw securities and funds to accounts at entities not subject to sanctions.  In fact, the deadline will be even shorter in view of the Christmas holidays in Europe. So far, there have been known cases of unblocking of coupon payments.

The law firm Nadmitov, Ivanov & Partners advises on dealing with the competent authorities in Belgium and Luxembourg to obtain authorisation from the competent authority to unblock securities, ETFs, dividends and coupon payments at Euroclear and ClearStream.