The past international court cases and subsequent verdicts could come to haunt VTB and its subsidiary Numetal Mauritius as they engage in a pitched battle with the world’s largest steel company ArcelorMittal to acquire the stressed asset of Essar Steel.
In 2014, the European Union Council had restricted Russian companies, including VTB Bank, from accessing its market for destabilising Ukraine.
Similarly, the US Treasury Department has also prohibited US persons from dealing with VTB Bank.
The Insolvency & Bankruptcy Code, under which Essar Steel is being auctioned, states that a person cannot submit resolution plan, if he or any other person acting in concert is prohibited from trading by SEBI or has been subjected to similar restriction outside India.
VTB’s Press Office, however, in a statement told BusinessLine that none of these issues would constitute a disqualification under Section 29A of the IBC, and none of these matters are in any shape relevant to the Essar Steel auction.
It said that the sanctions apply to long term financing and are irrelevant to acquisitions or lending by VTB. London-based VTB Capital Plc is exempt from the European Union sanctions.
In 2016, the US Commodity Futures Trading Commission (CFTC) had found VTB Bank and VTB Capital Plc violating norms by entering into certain block trades and banned them from the US futures exchange for two years.
Clarifying its stand VTB said: “the Commission had filed a lawsuit against one of the western banks charging it with serious claims in relation to several internal trades.
“This made them to review these kind of deals and banned trading within group companies... After several meetings with VTB Capital, the CFTC has concluded that block trades cannot be done between affiliates with consolidated accounts... VTB was fined the minimum amount possible. It is important to note that these were civil or administrative fines based on a technical interpretation of the rules,” it said.
RCB Bank issue
Last November, the Central Bank of Cyprus had imposed a fine of €800,000 on RCB Bank, 46 per cent owned by VTB Bank, for violating money laundering norms.
Under Section 29A(d) along with Section 29A(j) of the IBC, resolution application from an individual would not be considered if he or his connected person have been convicted for any offence punishable with imprisonment for two years or more.
VTB’s press office, however, said: “RCB Bank is not part of VTB Group since 2014. RCB Bank has settled the matter in a timely manner and the fine relates to past audits and did not relate to incidents of money laundering,” it said.
Bank Otkritie Financial Corporation, in which VTB owned 10 per cent, had lost billions of dollars in deposits and was bailed out by the Central Bank of the Russian Federation last August.
“The stake in Otrkitie Holding was written off as a loss of RUB 7 billion in Q3 2017... The allegation that this could serve as a basis for disqualification of Numetal from the bidding process is absolutely false,” said VTB.
A criminal complaint was filed with the Serious Fraud Office of the United Kingdom against Yuri Soloviev, the First Deputy President and Chairman of the Management Board of VTB Bank for dishonest seizure of the shareholding of InterV Investment S.a.r.l. in the Bulgarian Telecom Company by VTB Bank, and the consequent sale of shares to VTB Bank affiliate.
Soloviev may be considered as ‘related party’ of VTB Bank and a ‘connected person’ of Numetal under Section 29A(e) read with 29A(j) of the IBC, which makes a resolution applicant ineligible if he or his ‘connected person’ “is disqualified to act as a director under the Companies Act, 2013 for being convicted by a court”.
VTB's press office said, "The former owner of Vivacom, a fugitive from justice fighting extradition in Serbia, and persons acting in concert with him, wrote a false and defamatory letter to the SFO which they posted on the internet. The SFO has rightly ignored the letter and took no action".
"Moreover, in February 2018, the Commercial Court in England's High Court of Justice ruled in favour of VTB Capital plc under the case initiated by Empreno against VTB Capital plc and other co-defendants back in 2016 relating to challenge of the results of the auction in connection with the sale of shares of InterV (Vivacom holding company) by VTB Capital plc acting as security agent... Previously, VTB Capital won several legal cases, initiated by Empreno and its affiliates against Vivacom, in Luxembourg and Bulgaria."