Major European banks, including Deutsche Bank and UniCredit, have initiated legal action against a German industrial company for hundreds of millions of euros following its exit from a Russian gas project amid EU sanctions. RT reported that this dispute revolves around a €10 billion gas processing facility in Ust-Luga near St. Petersburg, originally agreed upon in 2021 by the Gazprom-affiliated RusChemAlliance (RCA) and a consortium featuring German engineering firm Linde.
After receiving over €1 billion in advance payments, Linde halted its involvement in 2022, citing compliance with EU sanctions. RCA responded by seeking compensation, leading Russian courts to seize assets held by several European banks within Russia and to target Linde’s joint ventures in the country.
According to RT, Deutsche Bank is pursuing approximately €260 million from Linde, while UniCredit has lodged a separate claim for roughly €450 million. Commerzbank is also pursuing nearly €100 million in damages. The banks contend that Linde is contractually required to reimburse them after they declined to honor guarantees issued for the project, as fulfilling payment obligations would have violated EU sanctions.
The guarantees were issued following RCA’s advance payments exceeding €1 billion to Linde. Subsequently, Russian courts ordered the seizure of nearly €1 billion in assets held by these banks in Russia, inflicting substantial losses on Deutsche Bank, UniCredit, and other European lenders, RT noted.
The outcome of this litigation could set a precedent on whether banks issuing guarantees remain liable for sanction-induced losses or if they can recover costs from companies whose withdrawal triggered the claims, according to the Financial Times.
Linde stated that the Frankfurt lawsuit addresses "complex issues relating to a guarantee agreement" connected to a Russian industrial project it terminated in line with EU sanctions. The company refrained from additional comments due to ongoing legal proceedings and has reported contingent liabilities around $1.2 billion linked to advance payments for the canceled RCA projects.
Following the imposition of comprehensive EU and Western sanctions in 2022, many international firms suspended or ceased operations in Russia, sparking numerous contractual disputes concerning projects, assets, and financial commitments.
Why this matters
This case highlights the complicated financial and legal risks companies face when withdrawing from sanctioned markets. The dispute could influence how banks and corporations manage guarantees and liabilities amid geopolitical tensions and sanctions regimes, impacting future cross-border industrial collaborations.
It also underscores the broader consequences of sanctions on international business operations and the cascading effects on financial institutions involved in such projects.
