Liability of Foreign Companies and Their Russian Subsidiaries: Development of the Supreme Court’s Stance

Supreme Court has provided its position in the landmark case of Sovcombank v. J.P. Morgan entities

On 9 October 2025, the long-awaited ruling of the Russian Supreme Court on the case of Sovcombank v J.P. Morgan Securities plc. and Russian JPMorgan Chase has been issued.

Although the courts of lower instances found for Sovcombank, the Supreme Court overturned the decisions and remanded the case for reconsideration. As in the Citibank case, the Supreme Court pointed out some major implications for suing a Russian subsidiary for the debts of its foreign parent company. Besides that, the Court for almost the first time since Uraltransmash case also commented on the exclusive jurisdiction of the Russian courts over sanctions disputes.

The key implications are the following:

1. Exclusive jurisdiction of Russian courts confirmed: sanctions serve as a ground

The Supreme Court ruled that applying foreign-imposed sanctions against Russia, its entities, and individuals would mean validating these measures, which contradicts Russian law. Since the dispute originated due to sanctions, leading to J.P. Morgan's failure to meet its obligations, the Court upheld the application of Russian law and maintained the exclusive jurisdiction of Russian courts over the dispute on the basis of Article 248.1 APC.

2. Bank of Russia shall be joined, while the Claimant’s possible attempts to minimize the damages shall be scrutinized

As in Citibank case, the Supreme Court concluded that the issue of joinder of the Bank of Russia as a regulator shall be considered in a new trial of the case.

3. Granting the claims and obtaining a licence

The Supreme Court explicitly stated that in order to resolve the dispute, it was necessary to review the defendants' arguments re. the possibility of the claimant to obtain a licence and recover funds, that had not been lost but are “frozen”, via an out-of-court procedure.

Meanwhile, the Court noted that the mechanism for unblocking funds is part of the sanction’s regime of an “unfriendly” jurisdiction. Therefore, the presence of such mechanism cannot diminish the rights of a Russian citizen to judicial protection in Russian courts.

4. Joint liability of parent companies and Russian subsidiaries

Expanding upon Citibank’s case, the Supreme Court clarified that findings related to joint causation of damage by the defendants must rest on comprehensive factual analysis. While no direct stance was taken on the permissibility of holding Russian subsidiaries liable, the Ruling identified key issues to be examined by trial courts:

(А) Property criteria. Circumstances of the level of integration (connection) beyond corporate ties between a foreign company and a Russian subsidiary.

(B) Facts of the assets being distributed among the controlled companies belonging to a single controlling centre. In such cases, the courts shall justify any deviation from the principle of autonomy of the legal entity, as well as the recovery of losses caused by one member of a group of companies from the assets of another.

(C) Additional factors: the corporate structure of the group, procedure for concluding transactions established within such a group, extent of participation in the management of the company by other shareholders.

(D) Features of foreign defendants' activities in Russia, use of the principle of autonomy of property of the legal entity by a group of companies to evade obligations.

Thus, the Court outlined additional criteria which shall be taken into account when considering the disputes on joint and several liability of the foreign company and its Russian subsidiary.

5. Provisions of the Law on Enforcement Proceedings

The Supreme Court also instructed the lower courts to examine the claimant’s argument on the possibility of qualifying the claim for recovery from the assets of the Russian subsidiary under the provisions of the Law on Enforcement Proceedings, which allows for the recovery from the assets of the debtor used (held) by third parties.

In our view, this approach may carry the risk of qualifying all the property of the Russian subsidiary as property of the parent company in order to justify the legality of such recovery.

6. Implications for future Provisions of the Law on Enforcement Proceedings

The Supreme Court’s Ruling in J.P. Morgan case provides arguments for both sides. It seems that the Court tried to find the balance and not to establish directly what position it favors. The Ruling’s sounds like guidance for lower courts to conduct a proper analysis in such disputes.

In any case, even after Citibank’s ruling the previous trend on “group liability” claims was reversed by trial courts who started to dismiss claims against Russian subsidiaries. It will be clear whether the approach has changed or remained more or less the same once we see the development of practice of trial courts based on J.P. Morgan case.