EU Court Rejects UniCredit's Request to Halt ECB’s Russia Exit Order

The European Union’s General Court has dismissed UniCredit’s attempt to suspend a European Central Bank (ECB) directive requiring the Italian bank to reduce its presence in Russia, according to a court ruling dated November 22. The decision marks a significant blow to UniCredit, which has operated in Russia for over 30 years.

The court determined that the ECB had conducted a thorough assessment of the regulatory landscape, including risks tied to Russian laws that could impede compliance. It refused UniCredit’s request for a suspension while the court examines the merits of the case.

In its ruling, the judge detailed how the ECB, UniCredit’s primary supervisory authority, had cautioned the bank about the dangers of maintaining operations in Russia. These risks include potential involvement in terrorism financing, money laundering, and violations of sanctions.

A UniCredit spokesperson declined to comment, and the ECB also refrained from making any statements.

Court documents reveal that discussions between the ECB and UniCredit began in 2022, with the central bank issuing a formal warning about Russia-related risks in April 2023. This was followed a year later by demands to impose restrictions on lending, deposits, cross-border transfers, and payments related to its Russian operations.

The ECB’s concerns include UniCredit’s limited access to client information held by its Russian subsidiaries and the inability to conduct compliance inspections at its offices in the region.

“The decision is really dramatic,” remarked Viktor Winkler, a German sanctions lawyer unaffiliated with the case. “The tone is that everyone has to get out of Russia if supervisors demand it, regardless of whatever Russian law says or any other reservations. The time for making excuses is over,” he added.

The ECB had highlighted increasing operational, reputational, financial, and sanction-related risks tied to UniCredit’s Russian business and suggested the sale of its subsidiaries in the country. However, UniCredit argued that the ECB had overstepped its authority and pointed out that compliance with its directives would be unfeasible under Russian law.

The decision, the court confirmed, cannot be appealed. Proceedings on the core issues of the case are ongoing, with no clear timeline for a final ruling.

In the meantime, UniCredit has been scaling back its Russian operations. During the third quarter, the bank reduced payments, loans, and deposits, aligning with its broader goals to shrink its Russian footprint by 2025.

For Winkler, the court's stance signals a high likelihood that the final judgment will not favor UniCredit. The ruling provides unprecedented insight into the ECB’s behind-the-scenes efforts to push UniCredit to sever ties with Russia.

UniCredit remains one of the two largest Western banks operating in Russia, alongside Austria’s Raiffeisen Bank. Earlier this month, Reuters reported that the ECB is urging both banks to hold additional capital buffers as safeguards against risks associated with their Russian businesses.

The setback for UniCredit comes as it seeks regulatory approval for acquisition deals. The ECB evaluates such proposals based on criteria like financial strength and reputation, including ongoing court proceedings.

On Monday, UniCredit, led by CEO Andrea Orcel, launched an unexpected €10 billion ($11 billion) bid for its Italian rival Banco BPM. The bank also disclosed that it is still in discussions to acquire Germany’s Commerzbank.

By fLEXI tEAM