A group of PAO Promsvyazbank bondholders whose debt securities were written off after Russia's central bank bailed out the lender have lodged a complaint with the European Court of Human Rights against the Russian state, Vedomosti reported Jan. 14.
The 16 investors, who invested $4.2 million in the bonds, are former clients of Promsvyazbank and bought the securities at the recommendation of the lender itself, financing the purchases with money from their deposits.
The bondholders claim that the write-off was illegal as the bonds were issued before December 2014, when the law allowing write-offs of subordinated debt by banks undergoing financial recovery was introduced. The investors also claim that the write-off "pursued the hidden goal of freeing the state from obligations to bank creditors."
Ilya Rachkov from Russian law firm Nektorov Saveliev and Partners, which represents the investors, told Vedomosti that the bondholders decided to lodge their case directly with the European Court of Human Rights, rather than in a Russian court, because local courts tend to side with banks in similar disputes and usually confirm the legality of the retroactive use of the debt write-off law.