Maksim Grishanin, First Vice President of Transneft, speaks about the court proceedings against Sberbank.
At the beginning of July Transneft won the lawsuit against Sberbank claiming payment of 70 billion considered by the court of first instance, the lawsuit concerned the transaction with foreign exchange derivatives entered into in 2013 due to which the company suffered losses. Sberbank is going to submit an appeal. Maksim Grishanin, First Vice President of Transneft, has told Kommersant (Ъ) about the company’s position in this dispute.
— In the course of the dispute consideration you were deemed a weaker party not being able to assess the risks. Could you actually predict such a scenario?
— That’s not what it was about. We did not declare our own incompetence. Our position was that Sberbank had acted in bad faith selling a complex structured product to us being at the same time our adviser. We raised the issue of completeness of information disclosure about the product which Sberbank had sold to us acting as the counterparty to the transaction. The issues of its structure, calculation methods, risks related to the real product and not the one depicted in presentations.
For some reason everyone considers our case a precedent but this is far from true. In 2011 there were legal proceedings against UniCredit Bank. According to their results the Higher Arbitrazh Court decided to summarize the practice of rendering of certain services and prepared a letter of information concerning the way the banks should operate on the derivatives market. Unfortunately, it has never been published, but the draft letter has come out and everyone makes references to it up to now. There was a case of Platinum Real Estate against the Bank of Moscow (the company tried to litigate the swap agreements which it had concluded with the bank in March 2013). In that case the fourth instance, the Supreme Court, actually confirmed the data stated in the HAC’s letter of information. It made clear that the certain circumstances of each case should be considered.
— So, why did the court support your claim?
— Together with Sberbank we provided thousands of pages in court. Our position was grounded on the bank’s documents: its letters addressed to us, its presentations… The transaction was in the process of sale to us from the beginning of 2013, they were constantly adjusting the conditions and telling us about its benefits. We saw it as a way to cut the cost of the traditional loan and the bank, as we happen to see, actually used the transaction to hedge its currency risks. Not only Transneft faced such a situation, but also a number of Sberbank’s clients, when it included similar products into their credit products.
— You presented expert estimates in court predicting a sharp fall in the ruble.
— Sberbank is our long-standing reliable partner. Please note that during the court proceedings we did not provide any new estimates. One of the experts engaged by us provided his estimates made in 2012—2013 and published in Direct Investments, the Sberbank’s corporate magazine. So, Sberbank being an institutional entity knew or had to know about the issues it published in its own magazine. And the main issue here is: what did it have to disclose to us? Did it have to inform us of the existing alternative opinions and analysis data? The second issue is that we were not informed of the forecast prepared by CB (Central Bank) of Russia and published just a month before conclusion of our transaction. It was an improper act not to take those data into account or not to communicate them to us. It is evident that the bank did not act with due care communicating that information to us.
As to blaming us for the fact that our own professional experts had not managed to assess the risks… Look, we were negotiating over the documents related to the transaction for 11 months and the statement of risks was sent to us only eight days before the transaction date. Moreover, the electronic message sent by the bank’s employee stated that it was a standard document to be signed as soon as possible, on the following day.
— Were you in the urgent need of refinancing the loan?
— No, but we used the opportunity provided to us by the bank, though we did not ask for it. The bank offered that transaction to us explaining that it posed no risk to us. And we had no reason to distrust Sberbank taking into account its experience, market position, a huge amount of similar transactions carried out and qualification of its macroeconomic analysts.
In November 2013 a forecast for 2014 was published which was prepared by CB in cooperation with the Ministry of Economics. Then Sberbank provided the estimates to us which were slightly different from CB’s forecasts. The bank’s presentation also stated that even if the barrier specified in the documents was broken an exchange of notional amounts would occur due to which we as well as the bank would break even. So, we drew one simple conclusion that it did not matter what barrier was set because it was only an assumed figure to calculate the premium.
— What went wrong after all?
— Everything went wrong because the documents provided eight or nine days before the transaction date did not correspond to all the materials presented to us before that. Finally it turned out that we would not have a deliverable option, that we would have a non-deliverable one instead, that there was a certain formula for calculation and that no exchange of notional amounts was provided for at all. This is what we are trying to prove in court.
— The bank has already submitted its appeal. What happens if you lose this time?
— We will appeal to the court of cassation.
— But in the long term is there still any risk to face such a situation one more time, whatever the court decision will be?
— We have had such an experience only once. We will never repeat it again. If currency risks are to be hedged we will do it but we no longer wish to deal with this kind of speculative products.
Still, the main thing that we realized is that clear rules of operation shall be established for the sellers of such products. Take a look at European practice. They have stated it clearly that when concluding transactions the bank selling any product shall first of all take into account the interests of its clients. There is a whole set of criteria which, in our opinion, should be met by the banks like Sberbank. We suggest that clear rules be established to regulate the sale of certain types of financial products.
— Who should establish such rules?
— The Central Bank. In 2013 everything was developing so fast, new products which the banks wished to test were being issued all the time. For it is natural that the banks issuing a product for the first time wish to protect to the maximum extent possible, otherwise, nobody will buy it. Then the product is being replicated. And its security is not always kept at the same level. That is why the rules are to be set so as to ensure high quality.
We would prefer that when we are offered such a product, firstly, we could see what it is like from the very beginning till the end. That we actually be taught to use this product, to handle it, so that we could carry out an assessment. The court itself states that the bank should first of all assess the client’s risk appetite, see whether the client actually needs it, and only after that the bank shall have the right to offer a product. So, once again the courts state that at first the bank is actually an adviser, and then it offers a product. Even if the client and the bank have not concluded an advising services agreement it in fact is gradually made up in the course of trust-based relations.
— But the court proceedings do not prevent you from cooperating with Sberbank, do they?
— We continue operating in the ordinary course.
— Are you ready to take up loans from them? Your need of financial resources up to 2020 is 100—150 billion rubles.
— We are going to raise these 150 billion rubles needed for the coming several years as usual in the form of a public debt, we see no problem here.