The English arm of VTB Bank - VTB Capital - is the latest in a line of Russian-linked financial institutions which have been forced into insolvency proceedings by the recent round of sanctions, its directors having applied to Court for an administration order.

Interestingly, though, VTB Capital has not gone down the route of seeking a special administration (as Sova Capital and Sberbank have recently done).  These special administrations are, broadly, used where systemically important banks or other financial institutions are insolvent and, particularly, where client money / investments need to be handled or returned.  

The reason that the directors sought a 'normal' administration order is somewhat unusual - VTB Capital was itself already in wind-down.  As a result of sanctions imposed in 2014, resulting from the annexation of Crimea, VTB Capital was in the process of shutting up shop.  As such, there was no ongoing trade or customers that needed to be protected by the special administration procedure.  VTB Capital was balance sheet solvent but the latest sanctions had caused its bank accounts to be frozen which had rendered it cash flow insolvent. 

Mr Justice Fancourt, when considering the application, was satisfied that an ordinary administration (as opposed to a special administration) was appropriate.  Particularly because the relevant regulators had been consulted and had not raised concerns.  Fancourt J was also satisfied that an administration order should be made in the circumstances but did not make such an order then and there; VTB Capital already had a licence from the UK sanctions authority - the Office of Financial Sanctions Implementation - but did not yet have one from its US equivalent, the Office of Foreign Assets Control ("OFAC").  Without an OFAC licence, the administrators would not be able to take the relevant steps needed to manage the estate and, therefore, Fancourt J said that he was minded to appoint the administrators but would leave the order unsealed until the OFAC licence had been obtained.  This is an interesting approach by the Court, and one which clearly seeks to achieve the best outcome possible in the circumstances and to provide certainty. 

It remains to be seen, as the economic effect of sanctions trickles down, whether further Russian-linked entities will find themselves at the doors of the Rolls Building seeking similar orders.