The St. Petersburg Arbitrazh Court has held Siemens AG and its former Russian subsidiary subsidiarily liable for the debts of OOO (Russian LLC equivalent) “Neftegaz i Energetika”, marking a landmark insolvency judgment amid sanctions and contested restructuring.
© unsplash, Sasun Bughdaryan
I. Introduction
On 21 August 2025, the Arbitrazh Court of Saint Petersburg and Leningrad Region issued a landmark and literally far-reaching judgment in case nr. А56-25656/2024/субс. holding OOO “Systems” (formerly OOO “Siemens”) and Siemens Aktiengesellschaft (Germany) to subsidiary liability for the debts of the bankrupt OOO “Neftegaz i Energetika”.
This decision exemplifies the Russian courts’ increasingly assertive stance on group liability in insolvency cases, especially where foreign parent companies and sanctions-related restructuring are involved.
II. Overview and Facts
The procedural background of that case is that the insolvency administrator applied to hold OOO “Systems” and Siemens AG subsidiarily liable as controlling persons of the debtor, OOO “Neftegaz i Energetika”, under Art. 61.11 and 61.16 of the Bankruptcy Law. The case followed the 2024 opening of insolvency proceedings against OOO “Neftegaz i Energetika”, which had been spun off from OOO “Siemens” in 2020.
After several hearings, expert examinations and repeated but unsuccessful court requests for evidence from the respondents, the court delivered the following ruling: on the one hand, it granted liability in principle, but on the other hand, it suspended the determination of the amount of liabilityuntil completion of distributions to creditors.
The main point of contention was the fact that in the end, after several rounds of adjustments, the transfer balance showed that the new OOO “Neftegaz i Energetika” started with a negative net asset value, was therefore technically insolvent from its inception. The other points of contention are the following:
- Operations, Group Control and Market Presence
The debtor was created in 2020 through a spin-off from OOO “Siemens” and inherited significant obligations (e.g. warranty service, penalty liabilities) while retaining insufficient funds. From its inception, the debtor’s balance sheet showed negative net assets of approx. RUB 226.35 million.
Despite the seemingly legal independence post-spin-off, OOO “Neftegaz i Energetika” operated in close economic, contractual and personnel entanglement with its parent OOO “Systems” and Siemens AG. Both companies shared contracts, internal services and group guarantees, while continuing to present themselves to customers and creditors as part of the Siemens group. OOO “Neftegaz i Energetika” relied on ongoing support from the group for viability in the Russian energy sector and despite the reorganisation, the companies’ financials and audits showed that the group connection still existed. Payments exceeding RUB 1.5 billion flowed from the debtor to Siemens entities between 2020 and 2023, reinforcing the perception of a single economic group.
- Insolvency, Sanctions and Liquidation
After the EU and US imposed further sanctions on Russia in 2022 after the invasion of Ukraine, Siemens AG announced its withdrawal from the Russian market. However, no comprehensive measures were put into place to settle group obligations to Russian creditors. Meanwhile, the Russian subsidiaries began divesting assets and preparing for liquidation.
OOO “Systems” transferred RUB 590.341.150 and RUB 6.226.667,99 to Siemens AG in August 2024, after insolvency proceedings had commenced. The court deemed these and other disposals as prejudicial to creditors. Also, neither Siemens AG nor OOO “Systems” prepared an economically grounded exit strategy from the Russian market after the imposition of EU and US sanctions in 2022. Instead, the group liquidated assets at undervalue and repatriated funds abroad and therefore intentionally limited the pool available to creditors.
In March 2024, “Neftegaz i Energetika” was declared insolvent. Subsequently, the creditors and the court-appointed insolvency administrator commenced action for subsidiary liability against both the former parent company (OOO “Systems”) and Siemens AG.
- Litigation and Court Proceedings
The Arbitrazh court criticised that the case’s complex factual findings and extensive document requests were complicated by non-cooperative behaviour from both OOO “Systems” and Siemens AG as they, according to the court, withheld information known to them for a longer period of time, allegedly in order to delay court proceedings.
The court highlighted the Presidential Decree Nr. 520 (9 November 2022), which requires special presidential authorisation for transactions in strategic energy sectors involving “unfriendly” foreign entities. No such authorisation was presented and therefore rendered the related transactions void, according to the court.
III. Legal Reasoning
With regard to the points of dispute raised by the parties, the Arbitrazh court came to the following conclusions:
- Subsidiary Liability and Material Consolidation
Relying on Article 61.11 of the Bankruptcy Law and Article1080of the Russian Civil Code, the court imposed solidary liability on both OOO “Systems” and Siemens AG as the presumption of joint conduct among affiliated controlling persons was not rebutted. Specifically, the court found that Siemens AG, as the UBO, and OOO “Systems”, based on documentation and facts, continued to exercise group control over “Neftegaz i Energetika” both legally and in reality. They benefited from the continued Russian operations, group guarantees and market presence, while leaving the creditors exposed.
The Arbitrazh court applied the doctrine of material consolidation (meaning that an undercapitalised spin-off is designed to externalise liabilities, the group’s consolidated assets may be drawn into the insolvency estate through subsidiary liability) and concluded that the reorganisation was executed in bad faith: the assets and obligations were distributed disproportionately, resulting in a technically insolvent company transferred to Russian ownership, while the parent company retained the group’s high value, highly liquid assets. Such an arrangement was deemed to have been driven by the group’s interest in offloading risk while shielding group assets from Russian creditors. The court applied subsidiary liability beyond the Russian border to the foreign parent company in Germany, Siemens AG.
The court justified this exceptional step with reference to established Russian Supreme Court practice on dealing with deceptive group structures, unfair reorganisation (e.g. Supreme Court Ruling No. 305-ЭС19-13326) as well as public policy concerns especially in the energy sector.
- Circumvention and Protection of Creditors
The court explicitly recognised that the transferring of cash and other assets out of Russia to Siemens AG (including the transfer of nearly RUB 600 million post-insolvency filing) was a deliberate attempt to avoid settlements with Russian creditors. This included direct payments to Siemens AG and third parties, as well as last-minute sales and suspicious outflows during liquidation.
- Procedural Conduct
The court criticised the respondent’s “attempts” to delay proceedings through repeated motions (refusal of the expert, new expert examinations, late evidentiary submissions), found these “tactics” abusive under Art. 8 and 41 APK RF and therefore denied the motions.
- Public Policy and Sanctions
The court rejected the argument that EU sanctions excused non-performance, stressing that recognition of foreign sanctions as binding would contravene Russian public policy and the prohibition on abuse of rights (Art. 1 and 10 Russian Civil Code).
IV. Consequences and Repercussions
In consequence, Siemens AG and its Russian subsidiaries have an expanded group liability for all debts of OOO “Neftegaz i Energetika” to Russian creditors. The proceeds from the asset liquidation are fully subject to future creditor claims, even if transferred abroad or frozen in C-accounts (special accounts designated for non-residents from “unfriendly” countries to receive payment for Russian securities). In short: Foreign parent companies can be held subsidiarily liable for Russian subsidiaries’ debts where reorganisation left the latter undercapitalised.
According to Russian courts, sanctions do not pose any constraints on absolving controlling persons of liability in Russian courts.
Even though the final amount of the liability is still to be determined, the determined fact of group liability is binding. As of the decision, claims included RUB 1.6 billion in the register along with additional liabilities such as ENKA’s EUR 24 million claim.
This decision paves the way for further legal actions seeking to reverse transactions and recover assets from both Russian and foreign entities in situations such as group structures and insolvency structuring.
This case demonstrates the Russian judiciary’s willingness to pierce the corporate veil and impose cross-border group liability where corporate restructuring is used to frustrate creditor claims, particularly under the cloud of international sanctions and in the energy sector, which is of national importance.
V. Conclusion
This ruling represents a significant precedent in Russia’s insolvency jurisprudence. By piercing the corporate veil of a multinational group and imposing solidary subsidiary liability, the court reaffirmed that creditor protection outweighs corporate structuring and sanctions arguments.
For foreign investors and multinational groups, this decision highlights heightened risks of Russian insolvency proceedings under the current legal environment which will be especially closely studied for its legal reasoning and creditor protection in Russia.
The ruling may be appealed to the Thirteenth Arbitrazh Appellate Court within one month. In the event of an appeal, further reports on this case will be published in this space.