Introduction

In recent years, cross-border insolvency and asset recovery against multinational corporations with involvement in Russia have taken on new complexity. A landmark decision by the Moscow Arbitrazh (Commercial) Court in October 2025, opening local insolvency (bankruptcy) proceedings against the German parent company Volkswagen Aktiengesellschaft (Volkswagen AG), exemplifies these developments. This article examines the case, its underlying facts, the court’s legal reasoning, and the broader ramifications for international businesses and creditors with Russian interests.

1. Background: From Contractual Dispute to Cross-Border Insolvency

The dispute stems from Volkswagen AG’s long-standing activities in Russia. The company not only exported vehicles but established a substantial Russian operational presence, including local production, investment, and a network of subsidiaries. This included supply contracts concluded directly with Russian companies under Russian law.

In one such supply agreement, Volkswagen AG failed to fulfil obligations, resulting in significant claims against the German entity. Volkswagen withdrew from Russia after 2022 but retained considerable connections and, for an extended period, official registration with Russian tax authorities. When a Russian creditor, AO “KAMEYA,” was unable to secure satisfaction of a final Russian court judgment by other means, it initiated insolvency proceedings against Volkswagen AG before the Moscow Arbitrazh Court.

2. The Legal Issues: Jurisdiction, Legal Grounds, and International Context

Jurisdiction Over Foreign Debtors in Russia

A core issue was whether a Russian court has jurisdiction to open insolvency proceedings (bankruptcy) against a foreign legal entity whose main seat is in Germany and which, by the time of the proceedings, had largely exited Russia.

The court’s approach rested on Russian insolvency law, the Arbitration Procedure Code, and evolving doctrine on cross-border insolvency. Crucially, the court recognized that jurisdiction is established not purely by the company’s seat, but via the “close connection” principle: if a debtor once conducted significant business, maintained assets, or otherwise preserved legal ties to Russia, Russian courts may have jurisdiction. The court also considered the existence of Russian creditors and the extent to which Russian legal interests were directly affected.

Notably, the court referenced the right to open secondary or non-main proceedings, focusing on local assets and claims related to operations in the forum state. The approach mirrors global practice, where secondary proceedings may be opened to protect local creditors’ interests or administer local assets—even when main proceedings exist elsewhere.

The Impact of International Sanctions and Public Policy

Sanctions and the effective closure of judicial recourse for Russian parties in the EU and certain other “unfriendly” states played a crucial role. Russian law provides for exclusive jurisdiction in Russia in cases involving foreign parties subject to foreign sanctions. The court found that in light of EU restrictions, especially the broad bans on providing legal services to Russian counterparties, effective protection of Russian creditor rights could only be ensured within Russia.

The court also invoked the principle that Russian public policy requires the protection of domestic creditors and the effectiveness of judgments, justifying the opening of “local” bankruptcy proceedings in Russia, even if this approach might conflict with the principle of “universalism” in cross-border insolvency regimes.

3. The Court’s Conclusions and Immediate Consequences

The Moscow Arbitrazh Court rejected Volkswagen AG’s procedural objections, finding that a sufficient connection with Russia persisted. The court explicitly relied on the firm’s long-term business activity, the maintenance of Russian subsidiaries, continued tax registration, Russian IP rights, and pending Russian creditor claims—even if the core interests and most assets had shifted abroad.

Key conclusions included:

  • Local bankruptcy proceedings are permissible and necessary when Russian creditors face a substantial claim, the debtor had significant presence, and alternatives (e.g., claims abroad) are practically impossible due to sanctions or other impediments.
  • Claims by AO “KAMEYA” were admitted into the creditors’ registry, and a Russian bankruptcy trustee was appointed to oversee the identification and liquidation of available assets, even if these are limited to those remaining in Russia.

4. Practical Implications: Risks and Considerations for International Business

Foreign Companies Exiting Russia

This case sends a powerful message to multinational groups with historical or residual Russian connections: formal exit alone does not guarantee immunity from local proceedings. Courts may assert jurisdiction based on prior business, the existence of Russian subsidiaries, or even the continued validity of Russian trademarks and IP rights. The process underscores the importance of both de-registering thoroughly and managing legacy exposure.

Creditors and Asset Recovery

For Russian claimants, the scope for initiating local bankruptcy proceedings against foreign counterparties—even those with a main seat abroad—has expanded under current geopolitical conditions. However, foreign creditors should be mindful that such proceedings often focus on Russian-situated assets only, with limited impact on recovery from the group’s global assets.

Enforcement Abroad and Legal Conflicts

The decision may complicate asset recovery where Russian court actions and foreign (especially EU or US) asset protection measures overlap. Recognition and enforcement of Russian bankruptcy orders abroad remain uncertain due to mutual public policy exceptions, ongoing sanctions, and diverging doctrines: in particular, some common law jurisdictions may prevent the recognition of Russian insolvency judgments on contracts governed by their own law.

Summary: What Does This Mean for International Stakeholders?

For companies:

  • Monitor your legal and economic ties with Russia even after exit, and seek local and international expert advice on winding down all exposure.
  • Assume that Russian courts may assert jurisdiction over you if there are any legacy business footprints.

For creditors:

  • Russian court proceedings may open a door to local asset recovery, but cross-border enforcement remains limited. Parallel action abroad may remain essential.

For legal and compliance teams:

  • Stay alert to new developments in Russian practice, as well as retaliatory measures in other jurisdictions. A nuanced understanding of the conflict of laws, recognition regimes, and international sanctions is more important than ever.

Please do not hesitate to contact us for further advice on transnational insolvency and litigation matters, especially concerning evolving risks in Russian and cross-border practice.