On 3 March 2022, Serbian banks received a letter from the National Bank of Serbia stating that Serbia did not implement sanctions against the Russian Federation and that the banks must continue to provide services to their clients who are in any way connected to the Russian Federation. The banks were told to do so without delay, in any case not later than 4 March 2022, and to report back on undertaken actions.
National Bank of Serbia is not wrong – on this day, Serbia did not sanction the Russian Federation, and it would not be legal for Serbian banks to cease providing services to clients who are in any way connected to the Russian Federation. However, this predicament has put the members of management and executive boards of Serbian banks, most of whom are citizens of the European Union („EU“) member states, between the laws of their state and the laws of Serbia that apply to them due to their position in the Serbian bank („EU Board Members“).
On the one hand, EU Board Members are subject to adherence to EU member state sanctions, wherever located. This includes directors or officers of non-EU incorporated or domiciled entities if they hold an EU passport. Failing to comply with the provisions on sanctions, an EU Board Member may be subject to prosecution in the EU member state they are a citizen of. The potential liability of the EU Board Member depends on the laws of the member state.
On the other hand, failing to comply with Serbian laws and the National Bank of Serbia’s letter may result in in-house supervision of the National Bank of Serbia, and one or more preventive and corrective measures and monetary fines that may be issued by the National Bank of Serbia under the Serbian Act on Banks (including the forced removal of a specific EU Board Member).
This conflict of laws creates a pincer movement around the EU Board Members and the domestic banks. Effectively, EU Board Members have an option to incriminate themselves in the EU member state they are a citizen of in order to comply with Serbian laws or to risk regulatory consequences from the National Bank of Serbia. Several practical remedies are considered at this point; however, it seems that this issue will require a systematic solution from the National Bank of Serbia that would ensure less uncertainty, especially when dealing with systematically important financial stakeholders on the Serbian market.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.