Key points:
- Deutsche Bank, UniCredit, Commerzbank, and other European lenders are suing Linde for assets seized by Russian courts after the banks refused to honor payment guarantees on a cancelled gas project.
- The dispute originates from a €10 billion gas processing plant at Ust-Luga, where Linde halted work in 2022 citing EU sanctions, triggering Russian court seizures of approximately €1 billion in bank assets.
- Russian courts ordered the seizure of about €244 million from Deutsche Bank, €460 million from UniCredit, €90 million from Commerzbank, and additional sums from BayernLB and LBBW.
- The Frankfurt court will hear the first case on July 14, 2026, with Deutsche Bank seeking €260 million in compensation from Linde for assets already confiscated by Russian authorities.
- Linde has disclosed contingent liabilities of approximately $1.2 billion related to advance payments received for the cancelled RCA projects, acknowledging the financial storm is far from over.
- The litigation could establish legal precedent for whether banks can recover sanctions-related losses from companies whose withdrawal triggered the claims, or whether they must bear the costs themselves.
The Ust-Luga unraveling: How sanctions turned a gas project into a financial minefield
The roots of this litigation trace back to 2021, when a consortium including Linde Engineering signed contracts with RusChemAlliance (RCA), a joint venture half-owned by Gazprom, to build a massive gas processing and liquefied natural gas plant at the port of Ust-Luga near St. Petersburg. RCA advanced more than €1 billion to Linde to begin construction, and to secure Linde's contractual obligations, major European banks including Deutsche Bank and UniCredit issued advance payment and performance guarantees in favor of RCA. These guarantees were standard instruments designed to protect the Russian company if Linde failed to deliver.
When EU sanctions forced Linde to suspend work after Russia's military operation in Ukraine began in 2022, the banks faced an impossible choice. Honoring the guarantees would violate EU sanctions, but refusing to pay would trigger legal consequences under the original contracts. The banks chose sanctions compliance, arguing that payment would breach European restrictions. RCA responded by pursuing legal action in Russian courts, which ordered the seizure of approximately €1 billion in assets held by the banks in Russia. Deutsche Bank lost about €244 million of local assets, while UniCredit lost roughly €460 million, Commerzbank around €90 million, and German state-owned banks BayernLB and LBBW about €270 million and €50 million respectively.
RCA also enforced claims against Linde's Russian joint-venture interests, forcing the sale of its stakes to local partners. The banks initially obtained anti-suit injunctions from English courts preventing RCA from pursuing claims in Russia but withdrew them last year after Russian courts threatened heavy financial penalties. Now the banks have turned around and sued Linde in Germany, arguing that the engineering group is contractually required to compensate them for the losses. Linde counters that it terminated the project in compliance with EU sanctions, and the banks' refusal to honor guarantees was their own decision.
The Frankfurt reckoning: Who pays when sanctions backfire?
The first hearing in Frankfurt on July 14 will address Deutsche Bank's claim for approximately €260 million in compensation from Linde. The Munich Regional Court will handle UniCredit's separate lawsuit seeking about €450 million, now in the pretrial stage, and Commerzbank's claim for nearly €100 million. BayernLB, which has not filed a lawsuit against Linde, has set aside a €285 million provision for the dispute alongside a matching reimbursement claim against the engineering group.
The central legal question is straightforward but carries enormous implications. When banks issue guarantees for international projects and then refuse to honor them because of government sanctions, who bears the financial loss? The banks argue that Linde's decision to withdraw from Russia triggered the chain of events, and Linde's contracts require it to indemnify the banks. Linde argues that it had no choice but to comply with EU sanctions, and the banks independently decided not to honor the guarantees, making them responsible for the consequences.
This litigation threatens to expose a fundamental contradiction in the Western sanctions framework. Governments impose sanctions expecting private companies to comply, but when compliance leads to massive financial losses, those same companies find themselves battling each other in court while the governments that created the problem face no liability. The banks are essentially asking the court to redistribute the costs of sanctions compliance from financial institutions to industrial companies, while Linde points out that the banks could have honored the guarantees and accepted the legal risk of sanctions violations.
The financial stakes extend well beyond the current claims. Linde has disclosed contingent liabilities of about $1.2 billion related to advance payments received for the cancelled RCA projects. If the banks succeed in their lawsuits, other companies that withdrew from Russia could face similar demands from banks holding their guarantees. If the banks lose, they absorb hundreds of millions in losses that will likely be passed to shareholders and customers. Either way, the message is clear: Western sanctions are not cost-free instruments of foreign policy, and the bill is now coming due in German courtrooms.
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