Law360, London (April 13, 2022, 1:40 PM BST) -- A European debt management committee held a first meeting on Wednesday to determine whether there has been a potential failure to pay on Russia's government bonds, increasing the risk that the country could default on its foreign debt.

The EMEA Credit Derivatives Determinations Committee, a group of international investment banks, was scheduled to discuss whether a "potential failure to pay" event has taken place on the Russian Federation's bonds, according to a meeting confirmation notice issued by the administrators.

The group said in an update later on Wednesday that the meeting had adjourned without a decision and that the committee will meet again on April 20. 

At issue was Russia's payment of $650 million on two sovereign dollar bonds in rubles instead of dollars on April 6, provoking speculation that failure to pay in dollars amounted to a technical default.

The committee, which covers Europe, the Middle East and Asia, could also determine whether the usual 30-day grace period applies after a failure to pay warrant declaring a credit event has been issued. Judgments by the determination committees can trigger derivatives contracts that insure a borrower's debt against default, which provides financial protection to bondholders.

Representatives from Barclays Bank PLC, Goldman Sachs International and Citibank N.A. are members of the committee due to vote on whether Russia may have failed to pay on the bonds.

Russia's finance ministry said on April 6 that the sovereign debt servicing was made in rubles rather than dollars after the U.S. prevented the Russian government from paying in dollars from accounts at American financial institutions. 

The finance ministry had tried to make the debt-servicing payment on the bonds using an account at an American correspondent bank, but that institution refused to process the transaction due to U.S. sanctions, the ministry said.

The ministry then turned to the Russian National Settlement Depository to make the payments in rubles through a local bank, and it said it now considers all debts to have been paid in full.

The EMEA determination committee was also meeting to discuss the settlement of transactions after it found Russia's sanctioned state-owned railway company RZD had failed to make bond payments due on March 28. The European Union and the U.K. government imposed sanctions on the company in February.

Credit Derivatives Determinations Committees consist of up to 10 companies that create derivatives and five voting companies that purchase them, along with observer members involved in the transactions. Up to three firm are involved that can consult at the meeting.

The committee is part of the International Swaps and Derivatives Association, an international body that aims to decrease credit risks and increase transparency and efficiency in the global derivatives market.

-- Additional reporting by Al Barbarino. Editing by Ed Harris.

Update: this story has been updated to include new information from the source.

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