Fertilizer oligarch flouts Cyprus law
09:05 - 03 November 2023
A long-running legal dispute over the ownership of a Russian ammonia producer is also being played out in Cyprus, with an oligarch attempting to shift assets to Russia – in breach of Cyprus law.
Since 2005, TogliattiAzot (ToAZ), the world’s largest ammonia producer, has been the target of attacks by corporate raiders linked to the Kremlin – most recently by Dmitry Mazepin, the owner of its rival company Uralchem, who is under EU sanctions as a close associate of Russia’s President, Vladimir Putin.
In 2021, after numerous court manoeuvres in Russia, Mazepin illegally replaced the ToAZ Board of Directors with his own proxies, seizing control of the company. This is a classic example of reiderstvo – a Russian term for corporate raiding – in which bribery, forgery, corruption, intimidation, and violence are employed by raiders to steal companies from their owners.
The real majority shareholders of ToAZ – four offshore companies registered in the Caribbean (who hold the shares as trust managers for other Carribbean entities) – have been litigating against Mazepin in the Irish courts since 2016 because one of Mazepin’s companies, Eurotoaz, an Irish company, is a co-conspirator in the raid to take control of ToAZ from the majority shareholders. The ToAZ shareholders are seeking approximately $2.1 billion in damages (approximately €2 billion at current exchange rates) and asking for an injunction to stop the wrongful acts constituting the raider attack. The ToAZ shareholders now also seek an order directing the return of their shares to them as the shares were acquired by an entity related to Mazepin at two forced auctions in February 2022.
In July 2019, in the context of ancillary proceedings in Cyprus in aid of the Irish proceedings, two of Mazepin’s companies registered in Cyprus, Uralchem Holding PLC and CI-Chemical Invest Limited – gave formal and legally binding undertakings to the Cypriot District Court of Limassol to (a) maintain gross assets of not less than US$1.75 billion and (b) periodically provide accounts and financial statements to the ToAZ shareholders. This was intended to ensure that the assets of Uralchem Holding PLC, CI-Chemical Invest Limited and other Cyprus companies owned by Mazepin would have their assets available to satisfy damage awards that the Plaintiffs in the Irish litigation might secure in an eventual judgment in their favour.
Then two of Mazepin’s Cyprus-registered companies, Uralchem Holding PLC and CI-Chemical Invest Limited, announced in December 2021 that they had “redomiciled” from Cyprus to Russia, with no prior notice or warning to the rightful shareholders. It later became clear that in fact they took none of the steps that are legally required by Cyprus’ Companies Law to redomicile to Russia – indeed one of the two companies, Uralchem Holding PLC, actually cannot move out of Cyprus according to its own corporate charter. On the face of it, this shows a disrespect for the laws and constitution of the Republic and a clear violation of the Undertakings given to the Cyprus court, as described in the contempt application currently pending in Cyprus.
To justify these clear violations of the undertakings, Mazepin’s Russian lawyers suggested that their clients were excused from compliance with Cypriot law because of Russia’s invasion of Ukraine (“due to the existing restrictive measures and political environment”). Russia’s invasion of Ukraine does not, of course, stop the laws of Cyprus from applying in Cyprus. In any case, the supposed “redomiciliation” allegedly took place in December 2021, more than 2 months prior to the invasion of Ukraine, so it must have been that Mazepin and his advisers were prescient, but not prescient enough to take any of the legal steps mandated by Cyprus law to carry out a redomiciling of these two Mazepin-owned entities out of Cyprus.
In fact, the companies themselves seem confused about whether or not they are still based in Cyprus. They paid the annual levy payable to the Cyprus Registrar of Companies for 2022 and 2023, and they also delivered some (but not all) of their management accounts, as required by their court undertaking, dating from after the supposed move to Russia in December 2021. So it seems that the “redomiciliation” of Mazepin’s companies was not only illegal, but fake.
Unfortunately, there is nothing new in Cyprus being treated as a playground for foreign oligarchs to work through their rivalries. It is unusual, however, to see such an egregious and messy attempt to flout the local judicial and legal system. Meanwhile, the real ToAZ shareholders have launched an application in the District Court of Limassol seeking an order that Holding and CIC had both breached their Undertakings, and the next hearing is on 27 November 2023.