The Irish court should not ignore the decisions of Russian courts in shareholders’ dispute on world’s largest ammonia producer
on November 3, 2022
By Newsroom
At the centre of all the litigation are Sergei Makhlai and Belarusian-born, Russia-based oligarch Dmitry Mazepin (above), owner of UCCU, who was put on an EU sanctions list after the outbreak of Russia’s war on Ukraine.
Photograph: Mikhail Metzel\Tass
Michael Collins SC, a lawyer defending the interests of minority shareholders of JSC “Togliattiazot” (ToAZ, Russian ammonia producer) in a dispute in Ireland, said that the Irish High Court should respect the decisions of Russian judges, held that ToAZ had evaded Russian taxation. There are no reasons why Ireland should not respect the decisions of competent jurisdiction in Russia which found that Sergei Makhlai, a billionaire and former chairman of Russian ammonia producer Togliattiazot, had engaged in a “massive fraud” on ToAZ along with three others, Michael Collins SC told the court.
The major owners of ToAZ who are litigating conspiracy-to-defraud allegations in Ireland, are asking the Irish High Court to ignore numerous hearings and judgments of competent Russian courts, a judge has been told.
Seven Russian courts involving 37 different judges held that ToAZ had illegally used schemes to evade taxes between 2009 and 2013 by selling ammonia – used in making fertiliser – at a very low value to a Swiss company that sold it on at market price, pocketing profit that should have gone to ToAZ, he said.
Michael Collins was making submissions on behalf of a minority ToAZ shareholder, United Chemical Company Uralchem (UCCU), which saw hundreds of millions of dollars being “siphoned off” and defrauded from the company that led to court proceedings in Russia.
Mr Collins said UCCU’s actions in Russia were similar to “shareholder oppression” proceedings in this country where a minority shareholder tries to safeguard its position.
At the center of the case are Sergei Makhlai and Belarusian-born Russian-based oligarch Dmitry Mazepin, owner of UCCU, who was put on an EU sanctions list after the outbreak of Russia’s war on Ukraine.
Mr Makhlai, along with his father Vladimir, also a former ToAZ chairman, were found guilty in Russia in 2019 of siphoning off some $1.4 billion (€1.39 billion) from ToAZ through related-party transactions using Swiss firm Nitrochem Distribution AG which is controlled by the Makhlais’ Swiss partner Andreas Zivy. The Makhlais were sentenced to 8½ and nine years’ imprisonment but had fled the country before sentencing.
The Irish case, which began in 2016, mainly involves foreign-registered companies and individuals. However, it includes Dublin-registered firm Eurotoaz Ltd. Mr Mazepin, UCCU and a number of other individuals and companies, including Eurotoaz, are being sued in the High Court’s commercial division by four Caribbean-registered companies – Trafalgar Developments, Instantania Holdings, Kamara, and Bairiki Inc. It was claimed they were all part of a conspiracy to defraud the plaintiffs, through illegal and corrupt actions, of their 70 per cent interest in Russian firm Togliattiazot (ToAZ), a rival ammonia producing company to Mr Mazepin’s UCCU.
The Caribbean firms have also applied to find UCCU in contempt of an undertaking it gave to the High Court not to enforce a June 2019 $1.2 billion Russian court judgment against the ToAZ plaintiff companies, including the sale of ToAZ shares, pending the outcome of the main Irish proceedings.
The Caribbean firms claim there was a prolonged and deliberate breach of the undertaking by UCCU by taking steps to bankrupt Mr Makhlai in Russia and this led to the sale of the ToAZ shares which the plaintiffs say they own.
The UCCU respondents denied the claims and said that a bankruptcy action did not breach the undertakings. Mr Collins said there had to be a fundamental respect for legal proceedings in foreign jurisdictions. The bankruptcy of Mr Makhlai, who is not one of the plaintiffs in the Irish case, was separate from the $1.2 billion judgment case, counsel said. The judgment was directed towards the Caribbean companies’ assets and did not extend to the Makhlai bankruptcy process.
There could therefore have been no breach of the defendants’ undertaking not to enforce the Russian judgment, he said.
Counsel said this was “an entirely Russian dispute” between the owners of Russian companies in the context of what had been a massive fraud. The only reason Ireland had been “sucked into it” was because a Dublin-registered company had a shareholding in it and it was “painted as a broad conspiracy” between UCCU and the other defendants.
Togliattiazot, the world’s largest producer of ammonia, is located in southwest Russia. Before the war in Ukraine, ToAz exported 2 million tons a year with a turnover of about $2.4 billion. A 2,400-km pipeline used to transport ammonia from ToAZ to the Ukrainian Black Sea port of Odessa was shut down eight months ago causing a shortage on the global market of nitrogen fertilizers, since ammonia is a key element for their production.
Michael Collins SC, a lawyer defending the interests of minority shareholders of JSC “Togliattiazot” (ToAZ, Russian ammonia producer) in a dispute in Ireland, said that the Irish High Court should respect the decisions of Russian judges, held that ToAZ had evaded Russian taxation. There are no reasons why Ireland should not respect the decisions of competent jurisdiction in Russia which found that Sergei Makhlai, a billionaire and former chairman of Russian ammonia producer Togliattiazot, had engaged in a “massive fraud” on ToAZ along with three others, Michael Collins SC told the court.
The major owners of ToAZ who are litigating conspiracy-to-defraud allegations in Ireland, are asking the Irish High Court to ignore numerous hearings and judgments of competent Russian courts, a judge has been told.
Seven Russian courts involving 37 different judges held that ToAZ had illegally used schemes to evade taxes between 2009 and 2013 by selling ammonia – used in making fertiliser – at a very low value to a Swiss company that sold it on at market price, pocketing profit that should have gone to ToAZ, he said.
Michael Collins was making submissions on behalf of a minority ToAZ shareholder, United Chemical Company Uralchem (UCCU), which saw hundreds of millions of dollars being “siphoned off” and defrauded from the company that led to court proceedings in Russia.
Mr Collins said UCCU’s actions in Russia were similar to “shareholder oppression” proceedings in this country where a minority shareholder tries to safeguard its position.
At the center of the case are Sergei Makhlai and Belarusian-born Russian-based oligarch Dmitry Mazepin, owner of UCCU, who was put on an EU sanctions list after the outbreak of Russia’s war on Ukraine.
Mr Makhlai, along with his father Vladimir, also a former ToAZ chairman, were found guilty in Russia in 2019 of siphoning off some $1.4 billion (€1.39 billion) from ToAZ through related-party transactions using Swiss firm Nitrochem Distribution AG which is controlled by the Makhlais’ Swiss partner Andreas Zivy. The Makhlais were sentenced to 8½ and nine years’ imprisonment but had fled the country before sentencing.
The Irish case, which began in 2016, mainly involves foreign-registered companies and individuals. However, it includes Dublin-registered firm Eurotoaz Ltd. Mr Mazepin, UCCU and a number of other individuals and companies, including Eurotoaz, are being sued in the High Court’s commercial division by four Caribbean-registered companies – Trafalgar Developments, Instantania Holdings, Kamara, and Bairiki Inc. It was claimed they were all part of a conspiracy to defraud the plaintiffs, through illegal and corrupt actions, of their 70 per cent interest in Russian firm Togliattiazot (ToAZ), a rival ammonia producing company to Mr Mazepin’s UCCU.
The Caribbean firms have also applied to find UCCU in contempt of an undertaking it gave to the High Court not to enforce a June 2019 $1.2 billion Russian court judgment against the ToAZ plaintiff companies, including the sale of ToAZ shares, pending the outcome of the main Irish proceedings.
The Caribbean firms claim there was a prolonged and deliberate breach of the undertaking by UCCU by taking steps to bankrupt Mr Makhlai in Russia and this led to the sale of the ToAZ shares which the plaintiffs say they own.
The UCCU respondents denied the claims and said that a bankruptcy action did not breach the undertakings. Mr Collins said there had to be a fundamental respect for legal proceedings in foreign jurisdictions. The bankruptcy of Mr Makhlai, who is not one of the plaintiffs in the Irish case, was separate from the $1.2 billion judgment case, counsel said. The judgment was directed towards the Caribbean companies’ assets and did not extend to the Makhlai bankruptcy process.
There could therefore have been no breach of the defendants’ undertaking not to enforce the Russian judgment, he said.
Counsel said this was “an entirely Russian dispute” between the owners of Russian companies in the context of what had been a massive fraud. The only reason Ireland had been “sucked into it” was because a Dublin-registered company had a shareholding in it and it was “painted as a broad conspiracy” between UCCU and the other defendants.
Togliattiazot, the world’s largest producer of ammonia, is located in southwest Russia. Before the war in Ukraine, ToAz exported 2 million tons a year with a turnover of about $2.4 billion. A 2,400-km pipeline used to transport ammonia from ToAZ to the Ukrainian Black Sea port of Odessa was shut down eight months ago causing a shortage on the global market of nitrogen fertilizers, since ammonia is a key element for their production.
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