Judge suspends making further directions in action against Russian oligarch

Two top Irish law firms wish to stop representing Dmitry Mazepin and his company

A High Court judge has temporarily suspended, in what he described as “extraordinary” and “unprecedented” circumstances, making further directions in an action brought here against a Russian oligarch, now subject of EU sanctions, his company and others arising from an alleged illegal scheme to take over a Russian fertiliser giant.

The suspension decision by Mr Justice Denis McDonald on Monday arose because two top law firms here want to stop representing Dmitry Mazepin, his United Chemical Company Uralchem (UCCU) and several other defendants in the ongoing lengthy and complex legal battle here over control of fertiliser giant TogliattiAzot (ToAz).

Sanctions

Mr Mazepin, a billionaire businessman and former member of Russian leader Vladimir Putin’s ruling party, was among those made subject last week of EU sanctions, including asset freezes, imposed following the Russian invasion of Ukraine.

Much of the ammonia produced by ToAZ is used as fertiliser to grow food in many countries spread across five continents and the company has been described as of strategic economic importance to Russia. If Mr Mazepin takes control of ToAZ, with an estimated value of €3 billion, he will be one of Russia’s largest players in the fertiliser industry.

The core claim in the Irish court proceedings, initiated in the Commercial Court in 2016 and yet to go to a full hearing, is that Mr Mazepin and UCCU are the central figures behind a long “corporate raiding” campaign dating back some 15 years involving alleged intimidation, fraud and corruption aimed at getting control of ToAZ from its majority shareholders.

He, UCCU and several other parties are being sued by four Caribbean-registered companies who claim they were defrauded of their 70 per cent interest in ToAZ. The claims are denied.

The complex case involves the largest claim, in terms of value, to come before the Irish court and is being heard here because one of the defendants, Eurotaz Ltd, has registered offices in Dublin.

The latest phase in the alleged corporate raiding scheme involved the shares of the plaintiffs being put up for sale in auctions last month in which, it is claimed, only proxies for Mr Mazepin were allowed to participate.

Bidder

The successful bidder at the auctions was Khimaktinvinvest (KAI), part of the UCCU group. On February 8th, KAI paid 31.55 billion rubles (€275,000) for 38.74 per cent of the shares held by the majority shareholders. On February 18th, KAI paid a further 25.85 billion rubles for 32 per cent of the majority shareholders stake.

Before the auctions, the majority shareholders applied to the Irish court to join KAI and another company, Aktum LLC, to the proceedings for the purpose of ensuring the shares are preserved.

The fact the auctions have taken place means the plaintiffs claim is likely to now proceed as one for some €2 billion damages.

Prior to the auctions, UCCU had given an undertaking not to enforce a €1.2 billion judgment obtained by it in July 2019 from a Russian court against the plaintiffs and others, against the plaintiffs or their shares. The undertaking was to apply pending a judgment from the Irish court.

UCCU and Mr Mazepin are facing contempt proceedings over alleged breach of that undertaking.

On Monday, the judge was told by Declan McGrath SC, instructed by William Fry solicitors, for Mr Mazepin, UCCU and other UCCU connected defendants, that his solicitors had confirmed, in a public statement on Friday, that, having reviewed their Russian related clients, the firm is winding down existing mandates and will not be accepting any new mandates from entities connected with the current Russian regime.

He was unsure if the firm will have to formally apply to “come off record” in this case but could say no more than that at the moment.

In the extremely unusual circumstances, “probably unprecedented” in the Irish courts, the proceedings were “in a state of flux” and he anticipated it would be difficult to meet a timetable concerning various pre-trial applications, counsel said. He asked that the judge make no further directions until April 4th when he hoped there would be clarity on the issue of legal representation.

Clarity

Aidan Redmond SC, for the plaintiffs, instructed by McCann FitzGerald, noted Mr Mazepin is now “an EU sanctioned person” and said he was not surprised by what counsel said. He said his side should not “be left floating” because of the defendants difficulties and asked the court to make directions and adjourn to April 4th when the defendants could outline any difficulties with complying.

Mr McGrath opposed that suggestion.

Paul Gardiner SC, instructed by Arthur Cox for Eurotoaz and an associated defendant, Andrey Babichev, who is a director of Eurotoaz, said his solicitors are also withdrawing from the case. This was a “rapidly evolving” situation but he believed the solicitors withdrawal was being accepted by those clients, counsel said.

Mr Justice McDonald said the circumstances were “really quite extraordinary”, “very strange and unprecedented” and it made sense to suspend the directions until there was greater clarity about how the case can move forward. He suspended all directions, including concerning a motion by KAI to challenge the Irish court’s jurisdiction in the matter, and listed the case for an update on April 4th.

The plaintiffs – Trafalgar Developments, Instantania Holdings, Kamara and Bairiki Inc – claim they were subjected to part of an internationally recognised phenomenon known as “raider attacks”, involving a so-called raider acquiring a minority shareholding in a target company before taking allegedly illegal steps to ultimately wrest control of it. It is claimed Mr Mazepin led, and was the main beneficiary of, the alleged scheme.

Mary Carolan

Mary Carolan

Mary Carolan is the Legal Affairs Correspondent of the Irish Times