The owners of a Russian company who are litigating conspiracy-to-defraud allegations here, including against a Dublin-registered firm, are asking the Irish High Court to ignore numerous hearings and judgments of competent Russian courts, a judge has been told.
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 (ToAZ), had engaged in a “massive fraud” on ToAZ along with three others, Michael Collins SC told the court.
Seven Russian courts, involving 37 different judges, held that ToAZ had evaded Russian taxation 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.
Mr 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.
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The 70 per cent majority shareholders in ToAZ – four Caribbean-registered trust firms – have brought proceedings here against UCCU and others, including an associated Dublin-registered firm called Eurotoaz, claiming they were defrauded of their shares through illegal and corrupt “corporate raiding” actions by the defendants.
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, he said.
At the centre of all the litigation are Mr 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 Mazepin is a former member of President Vladimir Putin’s United Russia ruling party.
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.
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.
There have been a number of hearings in Ireland already, in advance of the main case against UCCU and its co-defendants, dealing mainly with preliminary matters.
The latest is an application by the Caribbean firms 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.
In their submissions seeking an order that UCCU is guilty of contempt, the plaintiffs said there had been an “egregious breach” of the Dublin undertaking.
In submissions on behalf of UCCU, 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.
It was on that “very slender jurisdictional level” that the plaintiffs brought these applications in the Irish High Court, which found the case could go ahead here to avoid fragmentation of proceedings, he said. That decision has been appealed and a judgment is awaited from the Court of Appeal.
The case continues via a hybrid hearing before Mr Justice Mark Sanfey.
