Hiding Assets from Sanctions or Judgments
The BKITs believe that Mazepin and his associates have been attempting to hide assets and put them beyond the reach of western creditors and authorities. Among other things, Mazepin and his associates moved assets from Cyprus to Russia, at a time when they knew that contempt proceedings before the Irish court would be brought by the BKITs and in advance of the invasion of Ukraine, following which Mazepin was sanctioned as a member of the “closest circle of Vladimir Putin”. This asset transfer was achieved through what the BKITs believe was a fake redomiciliation of Cypriot companies to Russia. The BKITs maintain that this was a serious breach of an undertaking given to the Cypriot court. The BKITs have filed a contempt application in Cyprus, arising out of this serious breach of the undertaking given to the Cyprus court.
The Cypriot Undertaking
On 2 July 2019, two of Mazepin’s companies, – Uralchem Holding PLC (“Uralchem”) and CI-Chemical Invest Limited (“CIC”) – gave formal and legally binding undertakings to the Cypriot court (the “Undertakings”) to (a) maintain gross assets in Uralchem and CIC in excess of US$1.75 billion and (b) on or before specified dates, periodically provide accounts and financial statements to the BKITs (the rightful shareholders in ToAz – Bairiki Inc., Kamara Ltd., Instantania Holdings Ltd., and Trafalgar Developments Ltd.).
Mazepin’s companies failed to comply with these undertakings. The BKITs discovered from media reports in December 2021 that Uralchem and CIC had allegedly been “redomiciled” from Cyprus to Russia. No advance notice of this was given; it was presented to the media and to the BKITs as a fait accompli.
As it turned out, these “redomiciliations” were simply an illegal transfer of assets by CIC and Uralchem to two new entities established in Russia.
The BKITs maintain that they were carried out in blatant violation of the Undertakings and of Cypriot law. They were for the cynical purpose of putting assets beyond the reach of sanctions imposed by western governments and of judgments of the western courts, before the invasion of Ukraine. In this context, the BKITs regard Mazepin’s status as part of Vladimir Putin’s closest circle as significant.
The redomiciliation was a fake. Any Cypriot entity wishing to exit Cyprus for a new jurisdiction must follow clearly defined steps and processes mandated by the provisions of the Cyprus Companies Law.
They claimed redomicile, but conveniently didn’t even take a single step to comply with the Cyprus requirements for a redomiciling to occur. Both Uralchem and CIC have acknowledged that they took no steps whatsoever in Cyprus towards legally redomiciling from Cyprus to Russia.
In fact, Uralchem simply could not (and cannot) legally redomicile to another jurisdiction because its corporate documents do not permit it to do so. And although CIC in theory could redomicile, it has never taken even a single one of the mandated steps to do so under the Companies Law (see the relevant section of Cyprus’ Companies Law).
The Fraudulent Redomiciliation – Annual Levies
In December 2022, a year after the supposed redomiciliations, both Uralchem and CIC paid the annual levy payable to the Cyprus Registrar of Companies. They even paid the levy for 2023.
Obviously, companies that have lawfully redomiciled from Cyprus to another jurisdiction do not have to pay annual levies to Cyprus and the fact that they have paid the levy subsequent to their alleged redomiciliation to Russia suggests that they know very well they have never redomiciled as they claim.
It is not possible under Cyprus law to have a company redomicile to another jurisdiction and still have the original entity which was the subject of the redomiciling remain incorporated in Cyprus. That would mean that the original company has not actually redomiciled. There would be two separate entities, one Cypriot and one Russian, sharing the same identity at the same time in two jurisdictions.
Under Cypriot law, a Cypriot company can only continue as an existing company which is changing its domicile and transforming itself into a Russian legal entity if it completes the process of redomiciling as mandated by both Cypriot and Russian law.
Uralchem and CIC completely ignored and took none of the required steps to complete this in accordance with Cyprus law, and instead only took steps mandated in Russia. As a result, under Cypriot law, Uralchem and CIC are still Cypriot companies. By paying the annual company levy in Cyprus, they themselves implicitly acknowledge that they have not legally “redomiciled” at all.
Uralchem and CIC also failed to comply in a timely fashion with the Undertakings’ requirements to deliver their accounts to the BKITs every six months, presumably in order to cover up their actions and perpetuate their false narrative that a proper redomiciling had occurred.
Even then their stories were inconsistent, given that financial statements for Uralchem and CIC as of 30 June 2022 were delivered despite the supposed “redomiciliation” having taken place in December 2021.
When confronted with their clear violations of the Undertakings, Uralchem and CIC’s Russian counsel 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”).
The absurdity of this is highlighted by the fact that the supposed “redomiciliation” allegedly took place in December 2021, more than 2 months prior to the invasion of Ukraine. Thus, an excuse based on any “restrictive measures and [the post-invasion] political environment” is nothing more than a red herring.
In any event, Russia’s invasion of Ukraine does not provide legal entities and their owners, whether Russian or otherwise, with a right to simply ignore Cypriot law and the Undertakings they have provided.
Given these violations of the Undertakings, which the BKITs believe are for the purpose of putting assets beyond the reach of western sanctions or judgments, on 8 June 2023 the BKITs filed an application in the District Court of Limassol, seeking an order that Uralchem and CIC had both breached their Undertakings.
Full Cypress Business News article explaining the situation in depth: Fertilizer oligarch flouts Cyprus law | CBN