CL-2022-000456 - [2025] EWHC 1938 (Comm)

It is necessary to separate Mr Melnichenko’s involvement in the structural changes that I have summarised in Sections XVI and XVII above from his involvement in the business affairs of the group.

On the basis that Mrs Melnichenko has always acted as his proxy, that Mr Fokin is his appointee and trusted deputy, that Ms Skittides and Mr Lillikas were appointed because of their pro-Russian background and that Mr Noble was interviewed by Mr Melnichenko before his appointment, it seems clear that Mr Melnichenko was involved in the changes to the Claimants’ ownership structure that I have summarised in Section XVI above.

As regards the structural changes to the EuroChem group overall, summarised in Section XVII above, I received very limited evidence during the course of the hearing about the discussions that resulted in these changes, and none about the decisions that will have been required – i.e., who made these decisions and when. Mr Hechler gave evidence (no doubt correctly) that in so far as such decisions affected EuroChem AG itself (such as the transfer of 10% of its shares from MCC EuroChem), this must have been discussed at board level. However, there was no disclosure from the Claimants about this or about any of the other decisions that these structural changes will have required.

Nevertheless, it is telling that Mr Rashevsky’s response to the “Future of EuroChem” memorandum was that it would be discussed with “representatives of shareholders”. This suggested that the memorandum was discussed with Mr Melnichenko or those representing him (such as Mr Fokin) and that the important changes that ensued only occurred with his agreement and approval.

After the hearing had ended, in response to a question from me asking for confirmation whether any documents relating to the transaction which resulted in EuroChem AG acquiring 10% of its shares from MCC EuroChem had been disclosed, the Claimants spontaneously provided documents which confirmed (i) that the transaction was approved by the EuroChem AG board, at a meeting on 16 December 2022, and (ii) that it was approved at an extraordinary Shareholders Meeting, also on 16 December 2022. At the shareholders’ meeting, AIM Capital was represented by a proxy, Ms Anna Burdina, who had been authorised to vote on AIM Capital’s behalf, as 90% shareholder, by Mr Fokin. As 10% shareholder, MCC EuroChem was represented by Ms Basyrova.

This very late disclosure generally provoked more questions than it answered. Above all, it shed no light on how or why Mr Fokin came to the view that the transaction should be approved, what instructions or information he gave Ms Burdina or, more importantly, whom he had consulted before doing so. These are all matters on which the Banks would no doubt have wished to question Mr Fokin, had the documents been made available in time for them to do so. However, given my view of Mr Fokin’s evidence, I have no doubt that those consultations included Mr Melnichenko, who was involved not only in this transaction but in the associated structural changes that occurred in 2022/2023.

My confidence on this point is redoubled by the fact that these documents included an extract of EuroChem AG’s shareholders’ register, as at 28 October 2022. This recorded the 90% holding of AIM Capital and the 10% holding of MCC EuroChem, and, under the heading “BO” (i.e., beneficial owner), identified Mrs Melnichenko in relation to all these holdings. Thus, it is apparent that, at any rate up until about mid-December 2022, everyone involved in the transaction was treating Mr Melnichenko’s proxy as the beneficial owner of AIM Capital, of MCC EuroChem and (therefore, through them) of EuroChem AG. Whatever else this may signify (Footnote: ⁴), it must at least confirm that Mr Fokin’s instructions in relation to this transaction will have come from Mr Melnichenko.

How involved Mr Melnichenko has been since the implementation of those changes, is much more opaque. The written commitments given, and the sanctions compliance policies, as audited by Advolis, seem likely to have prevented him from having any involvement in the affairs of EuroChem AG or its EU subsidiaries, at least from about 2023 onwards. These firewall measures were designed to protect EuroChem AG and its EU subsidiaries from Mr Melnichenko’s influence, and appear to have done so. However, it is impossible to be sure what involvement he may continue to have in EuroChem group businesses activities conducted by group companies outside the EU, and especially in countries where sanctions are not applicable and the firewall has no effect; above all, Russia and the UAE.

It seems unlikely to be nothing more than coincidence that the location selected as the new centre for all the EuroChem group’s trading activities was Dubai, and that Mr and Mrs Melnichenko also moved to Dubai; the more so as Mr Melnichenko’s personal office is physically close to the offices of AIM Capital and EuroChem. This suggests at least a degree of involvement in the business activities centred in the UAE cluster.

As to Mr Melnichenko’s involvement in EuroChem’s activities in Russia, I received no direct evidence at all.

Mr Beloborodov gave evidence that he had no communication with Mr Melnichenko, but I do not find this surprising. Mr Beloborodov was responsible for the construction and commissioning of the new plant, but he appears to have had no involvement in strategic or financial decisions. I therefore would not expect Mr Beloborodov to have had communications with Mr Melnichenko, no matter how involved Mr Melnichenko was in the business affairs of EuroChem’s Russian entities: Mr Beloborodov simply did not hold the kind of position that would require communications to/from Mr Melnichenko.

Mr Beloborodov’s evidence was that the strategic and financial decisions affecting EuroChem NW2 were taken at the level of MCC EuroChem (for example, the decision to engage Velesstroy as the new contractor). I know nothing of how MCC EuroChem makes such decisions, except that it is apparent from the evidence of Mr Hechler and Mr Collishe that they are made without any input from EuroChem AG, and without any regard to sanctions. It therefore is entirely possible that Mr Melnichenko may be involved, whether directly or via deputies such as Mr Fokin or Mr Kryazhevskikh. Indeed, the exchange between Mr Shiryaev and Mr Melnichenko in March 2022, which I set out in Section XVIII above, suggests that this is likely.