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

The argument that Mr Fenwick KC wished to shut out was one derived from JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch), where Birss J made the following suggestion:

“[182] In the example of an unscrupulous person seeking to use a discretionary trust to protect assets from creditors, a trust which includes a role for that unscrupulous person as a protector with very wide powers of veto and to remove and appoint trustees may perhaps achieve the desired result. The unscrupulous person is only a discretionary beneficiary and so can truly state to a court that they do not hold any of the assets beneficially. However consider a protector who is not a fiduciary. In the capacity of such a protector, the unscrupulous person can prevent the trustees from distributing the money to anyone but himself (or herself) and can remove recalcitrant trustees who fail to do his or her bidding and replace them with trustees willing to do what the unscrupulous person wants. Viewed in that way, perhaps the discretionary trust is not really a discretionary trust at all; the unscrupulous person has retained effective control of the assets or at least can recover that control whenever they like. That is the claimants’ case on the facts.”

Birss J’s ultimate conclusion in that case, at [278], was that, on the terms of the trusts, the settlor had indeed retained effective control of the assets, because the trust deeds allowed him to retain his beneficial ownership.

The facts of this case are different, in that Mr Melnichenko was never the protector of the Firstline Trust. Indeed, until 9 or 10 March 2022, there was no protector.

However:

Thus, by retiring, Mr Melnichenko was able to seem to disappear from the trust structure. However, he thereby automatically became entitled (via his wife) to appoint Mr Fokin as protector.

For reasons that I have already explained, Mr Fokin was someone that Mr Melnichenko could rely on to do as he wished. Having Mr Fokin act, first as chairman of Linetrust PTC, then as protector, meant that Mr Melnichenko at all times retained effective control.

Accordingly, this, too, is a case where the trust was not really a discretionary trust, under the terms of the Trust Deed. Those terms gave Mr Melnichenko the ability to secure the appointment of Mr Fokin to the various roles that he has played over time. Furthermore, it is a case where it is justifiable to use Birss J’s adjective “unscrupulous” to characterise not only Mr Melnichenko but also Mr Fokin.

These conclusions about the nature of the Firstline Trust, which are in part factual and in part legal, add to and confirm my view that Mr Melnichenko falls to be regarded as the “owner” of the Firstline Trust assets, including EuroChem AG, for the purposes of Article 2(1) and Article 2(2) of Regulation 269.

They are conclusions that I have reached with the benefit of factual evidence which does not appear to have been available to the General Court in T-271/22 – for example, evidence as to the peculiarities regarding Mr Melnichenko’s Deed of Retirement, as to the shareholdings transferred to Mrs Melnichenko on 7 May 2022 and as to her attempt to reverse Mr Melnichenko’s retirement on 17 April 2023; evidence regarding the restructuring that occurred after March 2022 and the indications that Mr Melnichenko was involved in the decisions that must have been required; and, above all, the oral evidence that I received from Mr Fokin and Mr Noble, which shed very considerable light on Mr Fokin’s relationship with Mr Melnichenko and the influence that Mr Melnichenko has over him as protector and over the directors of Linetrust PTC. If such evidence had been available to the General Court, I apprehend that this would have confirmed its view.

Although it was not relied on by the Claimants, I should refer here to the decision of the Helsinki Court of Appeal in relation to SUEK AG. The Court of Appeal concluded that SUEK AG was controlled by Mr Melnichenko, for the purposes of Article 2(1), but that it was not owned by him. Section 4.2 of the judgment indicates that the conclusion as to ownership was arrived at on the basis of two opinions as to the nature of a discretionary trust under Bermudian law, which were consistent with the English law analysis that I have summarised above (and, I suspect, with the opinion referred to by the General Court in T-271/22), as well as a letter from Mr Noble. This evidence stated, and the Court of Appeal accepted, that the only rights a discretionary beneficiary has are to be taken into account when the trustees exercise their discretion, and the right to resign; and that Mrs Melnichenko is the new beneficiary, following Mr Melnichenko’s resignation.

While I can understand why the Helsinki Court of Appeal formed the view that it did, on the limited evidence it appears to have received, my view as to ownership is very different.