In March 1995, during the early years of the IFSC, a brass plate company called Eurotoaz set up in Dublin using a registered address at Clanwilliam Terrace in the docklands. 

Describing itself as an import/export trader, the fledgling business and its Hungarian shareholders listed its chief asset as a $20 million investment in Russian chemical giant TogliattiAzot, better known as Toaz.

Nobody could have guessed at the time that this purported acquisition would later prove a linchpin in a complex, multi-tentacled $2 billion conspiracy lawsuit with corporate interests sprawled halfway across the world.

While the litigation is far from resolved, this is an account of how an Irish shell company became mired in a battle involving Russian oligarchs, fraud, alleged collusion and the 460th most traded product in the world, ammonia.

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Toaz is far from being a household name in Ireland but it is a vast undertaking. Regularly cited as one of the world’s largest ammonia producers, it boasts a capacity output of up to three million tonnes a year to a customer base in 120 countries. 

Trade ammonia is typically used in fertilisers but also plastics, explosives, household cleaning agents and refrigeration systems.

Established during the Soviet era as a joint project with Armand Hammer, the late US oil tycoon and art collector known for his strong ties to the USSR, Toaz was privatised in 1992 as part of perestroika.  An ammonia pipeline stretching 2,000 kilometres from the plant in the western industrial city of Tolyatti, home of the Lada car, to the Port of Odessa in Ukraine is testament to the plant’s importance to the Russian economy.

Last year, the business recorded pre-tax profits of around €135 million, making it a hugely attractive proposition for potential investors.

But for more than a decade Toaz, described in court proceedings as “one of the last independent chemical enterprises in Russia,” after a consolidation of interests in the sector, has been under siege from an alleged forced takeover attempt.

A successful takeover of Toaz would leave Mazepin in charge of up to 20 per cent of the world’s ammonia production. And that is where the export/import brass plate Irish operation comes in.

A multi-jurisdictional legal battle, involving civil and criminal proceedings, has broken out, pitting Toaz shareholders against each other and shining a spotlight on Russia’s volatile and often corrupt business environment. 

The row has seen Interpol red notices, failed extradition requests and jail sentences handed down in absentia to former top brass business figures who have long since fled Russia. Convictions were handed down recently to former Toaz boss Vladimir Mekhlai, now exiled in London, who ran the company after the collapse of the Soviet Union up until 2011; and his son, US-based Sergei Makhlai, who took over the reins, acting as chairman of Toaz until his suspension in 2015.

The alleged takeover, or corporate raid, on the chemical producer, is said to be the brainchild of minority shareholder Dmitry Mazepin, a Belarussian oligarch with party political links to Vladimir Putin. The seemingly vastly wealthy Mazepin has come through business controversies in the past and was recently linked to a possible takeover of Formula 1 team, Williams. His son is Formula 2 racing driver Nikita Mazepin.

He is also the core shareholder and Chairman of Uralchem, a market-leading fertiliser and ammonia company in direct competition with Toaz. Mazepin’s 9.9 percent stake in Toaz is vested in Uralchem. 

A successful takeover of Toaz would leave Mazepin in charge of up to 20 per cent of the world’s ammonia production.

And that is where the export/import brass plate Irish operation comes in.

Four Caribbean firms with mystery owners

In 2016, a key leg of the Toaz dispute, involving claims of a $2 billion illegal conspiracy led by Mazepin, landed in the Commercial Court in Dublin. After a spate of pre-trial skirmishes, including attempts to have the proceedings thrown out, the action is finally gearing up for a full hearing.

The case is being brought by four Caribbean companies claiming to control more than 70 per cent of Toaz:

1. Trafalgar Developments;
2. Instantania Holdings;
3. Kamara; and
4. Bairiki.

The ultimate owners of these firms are currently a mystery.

Their contested claim is that a “raider attack” on the company has defrauded them of their majority stake in Toaz, once valued at $2 billion. The offshore firms allege they have been rendered powerless after their shares and dividend payments were subject to freezing orders by the Russian courts as part of spurious fraud proceedings instigated by Mazepin’s company Uralchem.

The ownership of Eurotoaz has changed hands since its early years and the company is now said to be a vital cog in the alleged plot to takeover Toaz.

Such actions, they say, are part of a wider campaign of threats and vexatious litigation aimed at debasing the value of the company, leaving it ripe for a takeover.

There has even been an allegation of judicial interference after one judge lodged a complaint of “inappropriate pressure” being applied during criminal proceedings.

The Caribbean entities lodged a Commercial Court case against Mazepin, Uralchem and nine other allegedly interconnected individual and corporate entities including Eurotoaz, the Irish vehicle set up 24 years ago and currently registered from the offices of top law firm Arthur Cox. 

The ownership of Eurotoaz has changed hands since its early years and the company is now said to be a vital cog in the alleged plot to takeover Toaz. While the sole shareholder is a British Virgin Islands registered firm called Benstock, Uralchem, run by Mazepin, was recently unveiled in court as the ultimate beneficial owner of the Irish firm. This had long been suspected.

For its part, Eurotoaz denies the claims. Company director Andrey Babichev, one of the defendants, maintains the litigation campaign it has waged in Russia is nothing more than a bona fide struggle to be recognised as a legitimate investor in the chemical producer.

In pre-trial court sittings, Justice David Barniville heard details from the plaintiffs’ side of how the alleged conspiracy to takeover Toaz exhibited features typical of a corporate raid. Such attacks are said to occur when an individual or group establishes a minority interest in a business and then uses that foothold to target the company’s assets by bombarding the firm with improper criminal complaints and costly lawsuits that undermine the value of the stock. 

The court heard raiders may sometimes frame themselves as victims of the company’s alleged improper conduct in order to claim lucrative compensation awards that bankrupt the business and allow them to acquire it on the cheap.

Russia has been particularly susceptible to raids due to high levels of corruption and the legal system’s lax approach to res judicata, the legal doctrine which prohibits litigants having several bites at the cherry on issues that have already been determined by a court.

The res judicata issue has been raised in pre-trial hearings, specifically when Eurotoaz unsuccessfully tried back in 2017 to have the Irish proceedings thrown out. How can the Caribbean companies argue that the proliferation of lawsuits against Toaz amounts to vexatious litigation or an abuse of process if such practices are clearly facilitated by the Russian legal system, its lawyers asked?

The plaintiffs’ case, at its lowest, is that lawful means cannot justify unlawful ends.

“The State-sponsored raider attack continues”

Central to the plaintiffs’ claims of conspiracy are a series of alleged direct and indirect threats from Mazepin that he was prepared to use “whatever means possible” including, but not limited to, the procurement and deployment of false evidence in the prosecution of vexatious civil claims and the making of malicious and false criminal complaints to the Russian investigative authorities to wrest control of Toaz from its majority owners.

In a meeting at a private airport in Budapest in 2012, Mazepin is alleged to have explicitly forewarned former Toaz boss Sergei Makhlai what would happen if he did not get his way. He allegedly threatened that Toaz’s relationship with a Swiss shareholder and trading partner, the agribusiness Ameropa, would be “misrepresented”, paving the way for a forced takeover of the chemical plant.

The statement claimed it was another example of “the increasing decay of the rule of law and the total lack of protection for foreign investors in Russia”.

In December 2014, criminal litigation prompted by Uralchem complaints led to detention orders, a share freeze and failed extradition requests against key Toaz and Ameropa personnel.

On affidavit, in the Irish conspiracy proceedings, Ameropa boss Andreas Zivy claimed in 2016 a representative of Mazepin had met him in Zurich offering to settle an Interpol red notice for his arrest in exchange for the sale of Toaz shares at a heavily discounted price. 

Last July, following what Newsweek described as “Kafkaesque” court proceedings, the Makhlais and Zivy were among five officials given prison sentences of between eight and a half and nine years for large-scale fraud. None of the men attended the Russian trial in which they were accused of understating product prices in order to avoid tax and embezzle vast sums of company money.

On top of the jail sentences handed down, they were fined around $1.85 billion in damages, allegedly the value of what was stolen. Some of the damages were awarded to Mazepin’s Uralchem which claimed victim status as a minority stakeholder in the company.

Ameropa issued a press release slamming the judgment from the first instance criminal court of Togliatti alleging the case had involved secret witnesses, manipulated expert reports and the physical prevention of defence lawyers representing foreign companies from attending court, sometimes by way of arrest. The statement claimed it was another example of “the increasing decay of the rule of law and the total lack of protection for foreign investors in Russia”. The “State sponsored raider attack continues,” the company said.

Mazepin’s alleged raid on Toaz has precedent. The chemical producer staved off an earlier hostile takeover in 2005 by the Renova Group, the Russian conglomerate headed up by billionaire Viktor Vekselberg, deemed by Forbes to be the 119th richest person in the world. 

Toaz chairman Makhlai and chief executive Aleksandr Makarov allegedly refused to sell up to Vekselberg,  then a minority shareholder in the enterprise. Pressure from law enforcement agents allegedly followed as a result. Complaints by Renova led to the two directors being indicted for fraud and tax evasion but on that occasion the charges were later dropped.

By 2008, Renova was in retreat from Toaz. 

“Had this information been made available to us we might afford a different opinion.”

Auditor Farrell Grant Sparks

Vekselberg allegedly sold his shares to Toaz rival Mazepin who, according to Forbes Russia, immediately began an acquisition strategy, through Uralchem, to consolidate his position in the company. Then the financial crisis struck. In 2009, he changed tack and tried to divest his stake to an offshore company called Belport Development. But the deal is said to have collapsed when Mazepin could not satisfy a clause in the $200 million share purchase agreement requiring him to provide Belport with a list of Toaz shareholders ahead of an AGM. 

Uralchem sued for damages claiming Toaz had refused to give up the information. While the charge was later deemed contrived by an arbitration court, it allowed investigators to conduct a sweeping search and seizure operation at the chemical company’s offices. Sensitive trade information was allegedly passed on from the authorities to Uralchem.

More litigation followed. Only this time the Uralchem case was transferred to the Basmanny District Court in Moscow, stated by counsel for the plaintiffs in the Irish proceedings to be “infamous” in terms of politically directed outcomes, especially in regards to rubber stamping  preliminary arrests and freezing assets.

According to Forbes, it was around this time that the Makhlais, believing the company was under siege, began building a multi-tiered offshore ownership structure around Toaz.

By then, the company was fighting what has been described in court as a “blizzard” of litigation on two fronts. On one side, there was Uralchem, on the other there was the Irish firm, Eurotoaz, Mazepin’s alleged co-conspirator.

Eurotoaz is accused by the Caribbean companies of conducting a long-running and aggressive legal campaign against Toaz since 2009, based on forged documents, to assert a non-existent shareholding of 4.4 or 8.8 per cent in the Russian plant.

The row is complex in the extreme. As stated, Eurotoaz readily accepts it sued the Russian firm in several forums but it maintains the litigation was for entirely legitimate purposes. It says it wanted its valuable shareholding in Toaz recognised and sought to pursue and seek redress from parties allegedly responsible for wrongfully removing the company from the shareholder’s register.

First there was a criminal complaint asserting that the company had been deprived of its rights in respect of 44, 541 shares acquired in 1994. The action was lodged in 2009 on behalf of Eurotoaz by Yevgeniy Sedykin, an entrepreneur, lawyer and allegedly disaffected shareholder in Toaz. This claim was allegedly dismissed because the prosecutor found “no wrongdoing”.

The position of the company seemed to change in the course of a second criminal complaint in which it was pleaded that the acquisition of shares had in fact been made by a Hungarian company, “Eurotoaz SVRP” in 1994. It was said that the shares were then transferred to the Irish entity in 1995. A letter registering the change of ownership was used in evidence.

But this is claimed by the Caribbean companies to be a forged document based on sworn evidence from the former Toaz director responsible for the share register, that the first time he had seen the letter was in 2010. A third criminal complaint launched in 2014 sought damages of $4.7 million and unpaid dividends for alleged theft of the company’s Toaz stock.

In tandem, there was a succession of civil claims in which Eurotoaz sought an order directing Toaz to correct the share register to replace Eurotoaz Hungary with the Irish firm. This was dismissed in the Russian arbitration court and ultimately by the Supreme Court which found the real purpose of the action by Eurotoaz was to get a foothold in the company.

Both the Irish and Hungarian companies were said to be owned by the same Hungarian man, Gyorgy Galantai.

Yet a trawl through filings in the Companies Registration Office (CRO) in Ireland shows the investment in Toaz was listed as an asset in the firm’s annual accounts every year from the late 1990s.

Despite the dismissal of the first claim, a new action was launched in 2014 seeking recognition of shareholder rights for Eurotoaz and dividend payments. Again it was unsuccessful but a lengthy appeal process ensued.

For its part, Eurotoaz has sought to prove its legitimacy as a shareholder by relying on a purported share certificate from 1996 and a Toaz prospectus from the following year listing Eurotoaz Limited as the owner of 8.806 per cent in company shares. However, to add to the confusion the address of the company is listed as Fribourg in Switzerland.

Toaz is said to have briefly recognised the Irish firm’s right to title before reverting back, pre-1997, to listing the Hungarian Eurotoaz as the relevant stake holder regardless of the fact that the Hungarian company was in liquidation. Eurotoaz claims this “mistake” on the register benefitted the majority Toaz shareholders in that it gave them additional voting power. 

The register of shareholders names Euro-Toaz (Hungary) for years 1994 and 1995 and Eurotoaz Limited for years 1996 and 1997, before reverting to Euro-Toaz (Hungary) in 1998. Again, the address of Eurotoaz Ltd is said to be in Switzerland, not Ireland.

Yet a trawl through filings in the Companies Registration Office (CRO) in Ireland shows the investment in Toaz was listed as an asset in the firm’s annual accounts every year from the late 1990s. The company also had successive directors based in Fribourg.

For each year between 1997 and 2006, the opinion of auditor Farrell Grant Sparks in the annual accounts states: “The directors have provided certified share certificates and details of the investment in the Russian company, [ToAZ]. According to the certified share certificates Eurotoaz Limited holds 44,541 shares…of its common stock. However we have been unable to obtain independent third-party confirmation and especially confirmation from the entity invested in.

“Accordingly we feel that the evidence available to us was limited because we were unable to obtain a reliable, independent third-party valuation directly from [ToAZ], the company in which the investment was made. Had this information been made available to us we might afford a different opinion.”

These statements do not appear after that. In fact, Eurotoaz appears to have been struck off the register by the CRO for failing to make returns before being reinstated by order of the High Court in 2007.

The audited accounts for the year ended 31 December, 2010, note that “Legal actions are in progress by the company to secure its shareholder rights” in ToAZ.

In 2012, Eurotoaz made an entirely separate investment of $317,600 in Toaz.

Eurotoaz’s purported struggle for recognition as a shareholder is still very much a live issue and is central to the firm’s defence in the Irish proceedings. The firm has experienced mixed fortunes before the Russian courts. In 2012, after a two-year lawsuit, its claim for recognition was dismissed for being out of time and statute barred.

For their part, Eurotoaz and its agents have sought to unmask the true identities in control of the Caribbean firms who lay claim to owning this Russian firm and its valuable assets.

The Caribbean shareholders make a similar argument before the Irish courts, that Eurotoaz rested on its laurels for years and only began to show muscle in asserting ownership and dividend rights after Mazepin entered the fray as a minority investor in Toaz.

Sedykin, who acted by power of attorney for Eurotoaz in its legal campaign, was subsequently convicted in 2015 for producing sham minutes of ToAZ shareholders and board meetings allegedly appointing him and other “nominees of Mr Mazepin” as directors of the company.

It was said in court that he had a struck a deal with Eurotoaz in 2009, before the company was bought by Benstock, that entitled him to 50 per cent of all shares and dividends recovered from Toaz in the course of legal actions.

Earlier this year, judgment was entered against Sedykin and another defendant in the Irish case, Belport Investments, the BVI company that allegedly agreed a share purchase with Mazepin over a decade ago. Neither party entered a defence in the Commercial Court proceedings and judgment was issued in default of an appearance. They have been ordered not to reduce their assets below $78 million until damages are determined by the court when the fate of the remaining nine defendants is determined at trial.

As the two sides arm up for yet another expensive court battle, this time in Dublin, the Caribbean stakeholders have sought batches of documents to shed light on Benstock’s acquisition of Eurotoaz.  They say correspondence between the various defendants will demonstrate they acted in concert and that the Irish firm participated in Mazepin’s alleged raider attack. 

For their part, Eurotoaz and its agents have sought to unmask the true identities in control of the Caribbean firms, who lay claim to owning this Russian firm and its valuable assets.