Sanctioned Billionaire-Linked Firm Loses $243M UK Bond Suit

Maire SpA and its two lenders won a U.K. court ruling against a €212 million ($243 million) demand by a company linked to a sanctioned billionaire.

EuroChem Group AG sued the Italian firm along with Societe Generale SA and ING Groep NV in 2022 in London over a giant construction project that was put on hold after Russia invaded Ukraine. The banks refused to pay a so-called performance bond provided as a guarantee by the Italian engineering group citing European Union’s sanctions targeting Andrey Melnichenko and his wife.

Payments under the bonds would be unlawful as Melnichenko indirectly owned the Eurochem firm that demanded the money, the judge said in the ruling. “The banks therefore are prohibited from honoring the bonds and paying under them,” Judge Robert Bright said.

The ruling to prioritize sanctions over contractual payments is a boost for western firms and banks as continue to strictly enforce sanctions regimes. Sanctioned Russians have regularly turned to British courts to try an unlock capital or assets, leading to conflicting court orders by judges in Russia and the U.K.

A SocGen spokesperson declined to comment. Spokespeople for EuroChem. ING and Maire didn’t immediately respond to emails seeking comment.

The bonds worth €280 million were issued in 2020 and 2021 for Maire’s contract to construct a fertilizer plant in Kingisepp, north west Russia. EuroChem demanded the money under the performance bonds in August 2022 after the project stopped and the EU imposed sanctions on Melnichenko, the founder of Eurochem Group.

Melnichenko, who started the company in the early 2000s, withdrew as beneficiary of a trust that holds the shares of EuroChem Group AG through a holding company. He has repeatedly pushed back against the “unjust” sanctions, saying he had “no political affiliations” and that there was “no justification” for the EU’s move. He is also sanctioned in the U.K.

EuroChem filed the London lawsuit after ING and SocGen rejected demands to pay the bonds in early August. The company then said it was never under sanctions and was controlled by “EU trustees of a trust, whose beneficiary has no majority ownership of, nor influence over, EuroChem.”

Top photo: Andrey Melnichenko, billionaire and owner of EuroChem Group AG, walks between sessions on day three of the St. Petersburg International Economic Forum in St. Petersburg, Russia, on Friday, June 4, 2021. Photographer: Andrey Rudakov/Bloomberg.

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