Ziyavudin Magomedov v TPG Group Holdings (SBS), LP

Hearing date: 10 November 2023 Further written submissions: 15 November, 4 December 2023

APPROVED JUDGMENT

This judgment was handed down by the court remotely by circulation to the parties' representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 6 December 2023 at 10.00am

This judgment concerns the application by the Claimants for a notification injunction against the Twentieth Defendant (‘Transneft’).

As set out in my judgment of 27 October 2023 ( [2023] EWHC 2655 (Comm)) (‘the October Judgment’), with which this judgment should be read, the Claimants make claims in this action in respect of two alleged conspiracies. One of those is what has been called the ‘NCSP Conspiracy’, the other is the ‘FESCO Conspiracy’. At the hearing on 10 October 2023, I adjourned the Claimants' application for a notification injunction against Transneft, which is the only Defendant who had been served with proceedings alleged to have been involved in the NCSP Conspiracy. The hearing of that application came back before me on 10 November 2023, and took a full day.

The Alleged NCSP Conspiracy

The October Judgment identifies the Claimants. Transneft is a Russian state-owned oil pipeline company. Its evidence is that it is the largest oil pipeline company in the world. The Claimants say that it is an entity run by individuals who have substantial political influence.

The claim made by the Claimants against Transneft, as I have said, is in respect of the NCSP Conspiracy. The Claimants contend that this was a conspiracy to deprive them of a significant and strategic asset, namely a major stake in PJSC Novorossiysk Commercial Sea Port (‘NCSP’). NCSP is a Russian public company, which is said to be the third largest port operator in Europe and Russia's largest commercial seaport operator, controlling ports on the Baltic and Black Seas.

Before 2018 the First Claimant (‘ZM’) had a significant stake in NCSP through the Tenth Claimant (‘Port-Petrovsk’), a company which he owned with his brother, Magomed Magomedov (‘MM’).

The ownership structure has been depicted graphically thus:

Omirico Limited (‘Omirico’) was a 50/50 joint venture between Port-Petrovsk and Fenti Development Limited (‘Fenti’), established to acquire a majority interest in NCSP. Fenti is a wholly owned subsidiary of Transneft.

The Claimants' NCSP Conspiracy case is, in outline, as follows:

(1) That there were, from about November 2017, discussions about Transneft (via Fenti) acquiring Port-Petrovsk's stake in NCSP; and that an agreement in principle had been reached in March 2018 that Port-Petrovsk's shares in Omirico would be sold to Fenti for US$ 1.156 billion. It is also said that, as part of the same proposed deal, a loan of approximately US$ 150 million owed by Omirico to another company beneficially owned by ZM, Torresant Industry Ltd (‘Torresant’), would be assigned to Fenti. A share sale and purchase agreement was produced. As the Claimants say, it was scheduled for execution in mid-March 2018, but was delayed by requests from Transneft for personal guarantees from ZM and MM.

(2) On 29 March 2018, ZM and MM met Mr Tokarev, the President of Transneft, to conclude the negotiations. The next day, on 30 March 2018, ZM and MM were arrested in Russia on what ZM contends to have been false charges of embezzlement. The Claimants contend that this arrest had been discussed at a meeting which occurred on 30 March 2018 between President Putin and Mr Tokarev, whom the Claimants say is a close ally of President Putin with an association going back to their days as KGB officers together in East Germany. The Claimants say that these two men discussed seizing control of NCSP, given its strategic importance to the Russian state. They say further that the sale of the shares in Omirico was delayed by Mr Tokarev by the device of asking for personal guarantees from ZM and MM, ‘until the arrests of ZM and MM could be arranged’.

(3) As a result of the arrests, the proposed sale did not conclude. However, the Claimants contend that, in June or July 2018 the Tenth Defendant, Ms Mammad Zade, who had been CEO of ZM's corporate group and who, the Claimants say, effectively remained in control of substantial aspects of his business affairs, communicated a message to ZM in prison via his criminal lawyers. Ms Mammad Zade is said to have conveyed that Mr Tokarev had indicated that he would speak to President Putin to stop the prosecution of ZM and MM and would secure their release from prison, but only if they first agreed to sell Port-Petrovsk's shares in Omirico for a price of US$ 750 million. This the Claimants call ‘the Threat’. The Claimants further contend that in making the Threat, Mr Tokarev, on behalf of Transneft, represented that he was capable of procuring the release of ZM and MM, that he intended to procure that release if ZM and Port-Petrovsk agreed to sell Port-Petrovsk's interest in Omirico for US$ 750 million, and that he understood that ZM and MM would be released if ZM and Port-Petrovsk agreed to sell that interest for US$ 750 million. These the Claimants call ‘the Representations’.

(4) The Claimants say that ZM and MM did not agree to those terms. ZM conveyed to Ms Mammad Zade that he did not want to proceed with the reduced offer conveyed in the Threat.

(5) However, the transaction proceeded regardless. A SPA for the sale at US$ 750 million was signed, as the Claimants say without ZM's knowledge or approval, on 31 August 2018 by Mr Zaur Karmokov a director of Port-Petrovsk. It is said that this must have been as a result of a decision by Ms Mammad Zade to allow the sale to proceed. This, the Claimants say, could only have been because either she was now acting in collusion with Transneft, or she was acting on the Threat that Transneft had made hoping to secure ZM's release from prison in return for doing the deal.

(6) The Claimants say that it is also significant that the Omirico SPA executed on 31 August 2018 included a term that did not appear in the March 2018 version, namely the identification of a specific bank account for the receipt of the proceeds of the sale at Sberbank. On 18 September 2018, following execution of the Omirico SPA but prior to completion, the Russian General Prosecutor sought and obtained, from the Tverskoy District Court of Moscow, an order that funds deposited or to be deposited in that account be seized. On completion of the transaction on 27 September 2018, the proceeds were seized. Those funds have ultimately been confiscated by order dated 27 May 2022. The result is that ZM and Port-Petrovsk have lost their interest in NCSP, in exchange for nothing.

(7) These alleged facts are said by the Claimants to give rise to causes of action in intimidation and duress (in relation to the Threat); misrepresentation (in relation to the Representations), and dishonest assistance (by Transneft of Mr Karmokov in his alleged breach of fiduciary duties as a director of Port-Petrovsk and of Ms Mammad Zade in her alleged breach of duties as a de facto director of ZM's corporate group).

The Claimants' Application

The Claimants contend that they have a good arguable case in respect of the NCSP Conspiracy and the causes of action which I have referred to. They contend further that there is a real risk of dissipation of assets by Transneft. And they contend that, in the circumstances, it is just and convenient to make a notification order. The Claimants' position by the time of the hearing was that the order should require Transneft:

(1) to give 28 days' notice of an intention (a) to acquire or dispose of shareholdings in companies or stakes in partnerships anywhere in the world worth US$ 10 million or more, (b) to reorganise or alter its own capital structure, (c) to take on or pre-pay debt facilities in excess of US$ 50 million; (d) to commence, settle or discontinue litigation proceedings with a value in excess of US$ 10 million, or (e) to declare or pay dividends or otherwise distribute assets to shareholders or investors;

(2) within 10 working of service of the order to inform the Claimants' solicitors of all its cash balances exceeding US$ 1 million worldwide, and all other assets outside Russia exceeding US$ 10 million and all other assets within Russia exceeding US$ 50 million; and within 15 days after being served with the order should swear and serve an affidavit setting out this information.

For its part, Transneft opposed the application. In...