Sanctions evasion and offshore trusts
A case study from the High Court ruling in EuroChem—or, how two hundred and eighty million euros froze somewhere between Kilimanjaro and Cyprus
By Robert Nogacki
I. A Factory at the Edge of the World
Kingisepp is a small city in the Leningrad Oblast, situated eleven miles from the Estonian border and perhaps ninety from St. Petersburg. The name derives from the German Kingisep—itself a corruption of an Estonian word meaning “cobbler”—though since 1922 the town has borne the name of Viktor Kingisepp, an Estonian communist executed by the independent Estonian government for subversive activities. It was here, on industrial grounds adjacent to the older Phosphorit fertilizer plant, that the EuroChem Group decided to build one of the world’s largest ammonia and urea production facilities.
The project was worth billions of euros. Projections indicated the plant would produce over a million tons of ammonia annually, significantly expanding the total production capacity of EuroChem—already one of the world’s largest fertilizer manufacturers, with facilities stretching from Belgium to Kazakhstan. Construction was entrusted to the Italian engineering firm Tecnimont, which—in accordance with standard practice for major infrastructure projects—was required to provide the investor with financial security. Between 2020 and 2021, Société Générale and ING issued six on-demand bank guarantees totaling more than two hundred and eighty million euros. The beneficiary was a special-purpose vehicle called LLC EuroChem North-West-2, created solely to execute the Kingisepp project.
On-demand guarantees—sometimes called “first-demand guarantees”—are a particular financial instrument whose essence lies in the bank’s commitment to pay a specified sum upon the beneficiary’s mere demand, without examining whether the claim is justified under the underlying contract. Lord Denning once called this construction “the lifeblood of international commerce.” It allows parties to cross-border transactions to obtain nearly immediate access to cash in case of dispute, without waiting years for litigation and arbitration to run their course. The bank pays; settlements between contractor and investor come later.
On February 24, 2022, everything changed.
Russia’s invasion of Ukraine triggered an avalanche of sanctions the likes of which the world had not seen since the end of the Cold War. The European Union, acting with unprecedented speed, began freezing the assets of Russian oligarchs, politicians, businessmen, and entities connected to Putin’s regime. The primary legal instrument was Council Regulation No. 269/2014—an act originally passed in the context of the Crimean annexation but now being expanded at a pace of several updates per week.
On March 9, 2022, the name Andrey Igorevich Melnichenko appeared on the sanctions list.
II. The Man Who Built an Empire from Currency Kiosks
Who is Andrey Melnichenko? The story of his career reads like a textbook example of Russian capitalism in the nineteen-nineties—with the significant difference that, unlike many of his contemporaries, Melnichenko managed to survive every shock, upheaval, and political shift while keeping his fortune relatively intact.
He was born on March 8, 1972, in Gomel, in the Byelorussian S.S.R. His parents were teachers. Young Andrey showed mathematical aptitude and in 1989 began studying at the Physics Department of Moscow State University. Soon, however, he transferred to the Plekhanov Russian University of Economics, where he studied finance. It was a typical move for an ambitious young man in the Russia of late Soviet and early Yeltsin days: physics was prestigious, but the money lay elsewhere.
While still a student, Melnichenko opened his first currency-exchange kiosk on the university campus. This sounds banal—such kiosks were sprouting like mushrooms across Russia at the time—but Melnichenko had ambitions beyond petty currency trading. Together with two partners from his studies, he pooled fifty thousand dollars and obtained a banking license from the Bank of Russia. In 1993, at twenty-one, he co-founded MDM Bank.
What followed was financial virtuosity in a style that might delight both an economist and a writer of thrillers. MDM Bank grew through acquisitions, absorbing seven regional banks. In 1997, Melnichenko bought out his partners and became sole owner. A year later, when the 1998 financial crisis swept away dozens of Russian banks—including several considerably larger than MDM—Melnichenko emerged nearly unscathed. Bloomberg attributed this to “conservative credit policy, lack of illiquid assets, and no exposure to government bonds.” Put more prosaically: while other Russian bankers were playing roulette with sovereign debt, Melnichenko stuck to things he understood.
In the early two-thousands, Melnichenko and a new business partner, Sergei Popov—a metals trader from the Urals—founded MDM Group, an investment holding company focussing on three sectors: pipe manufacturing, coal mining, and fertilizer production. The strategy was simple: buy devastated, neglected post-Soviet industrial assets in sectors that didn’t attract political attention—and modernize them. Within a few years, MDM Group had built three giant companies: TMK (a pipe manufacturer, sold via I.P.O. on the London Stock Exchange in 2006), SUEK (the Siberian Coal Energy Company, one of the world’s largest coal producers), and EuroChem (fertilizers).
Forbes and Forbes Russia have repeatedly emphasized that Melnichenko belongs to that narrow group of Russian billionaires who built their fortunes without direct Kremlin support—neither under Yeltsin nor under Putin. He did not participate in the notorious loans-for-shares privatizations of the nineties, which gave fortunes to such figures as Mikhail Khodorkovsky, Boris Berezovsky, and Roman Abramovich. His assets came from sectors the Kremlin didn’t care about—at least until they became large enough to be strategically important.
By 2022, Forbes estimated Melnichenko’s fortune at around eighteen billion dollars. In 2023, paradoxically despite sanctions, he took first place among Russian billionaires with a fortune of 25.2 billion dollars. Part of this growth stemmed from record fertilizer prices—in a world where war in Ukraine had disrupted global food-supply chains, fertilizers became strategic commodities.
Melnichenko lived in the style one might expect of a man with such wealth. In 2005, he married the Serbian model and singer Aleksandra Nikolić. Their wedding on the French Riviera passed into the legends of industry gossip. Melnichenko was also famous for two yachts designed by Philippe Starck—Motor Yacht A from 2008 (three hundred and ninety feet long, resembling a submarine) and Sailing Yacht A from 2017 (four hundred and sixty-eight feet, the largest private sailing yacht in the world, with masts rising nearly three hundred feet). The latter was seized by Italian authorities in the port of Trieste a few days after sanctions were imposed. Its value was estimated at over half a billion dollars.
But the real value—those billions in EuroChem and SUEK—lay elsewhere. It was hidden behind a structure that Melnichenko had been building for sixteen years.
III. The Architecture of Invisibility: The Firstline Trust
To understand the High Court ruling of July 2025, one must first understand the ownership structure that formed the heart of the entire case. This is no easy task—the structure was deliberately designed to be difficult to comprehend, and even harder to penetrate.
At the very bottom sits LLC EuroChem North-West-2—the Russian special-purpose vehicle building the Kingisepp plant. All shares in this company are owned by MCC EuroChem JSC, a Russian joint-stock company serving as the holding for all the group’s Russian assets. MCC EuroChem is, in turn, wholly owned by EuroChem AG—a Swiss company headquartered in Zug that serves as the group’s formal center for capital-markets purposes and international operations.
Up to this point, the structure is straightforward: a Russian factory belongs to a Russian holding, which belongs to a Swiss company. Standard corporate hierarchy.
But above EuroChem AG, the labyrinth begins.
One hundred per cent of EuroChem AG’s shares belong to AIM Capital Limited—a Cypriot company whose name is an acronym of Andrey Igorevich Melnichenko’s initials. Some 99.38 per cent of AIM Capital’s shares are owned by Linea (CY) Limited, another Cypriot company. The remaining 0.62 per cent consists of two thousand preference shares belonging to Aleksandra Melnichenko—but more on that shortly.
Some 75.1 per cent of Linea (CY) Limited is owned by the Firstline Trust.
And here we enter the world of Anglo-American trust structures—a world where the concept of “ownership” takes on an entirely new meaning. For details see our article Trusts as Controlled Foreign Entities.
A trust in the common-law system is a legal arrangement in which one person (the settlor, or founder) transfers assets to another person (the trustee) with instructions to manage them for the benefit of specified beneficiaries. The key concept is the separation of ownership: the trustee is the formal, “legal” owner of the assets, but the economic benefits flow to the beneficiaries (the beneficial owners).
The Firstline Trust is a discretionary trust—meaning the trustee has discretion as to when, how much, and to which beneficiaries to distribute benefits. Beneficiaries of a discretionary trust—at least according to orthodox English and Bermudian legal doctrine—have no proprietary claim to specific trust assets. They have only the right to expect that the trustee will consider their interests when making decisions. This is a fundamental difference from an ordinary trust, where the beneficiary has a defined, enforceable share of the assets.
The Firstline Trust was originally established in 2006 in Bermuda, then restructured into a new legal form in 2015, still governed by Bermudian law. According to the Declaration of Trust dated September 24, 2015, the sole “First Beneficiary” was Andrey Melnichenko. The deed provided that in the event of his death or resignation, his wife Aleksandra would automatically become the sole beneficiary—as “Secondary Beneficiary.”
The trustee of the Firstline Trust was Linetrust PTC Limited—a Cypriot company (formerly Bermudian) that itself belonged to another trust, the Lineboro Trust. This is a construction known in industry jargon as an “orphan structure”—where a trust owns a company that is the trustee of another trust, creating a closed circle with no clear human owner at the top.
But the Firstline Trust had one more crucial element: the institution of the protector. A trust protector is a person vested with supervisory powers over the trustee—they can approve or veto certain decisions, and most importantly, can remove and appoint trustees. It is a powerful role, because although the protector does not formally manage the assets, they control those who do.
According to the Firstline Trust’s charter, when Melnichenko was the First Beneficiary, no protector was needed. But if he were to resign, his wife would automatically become not only the new beneficiary but also—temporarily—the protector.
This entire complicated structure—companies in Cyprus, trusts in Bermuda, holdings in Switzerland—served one purpose: to separate Andrey Melnichenko from his wealth in a manner sufficiently convincing to persuade banks, regulators, and tax authorities that he no longer owned those billions. That they were “in trust.”
Until February 24, 2022, this construction worked flawlessly. Melnichenko could travel freely around the world, his companies operated on four continents, his yachts called at the most exclusive Mediterranean ports.
Then Russia attacked Ukraine.
IV. Two Weeks That Changed Everything
The sequence of events between February 24 and March 10, 2022, was of critical importance to the entire case. And it was precisely this sequence—specifically, the dates of certain documents—to which Justice Andrew Bright devoted particular attention.
Regulation 269/2014 was originally enacted in the context of the Crimean annexation and provided for freezing the assets of persons and entities “undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine.” In practice, this meant that persons entered on the list in Annex I to the regulation became “designated persons”—persons subject to sanctions—against whom an absolute prohibition applied:
- making any funds or economic resources available to them (Article 2(2)),
- and all assets belonging to them were to be frozen (Article 2(1)).
Crucially, however, the regulation spoke not only of assets “belonging to” or “owned by” persons subject to sanctions but also of assets “controlled” by them. And furthermore—which was even more important in the case of complex corporate structures—these provisions extended to “natural or legal persons, entities or bodies associated with them,” meaning individuals, legal persons, and entities “associated” with the sanctioned person.
In other words: if Melnichenko were entered on the list, not only his personal bank accounts might be frozen but everything he controlled—potentially including the entire EuroChem group.
On March 9, 2022, Melnichenko was entered on the list. The justification in Annex I read:
“Andrey Igorevich MELNICHENKO is a Russian industrialist owning major fertiliser producer EuroChem Group and coal company SUEK. A. Melnichenko belongs to the most influential circle of Russian businesspeople with close connections to the Russian Government. […] On 24 February 2022, in the aftermath of the initial stages of Russian aggression against Ukraine, Andrey Igorevich MELNICHENKO, along with other 36 businesspeople, met with President Vladimir Putin and other members of the Russian government to discuss the impact of the course of action in the wake of Western sanctions.”
That famous meeting of February 24—the day of the invasion—became key evidence of “close connections to the government.” Melnichenko later argued that he was there as a member of the Russian Union of Industrialists and Entrepreneurs, a lobbying organization, and that participation in the meeting did not signify support for the war. The E.U. General Court did not accept this argument.
And here we arrive at the most crucial moment of the entire story.
According to documents presented by the claimants in the High Court case, Melnichenko signed a “Deed of Retirement”—an act resigning from his position as beneficiary of the Firstline Trust—on March 8, 2022. That is, one day before being entered on the sanctions list.
Why was this date so important?
Understanding this requires stepping back to the mechanics of sanctions. Article 2(1) of Regulation 269/2014 mandates freezing assets “belonging to, owned, held or controlled by” persons on the list. If Melnichenko resigned from his position as trust beneficiary before being entered on the list, one could argue that at the moment sanctions were imposed, the trust’s assets no longer “belonged” to him in any legally meaningful sense. He was merely a former beneficiary, a person historically connected to the structure but having no current rights to the assets.
Moreover—and this was crucial to the entire construction—Melnichenko’s resignation automatically made his wife Aleksandra the beneficiary. In March 2022, Aleksandra Melnichenko was not subject to sanctions. So if the assets now “belonged” to her, sanctions imposed on her husband should theoretically not affect them.
Does this sound like legal camouflage? Justice Bright thought so too.
V. Kilimanjaro, Tanzania: The Problem with the Date
On March 8, 2022, Andrey Melnichenko celebrated his fiftieth birthday. He marked it in a manner befitting a billionaire with a passion for extreme challenges—climbing Kilimanjaro, the highest peak in Africa.
According to the document presented in court, on that very day—on the slopes of Africa’s tallest mountain, on the eve of the European Union imposing sanctions upon him—Melnichenko found time to sign a formal legal deed resigning from a multi-billion-dollar fortune. The signature was witnessed by one Harry William Tree.
Justice Bright approached this narrative with the professional skepticism of an experienced Commercial Court judge.
The first clue was another document: Melnichenko’s letter of resignation from his position as non-executive director of EuroChem AG. The letter bore the date March 9, 2022, but—as witnesses testified and was uncontested between the parties—Melnichenko actually signed it on March 10. The document was deliberately backdated by one day.
The second clue was the restructuring of other trusts belonging to the Melnichenko family—the so-called “Valla trusts.” In connection with this, a draft indemnity agreement for the trustees was discovered, which explicitly stated that the restructuring was meant to allow “Mr and Mrs Melnichenko to continue to enjoy the benefit of the trust assets.” This draft agreement was to bear the date February 28, 2022—before the invasion and before sanctions—even though it was actually prepared and signed after March 9.
The third clue was that the first document in the record mentioning the Deed of Retirement at all was an e-mail dated March 10, 2022, sent by an AIM Capital lawyer, Giovana Papamichael. The e-mail stated that Melnichenko “informed the trustees on the 8th of March about his resignation.” Attached was a PDF of the resignation document. But the metadata of that PDF file indicated a creation date of March 10, 2022.
The fourth clue was whom the claimants did not call as a witness. They did not call Melnichenko—which could be explained by his preference, as a sanctioned person, to avoid European jurisdictions. But they also did not call Harry William Tree, the man who allegedly witnessed the signature on Kilimanjaro.
What’s more—this same Harry William Tree was also the witness on another document: the deed by which Aleksandra Melnichenko, on March 17, 2022, resigned from the position of protector of the Firstline Trust and appointed Andrei Fokin in her place. The problem was that on March 17, both Aleksandra and Fokin (who also signed the document) were in the United Arab Emirates. Where was Tree?
Justice Bright formulated his conclusion with the characteristic concision of a Commercial Court judge:
“The Claimants have failed to prove the date of the Deed of Retirement. I do not accept that it was signed by Mr Melnichenko on 8 March 2022, or before he was added to the list at Annex I to Regulation 269. It seems to me more likely that it was created on 9 or 10 March 2022 and backdated.”
To the uninitiated reader, it may seem that a question of one or two days is a trifle. Nothing could be further from the truth. In sanctions law, time is everything. Had Melnichenko actually resigned before sanctions were imposed, his entire line of defense would have had at least theoretical foundations. Backdating a document—if proven—is not only evidence of dishonesty but potentially a standalone violation of law, termed in sanctions jargon as “circumvention.”
But even if the date were genuine—which the judge rejected—the resignation would not have changed the fundamental problem. Aleksandra Melnichenko was also made subject to sanctions, though somewhat later: on June 3, 2022. The justification was terse: “Aleksandra Melnichenko is the wife of Andrey Melnichenko, a Russian industrialist who transferred his effective ownership and benefit […] to her. She takes advantage of the fortune and benefits from the wealth of her husband.”
VI. The Witnesses: The Protector and the Former Head of Interpol
If this story had supporting characters worthy of a John le Carré novel, they would be Andrei Fokin and Ronald Noble.
Andrei Fokin is a Russian citizen residing in Cyprus who, from March 17, 2022, served as protector of the Firstline Trust. Officially, this was his only role in the structure. In practice—as cross-examination revealed—his connections to Melnichenko and his empire ran much deeper.
Before March 2022, Fokin was a director of Linetrust PTC—the company that served as trustee of the Firstline Trust. From March 9 to 18, 2022, he was its sole director. He was also a director of AIM Capital—the company directly owning EuroChem AG—until January 2024. He admitted in testimony that before March 2022 he managed Melnichenko’s family office—the private wealth-management center for the family. When asked who currently performs this function, he refused to answer.
Fokin also admitted that he regularly travels to Dubai—where Melnichenko now lives—and that he sometimes stays there for extended periods. He could not explain why the protector of a trust based in Cyprus needs to fly to the Emirates so frequently. He also acknowledged that he discussed with Melnichenko the candidates for people who would replace him in positions within the structure.
But the real drama unfolded over documents.
In the record was an e-mail from March 10, 2022, in which Fokin wrote to Melnichenko, attaching information about bank-account balances. The document was disclosed with redacted data. When Justice Bright ordered the redactions removed, it turned out the matter concerned transfers totalling more than a hundred and thirty-two million dollars, executed on March 9, 2022—the day sanctions were imposed on Melnichenko. The accounts formally belonged to Aleksandra or to trusts of which she was a beneficiary. But from the correspondence between Fokin and Melnichenko, it was unambiguously clear that they treated them as Melnichenko’s personal property.
Even more damning was the draft indemnity agreement for the Valla trusts’ trustees. Fokin initially testified that he had no power of attorney to act on behalf of these trusts and that no restructuring had taken place. Documents from proceedings in Italy and before E.U. institutions proved, however, that the restructuring had indeed occurred as planned—which meant that Fokin must have had the power of attorney and that he had lied under oath.
Justice Bright was merciless:
“These two matters are of particular significance, not only because they were occasions when Mr Fokin was being deliberately untruthful in evidence, but also because of their subject-matter. The cash transfers of 9 March 2022 show that Mr Fokin was working closely with Mr Melnichenko in the immediate aftermath of the imposition of sanctions, specifically to evade those sanctions. The documentation relating to the restructuring of the other trusts again shows Mr Fokin working with Mr Melnichenko to negate the effects of sanctions. It also shows that those involved deliberately backdated the documentation to 28 February 2022: i.e., a date before sanctions were imposed.”
Ronald Noble was an even more surprising figure. An American lawyer and former official of the U.S. Treasury Department, Noble served as Secretary-General of Interpol from 2000 to 2014. Here was a man who for fourteen years had headed the largest international police-coöperation organization, coördinating the pursuit of terrorists, drug traffickers, and financial criminals around the world.
In June 2022, Noble became a director of Linetrust PTC and Linea—the companies managing Melnichenko’s trust. In his written testimony, he described Melnichenko as “a principled and honest man.”
But his oral testimony was considerably less edifying.
Noble admitted that his standard practice was not to allow notes to be taken at any one-on-one meetings. He used only “disappearing messages”—messages on WhatsApp and Signal with automatic deletion. When asked why, he replied that it was his habit owing to “the sensitivity of matters.” For the former head of Interpol—an organization specializing, among other things, in tracking the digital traces of criminals—this sounded at least ironic.
At one point during cross-examination, Noble described Melnichenko as “the decision-maker.” A second later, realizing what he had said, he desperately tried to backtrack, claiming that he did not at all consider Melnichenko to be the decision-maker in the structure. Justice Bright commented in a single sentence: “I found this rapid back-track utterly unconvincing.”
Noble also testified that, as the person responsible for compliance in the structure, he had ensured that all EuroChem group companies, regardless of location, complied with sanctions. The problem was that EuroChem NW2—the company building the Kingisepp plant—had entered into financing agreements with Russian banks subject to sanctions (VTB Bank, VEB.RF, Otkritie FC Bank, Sberbank) and had hired as contractor Velesstroy—a Russian construction company subject to U.S. sanctions.
When Noble was confronted with these facts, the judge noted: “He appeared to be neither surprised nor disappointed; nor, even, interested.”
VII. The Wife as Proxy: The Letter That Changed Everything
On April 17, 2023—more than a year after sanctions were imposed—Aleksandra Melnichenko wrote a letter to Ronald Noble, then chairman of Linetrust PTC. Its contents were astonishing:
Aleksandra stated that she wished to relinquish her status as beneficiary of the Firstline Trust and restore the status quo as of March 7, 2022—in other words, to de facto reinstate her husband as beneficiary.
Of course, this was never done. But the mere fact that such a letter was sent was devastating to the credibility of the entire construction.
Justice Bright drew an unambiguous conclusion:
“The only credible explanation for the fact that the letter was sent at all is that Mr Melnichenko’s resignation in March 2022, in favour of his wife, was a manoeuvre that he and his advisers hoped would enable both the EuroChem group and the Melnichenko family to evade sanctions. After it became clear that this would not work (not least because sanctions were then imposed on Mrs Melnichenko), the switch to Mrs Melnichenko seemed pointless.”
And further:
“It seems clear that, in March 2022, Mr Melnichenko gave up his rights as discretionary beneficiary under the Firstline Trust in the knowledge that Mrs Melnichenko would automatically replace him. He intended her to act as his proxy; which is what, in reality, she is.”
This was the crucial moment of the judgment. Justice Bright not only questioned the date of the resignation document—which was serious in itself. He questioned the entire premise that Melnichenko had ever truly given up control of his wealth. His wife was from the beginning a stand-in, a front, through whom he continued to wield power.
And if Aleksandra was merely her husband’s proxy, then all transfers and structural changes made after March 2022—including the transfer to her of share packages worth billions of dollars—were in essence transfers to Melnichenko himself. A designated person.
VIII. The Law: What Do “Ownership” and “Control” Mean?
We now arrive at the heart of the legal battle. Article 2(1) of Regulation 269/2014 provides that “all funds and economic resources belonging to, owned, held or controlled by” persons on the sanctions list shall be frozen.
The claimants—EuroChem NW2 and EuroChem AG—argued that under English and Bermudian law (which governed the Firstline Trust), the beneficiary of a discretionary trust has no “proprietary interest” in the trust’s assets. He has only the right to expect that the trustee will consider his situation. The classic line of authority in Gartside v. I.R.C. from 1968 and Pearson v. I.R.C. from 1981 clearly confirmed this.
If this logic held, Melnichenko’s entire structure would be sanctions-proof. He’s not the owner, because the trust is discretionary. He doesn’t control, because it’s the trustee who makes decisions. And the trustee—Linetrust PTC—is not on the sanctions list.
Justice Bright rejected this argument on three grounds.
First, E.U. sanctions law requires an autonomous, purposive interpretation—not necessarily aligned with the technical concepts of national law. The purpose of Regulation 269/2014 is to exert economic pressure on Russia sufficiently strong to compel it to withdraw from Ukraine. An interpretation that would allow oligarchs to hide billions behind formalistic trust structures would be contrary to that purpose.
Second, the E.U. General Court—in the case of Melnichenko himself against the Council of the European Union—had already ruled that the beneficiary of a discretionary trust may be considered the “owner” of trust assets for sanctions purposes. In its judgment of January 22, 2025 (T-271/22), the Court stated:
“By setting up the trust and designating himself as its beneficiary, [Melnichenko] retained, through the companies and intermediate structures […], economic interests in EuroChem and SUEK. The fact that he used an intermediate legal structure, such as a trust, is not such as to prevent it from being regarded as the holder of the shareholdings managed by that trust.”
Third, Justice Bright applied an analysis drawn from the English case of JSC MP Bank v. Pugachev from 2017, in which Justice Birss suggested that a discretionary trust may not be a “true” discretionary trust if the settlor has retained actual control through mechanisms such as the protector role or the ability to influence the selection of trustees.
In the case of the Firstline Trust, all these elements were present: Fokin—Melnichenko’s trusted lieutenant—controlled the structure as protector; Aleksandra—Melnichenko’s wife acting as his proxy—was the beneficiary; and the very architecture of the trust gave Melnichenko the ability to influence the staffing of key positions.
IX. The Firewall That Didn’t Reach Russia
After sanctions were imposed, the EuroChem group undertook frantic efforts to separate its European operations from any connection to Melnichenko. In an internal document titled “The Future of EuroChem,” prepared as early as March 14, 2022, senior managers proposed dividing the group into three clusters:
- a Russian/C.I.S. cluster, headquartered in Moscow;
- an international-business cluster, headquartered in Switzerland;
- a trading cluster, headquartered in a jurisdiction not subject to sanctions—for example, the United Arab Emirates.
In this document—which, significantly, repeatedly described sanctions as “nonsense”—there was talk of the need to “preserve and realise value for the historic owner” and that business continuation would proceed “in the form timing and shape as per shareholder’s desires.” Marc Hechler, the current C.E.O. of EuroChem AG, testified that he did not remember the document’s details and did not know whether it had been discussed with “the shareholder.” Justice Bright did not believe him.
In any event, a significant portion of the restructuring actually took place. Russian assets were consolidated under MCC EuroChem. Trading operations were moved to Dubai. And EuroChem AG and its European subsidiaries implemented a system of “firewalls”—barriers intended to protect them from Melnichenko’s influence.
This system included:
- written statements from all directors and managers that they had entered into no arrangements allowing Melnichenko to exert influence;
- compliance policies binding all companies “where sanctions are legally in force”;
- external audits by the French firm Advolis, confirming sanctions compliance.
National Competent Authorities—the agencies of member states responsible for enforcing sanctions—accepted this firewall. SECO in Switzerland, DGT in France, SEOK in Cyprus, BTI in the Netherlands—all issued opinions that EuroChem AG and its European subsidiaries were not subject to asset-freezing.
But there was a fundamental problem.
The firewall covered only EuroChem AG and companies in the European Union and Switzerland. It did not cover MCC EuroChem in Russia. It did not cover EuroChem NW2—the company building the Kingisepp plant. It did not cover operations in Dubai.
Ilya Beloborodov, the only witness from the Russian side who testified in court—the General Director of EuroChem NW2—revealed in testimony a picture entirely at odds with the narrative of “independence from Melnichenko”:
- He reported to MCC EuroChem, not to EuroChem AG.
- He had no contact whatsoever with anyone at EuroChem AG.
- All strategic decisions—whom to hire as contractor, where to get financing—were made by MCC EuroChem.
- After sanctions were imposed, “nothing really changed” from his perspective.
- Melnichenko was commonly referred to as “the beneficiary” and as “right at the top.”
Marc Hechler, C.E.O. of EuroChem AG, admitted in testimony that he did not know the composition of MCC EuroChem’s board and that EuroChem AG had no real influence over operations in Russia.
Justice Bright drew from this the conclusion the claimants had desperately sought to avoid:
“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. […] It is entirely possible that Mr Melnichenko may be involved [in Russian operations], whether directly or via deputies such as Mr Fokin.”
X. Two Hundred and Eighty Million Euros Frozen
We arrive at the finale. On the legal side, the judgment was devastating for the claimants.
Issue one: ownership and control. Justice Bright ruled that Melnichenko is the “owner” of EuroChem NW2 and EuroChem AG for purposes of Regulation 269/2014, despite the trust structure. He also ruled that Melnichenko exercises actual control over the group’s Russian operations, even though he formally resigned from all positions.
Issue two: freezing of the guarantees. Since EuroChem NW2 is “owned” or “controlled” by a designated person, its assets—including the bank guarantees—are subject to freezing under Article 2(1) of Regulation 269/2014. “Freezing of funds” is defined as “preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way.” Payment by the banks upon the beneficiary’s demand would constitute an “alteration” and “use of” frozen funds. It is therefore prohibited.
Issue three: the assignment. In December 2024, EuroChem NW2 assigned “the proceeds arising from possible drawdown” of the guarantees to EuroChem AG. The logic was: since EuroChem AG is behind the firewall, it can receive payment. Justice Bright rejected this argument in a single sentence: since the guarantees themselves are frozen and the banks cannot pay them out, there are no “proceeds” that could be the subject of an assignment.
Issue four: place of performance and the rule in Ralli Brothers. Even if sanctions did not block payment, the guarantees would be unenforceable under a classic principle of private international law: a contract is invalid to the extent that its performance would be unlawful in the country where it is to be performed. The SocGen guarantees required demands to be made in Paris—payment there would be illegal. The ING guarantee required demands to be made in Milan—payment there would be illegal. French and Italian law implement Regulation 269/2014.
The claim was dismissed in its entirety.
XI. Coda: On Open Justice
The judgment ends with an unusual coda—a critique of the claimants’ disclosure practices. Hundreds of documents with redacted portions, confidentiality clubs, documents disclosed at the last minute. Justice Bright did not mince words:
“My overall impression was that the Claimants’ approach to disclosure was that any material that they did not wish to be seen, or at least to be seen by the general public, could be dealt with by redaction and/or the Confidentiality Club, on the basis that it would then be up to the Banks and Tecnimont to challenge the treatment of each relevant document, should they wish to do so, on a case-by-case basis.”
And further, in a tone rarely encountered in Commercial Court judgments:
“A fundamental long-standing feature of the judicial system of this country is the commitment to open justice. […] Parties who come to this country seeking justice are obliged to respect and share our commitment to open justice. It is part of the price of litigating here.”
For the EuroChem group—and for all those who in the future will try to hide billions behind complex trust structures—the message was unambiguous.
XII. The Final Lesson
This judgment has significance extending far beyond the specific dispute between a Russian fertilizer producer and European banks.
First, it demonstrates the limits of legal formalism in confrontation with public law. Melnichenko had everything a lawyer designing an asset-protection structure could want: a professionally drafted trust deed, years of history, formal separation between settlor and assets, professional trustees, external compliance audits. And it was not enough. When the regulator’s goals—in this case, ending a war—are sufficiently important, courts will penetrate any façade.
Second, it confirms that in the twenty-first century there are no legal structures entirely impervious to penetration. Metadata of electronic documents, chronology of e-mail communications, consistency of witness testimony—all of it matters. Backdating documents, “disappearing messages,” avoiding notes—these do not protect against disclosure; indeed, the very fact of employing such practices becomes incriminating circumstantial evidence.
Third—and perhaps most importantly—it demonstrates that contemporary sanctions law treats “control” and “ownership” as functional concepts, not formal ones. What matters is not what the documents say. What matters is who really makes decisions. Who benefits. Who loses. Who cares.
In her letter of April 17, 2023, Aleksandra Melnichenko wrote that she wished to “restore the status quo as of 7 March 2022.” One line of text that gave everything away. Because if anything changed in March 2022—if Melnichenko really did resign from control and ownership—why would she want to “restore” it?
The answer, of course, is that nothing changed. The documents changed. The names on paper changed. But the reality—that material, economic, human reality of billions of dollars and tens of thousands of employees and factories producing fertilizers—remained the same.
And it was precisely this reality—not the paper fiction—that the court chose to see.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
