The Decision to Lift the Ban on 75% of Zangezur Copper-Molybdenum Combine Shares has been Annulled: Judicial Error Allowed

The Court of Appeal has recorded that the Syunik Regional Court committed a judicial error in its decision to lift the ban on 75% of the shares of the Zangezur Copper-Molybdenum Combine (ZCMC). This was reported by Factinfo.

It is noted that Mikhail Zurabov, a former Minister of Health and Social Development of Russia, who owns 12.5% of ZCMC shares, had filed a lawsuit demanding priority in acquiring the ZCMC shares. On August 2, the court not only accepted the case but also applied a protective measure, putting 75% of ZCMC's shares under seizure.

On September 30, the Syunik Regional Court made a decision to lift this measure, shortly after which the shares were purchased by the daughter company of Russian billionaire Roman Trotsenko’s Geopromining LLC, named Industrial Company LLC. Immediately after the transaction, Trotsenko donated 15% of the purchased shares to the Government of the Republic of Armenia.

It should be noted that the sale price of the shares was set quite low; however, Trotsenko has yet to complete the payment and the contract includes deferred payment terms. Additionally, problems have arisen regarding financing the transaction, as some banks perceive risks concerning the legality of the share acquisition and are refraining from granting loans. Time has shown that the banks’ concerns were justified, and the risks of invalidating the transaction are more than substantial.

Factinfo has reported that representatives of Mikhail Zurabov filed an appeal to the Court of Appeal, seeking to overturn the court's decision to lift the protective measure. The representatives of the plaintiff side stated that from the point of the court session scheduled to discuss the protective measure until the issuance of the court's decision, the plaintiff was deprived of an independent, impartial, and unbiased court to examine their case and request, highlighting the urgency displayed by the court regarding this matter.

Moreover, during the court session, the representative of the plaintiff requested a recess to study new evidence presented by the party submitting the motion, and did not rule out the need to postpone the session to present a position on the evidence and receive an additional time frame. The court responded only by granting a recess, excluding the possibility of postponing the session, which further indicates that the court acted biasedly.

The plaintiff has asserted that the urgency and haste displayed by the first instance court are evident from the sale of the seized property the same day the ban was lifted, which serves as direct evidence of agreements that the judge had with the parties involved, evident only after the court announced its decision. On the day of the decision’s announcement, it became clear from news sites and the statement of the Armenian government that the defendant company had transferred 1,649,003 regular nominal shares of the disputed shares, amounting to 60.0000946%.

Furthermore, the first instance court did not have the minutes of the extraordinary general meeting of shareholders held on September 15 when discussing the protective measure’s lifting motion. However, reviewing the minutes and decision would have substantiated that the reason for the third party “AMP Holding” LLC's vote against the transfer of shares was in no way related to the ban imposed by the court; moreover, the third party was not deprived of the opportunity to vote in favor of the transfer under the condition of lifting the bans.

The plaintiff has maintained that convening a meeting and voting in favor of the transfer by the plaintiff company is an extrajudicial step aimed at reaching an agreement on an important matter related to the company with another shareholder, while the third party has been attempting, and is still attempting, to obstruct the proper exercise of the plaintiff’s rights—a fact that should have been substantiated by the court had the evidence been examined according to the law and assessed within the logical framework of the plaintiff's intentions.

The Court of Appeal granted the plaintiff’s appeal, overturning the first instance court's decision to lift the protective measure. The appellate court concluded that the first instance court had committed a judicial error. The inter-state judicial bodies have already recorded a violation of the rights of an investor, in this case, the holder of 12.5% of ZCMC shares. The latter may also appeal to international investment arbitration, where, if a violation of rights is established, the state could be required to pay substantial compensation.