Insolvency

Successfully defending one of the richest Russian businessmen in a dispute initiated by a major state-owned bank to bring him to subsidiary liability. The bank wanted to recover more than RUB 3.5bn from the client in a development company bankruptcy case. The case was complex due to the bank having a debtor’s disclosure statement in which the client is named as beneficiary. The bank also held the client responsible for a significant number of episodes that covered an extended period of time, which further complicated the client’s defence.

Leading participation in the Metrostroy insolvency case. The project is critical, both for the continuation of the construction of the metro in St Petersburg and for the satisfaction of lenders’ claims by way of the return and sale of assets worth more than US$200m and the subsidiary liability of the debtor’s shareholders. The team ensured that the client’s claims of almost US$50m were included in Metrostroy’s register, despite the actions of opponents in three instances. In addition, the team prevented the inclusion of unjustified claims for US$45m in the register, which will contribute to a fair distribution of the insolvency estate.

Representing Shell as one of the major creditors in the Mari Refinery insolvency case, as well as representing the client in separate disputes worth over US$70m concerning the challenging of transactions.

Providing UniCredit Bank with a complex legal and commercial expert opinion regarding the debtor’s finance and assets, on the date of the payment execution of more than US$4.2m in favour of the client, to defend against the receiver’s claim challenging the payment allegedly executed when the debtor was insolvent. The opinion prepared by the firm became the client’s main evidence in court to prove that payments made by the debtor to him could not be declared void. The court considered this evidence and ruled in favour of our client. As a result, the client avoided a loss of US$4.2m.

Successfully defending a client in the insolvency proceedings of Murmansk Shipping Company (MSCO), one of the primary shipping companies operating in Arctic Russia and Northern Europe, in two disputes: (i) on contesting a compensation agreement (initiated by MSCO’s insolvency trustee) and (ii) on contesting a securities pledge agreement (initiated by VTB) concluded between MSCO and the client. Both disputes (appr. US$15m in total) were won by the firm.

Representing the leading transport companies in Russia in the bankruptcy case of the Antipinsky Oil Refinery with the lenders’ claims totalling US$5bn. The successful defence against challenging transactions in favour of clients required the establishment of a precedent for recognising forced payments late after filing for bankruptcy as committed in the ordinary course of business.

Successfully defending law firms in disputes over the challenging of transactions under legal services contracts on the basis of unequal counter-provision to the debtor. The team presented an impressive amount of evidence of the fact of rendering services and their equivalence, including three specialist opinions. As a result, the court dismissed the receiver’s claims in full.

Successfully representing RBC for three years in seven separate disputes in the bankruptcy case of a former subsidiary (RBC Money payment system), including protection from subsidiary liability, challenging the sale of a business and payments (the total value of the disputes was in excess of US$63m).

After the firm’s team successfully defended RBC against subsidiary liability, the opponents attempted to hold the debtor’s former directors liable in order to force them to provide information favourable to the opponents that could be used to revise the subsidiary liability dispute against RBC. We represent one of the debtor’s directors who was brought to subsidiary liability in order to reduce its amount and the risks of foreclosure for the client’s assets.

Advising the client (a foreign creditor) in relation to disputes over debt collection in the amount of more than US$20m from two Russian companies (major oil traders) and their affiliates who provided a pledge. We also support disputes over inclusion of the client’s claims in the register of creditor claims of debtors which are under insolvency proceedings.

Representing oil traders in the bankruptcy case of Samaratransneft-Terminal with a register of claims of US$662m made it possible to achieve a peaceful settlement at the end of a year of disputes over the subordination of US$307m in bond claims. We also secured the inclusion in the register of a US$12m claim based on a pdf copy of a guarantee under Swiss law, the issuance of which the debtor denied.

Representing the interests O1 Properties Group companies in the bankruptcy case of a large office centre in Moscow. Following the results of a year of confrontation with TRUST Bank in a bankruptcy case and three parallel processes worth US$97m in total, we managed to achieve settlement of the dispute on the most favourable terms for the client.

Representing Raiffeisenbank in the case of the bankruptcy of a debtor with a debt of over US$53m secured by the pledge of a Russian shopping centre. The project was successfully implemented, despite disputes on subordination, unauthorised construction, invalidity of collateral and a chain of restructuring transactions.

Successfully defending of one of the ten largest transport companies in Russia and its senior executives in courts of all instances, including the Supreme Court of the Russian Federation, in three disputes on subsidiary liability for US$7m as participants and members of the board of directors of a subsidiary, recovering corporate losses and challenging the debtor’s transactions with a related person with the aim of repeating attempts to bring clients to subsidiary liability.

Representing a client in a dispute on bringing him to the subsidiary liability initiated by the debtor’s receiver, who stated that our client had not filed for the bankruptcy of the debtor in a timely manner and that he is therefore obliged to pay off the creditor’s claims. Through the firm’s efforts, the client avoided recovery of US$4m, which is a significant amount for a senior executive.

Representing one of the ten largest transport companies in Russia in a dispute initiated by the debtor’s receiver on challenging a debtor’s payments in the client’s favour of US$1m made under lease and transport services agreements, which allegedly caused harm to the debtor. The court was persuaded by our arguments and dismissed the claim in full. The court of appeal upheld the judgment.

Representing clients (former members and directors of the company) in a major corporate conflict in order to restore lost control over the company and protect against the recovery of corporate losses under 12 parallel cases on challenging corporate decisions, transactions on the disposal of shares and assets, recovery of losses and subsidiary liability.
We joined the project in late 2019, when the company had been in a corporate conflict for seven years that resulted in:
- the opponents’ full control over the company via acquiring of 90% company’s shares under mala fide contracts and decisions of general meetings of shareholders and creditors
- final stage of the company’s insolvency; and
- first instance court judgment on recovery of US$1.75m damages from our clients.

Our success in several proceedings for last 1.5 years (13 separate court proceedings in total) turned the situation in opposite way:
- the court invalidated the opponents’ SPAs and established our clients’ full corporate control over the company
- insolvency proceedings against the company were terminated
- first instance court judgment on recovery of US$1.75m damages from our clients was cancelled by upper court
- the opponent’s claim for termination of our client’s shareholding was dismissed
- we initiated a criminal prosecution of the opponents and protected the clients from criminal prosecution upon the opponents’ complaints
- company under our clients’ control recovered additional US$0.7m from former bankruptcy receiver

Preparing an expert report on Russian law for the High Court of England regarding whether a Russian court would recognise and give effect to a restructuring scheme involving a group of the world’s largest investment banks and groups (including The Big 4). The court sanctioned a restructuring scheme, basing its decision, inter alia, on Maxim Kulkov’s report.

Preparing an expert report by Maxim Kulkov for an LCIA arbitration under UNCITRAL Rules between the client and a major Cyprus investment company. The dispute arose out of REPO agreements with the client entered into in accordance with the Global Master Repurchase Agreement 2000 (GMRA) under English law.

Defending Campina in insolvency proceedings on the receiver’s claim challenging payments by the debtor to Campina under a settlement agreement. The receiver stated that the transaction was made in unfair preference over other creditors. Thanks to the team’s efforts, the court dismissed the receiver’s claim in full.

Representing the interests of two major creditors (Russian oil and gas trader GALA-FORM and Raiffeisen Bank, acting as a collateral agent under the Syndicated Loan Facility, which was issued by the three major banks) with the total clients’ claims amounting to approximately US$73m in the insolvency cases of oil and gas companies Enisey and NGK Razvitie Regionov.
The project was complicated by dozens of parallel proceedings outside the bankruptcy, including three cases on challenging the guarantees and corporate decisions on complex liabilities from syndicated loans under English law in three parallel proceedings in three of Russia’s regions. The cases were convincingly won in favour of our clients whose position was supported by the Supreme Court of the Russian Federation.
The case was listed among the Top-10 most interesting bankruptcy proceedings in Russia in 2017 (according to Pravo.ru).

Representing B&N Group (including B&N BANK, RostBank and MDM Bank) in the recovery of over US$105m from a number of Russian banks, as well as representing the client in over 23 cases relating to the bankruptcy of legal entities. In the process we managed to create a new practice of contesting preferential payments by third parties performed at the debtor’s expense, but not on behalf of the debtor (and recovering funds from the lender obtained from a third party directly from the debtor’s bankruptcy estate), which was approved by the Russian Supreme Court and the Commercial Court of the Moscow Region. Further details are available in the following article (in Russian) by Nikolay Pokryshkin.
Moreover, the Commercial courts of the Moscow Region declared the payments received by the opponent bank from its debtors by way of a chain of payments, amounting to app. US$66m in total, invalid, thereby supporting the position we developed and presented to the court on contesting fraudulent transfers traditionally employed by banks in debt restructuring in order to avoid establishing banking reserves.

Representing Arktikgaz in the case of insolvency of a contractor in the course of contesting transactions allegedly designed to benefit the client to the tune of app. US$12m.

Representing B&N BANK in a separate dispute on the invalidation of a subordinated loan agreement for US$7.5m in the course of the case on the insolvency proceedings of lender LLC GROT-1. In addition to the successful outcome, in three instances, of the main dispute on the validity of the subordinated loan under the insolvency case, we also successfully defended the client against the unsubstantiated claims of the lender, LLC GROT-1, in two parallel claims proceedings: (i) on the termination of the subordinated loan agreement for app. US$9m; and (ii) on the issuance of a writ of execution in relation to a fictitious arbitration court ruling on the recovery of US$7.5m from the client.

Representing the temporary managers (KPMG) appointed by an English court and the companies under their control in more than 25 sets of court proceedings in relation to illegally transferred Russian assets worth over US$75m controlled by Mukhtar Ablyazov, the former chairman of the Kazakh BTA Bank. The project included advising the client and representing the client in courts in connection with the necessity to protect and recover the contested assets, i.e., a large logistical facility in St Petersburg, a Moscow business centre, a shareholding in a major Moscow hotel, and participation interests in companies owning property in Moscow worth app. US$150m.
The project involved issues of foreign law of various jurisdictions (Cyprus, the Seychelles and England) and required coordination and cooperation among several legal advisers working on proceedings in different jurisdictions.

Advising the aviation fuel supplier company on Transaero airline’s bankruptcy case with regard to contesting claims worth over a billion of dollars brought by lenders/lessors on the basis of dozens of English-law-governed lease contracts and related agreements. We organised and coordinated the work of English and Russian law specialists, reviewed the claims of all lenders for complaints in relation to counterclaim balances, and arranged for evaluation of the market price of aircraft. The competing lenders were members of 4 groups of major Russian banks with total claims exceeding US$1.5bn.

Representing B&N Bank Group (including MDM Bank, Rost Bank, Politex and FK Rost) in the insolvency cases of 4 individuals who were the beneficiaries of certain debtor companies and the sureties for the debts of such companies owed to our clients. The project was notable for the debtors counteracting the transfer of the assets directly prior to the bankruptcy. In two court proceedings in courts of general jurisdiction we succeeded in getting chains of sale and purchase / gift transactions by debtors’ spouses made in order to conceal the debtors’ real estate worth over US$1.5m declared invalid. We also carried out non-bankruptcy recovery of the debtors’ assets located abroad.

Representing Khlynov Bank, which is listed in the Forbes’ list of 100 Reliable Russian Banks of 2018, in the case of the bankruptcy of an individual, i.e., the beneficiary of a dairy factory and a meat processing plant previously financed by the client. The case was complicated by the fact that the debtor held an administrative position (an elected official), attempted to transfer levied assets on the basis of a prenuptial agreement, amicable agreements with non-insolvent affiliates, and property sale transactions. Furthermore, the beneficiary tried to impose a restructuring plan on the lenders in collusion with one of the lending banks and the financial manager.
However, on behalf of the client, the firm managed to: (i) sell the debtor’s property and gain the court’s approval of the receiver candidate proposed by the Client; (ii) reveal an asset concealed by the debtor in France (a mansion worth more than EUR1.1m), and (iii) have the debtor prohibited from leaving the Russian Federation and initiate the sale of the foreign assets for the benefit of the lenders.

Defending German senior executives of a Russian company (and a major German holding) from subsidiary liability amounting to US$7.5m. The case is complicated by numerous incidents and negative testimony given by former employees of the debtor, the participant, and the general director of the debtor.

Representing Brunswick Rail as lender in the insolvency case of OJSC Armavir Heavy Engineering Plant with claims totalling US$6.3m. We successfully secured interim measures for the attachment of real estate worth approximately US$8.5m which was previously sold, through a chain of transactions, to a third party on the verge of insolvency. Under this project we also worked on recovery of debts separate from the bankruptcy case, initiating a criminal investigation, developing a PR campaign, searching for assets, and identifying and proving links between the debtor and lenders controlled by the debtor through Russian and offshore companies by way of which assets were transferred in order to conceal them from levy of execution.

Representing Cypriot company Genemedix Enterprises Limited in the case of the insolvency of its subsidiary (a refined oil production plant in Stavropol Krai) under a dispute over the client’s subsidiary liability.

Representing Caterpillar Financial as lender in the case of the bankruptcy of lessee CJSC Holding Centre. The firm’s lawyers participated in separate disputes regarding the debtor’s transactions and the declaration of the bankruptcy trustee’s actions as unlawful.

Preparing a pre-bankruptcy asset protection strategy to mitigate the risks of the company’s key assets being sold to third parties. The development of the strategy was complicated by the presence of a corporate conflict in the company, where each of the company’s shareholders wanted to keep key assets for themselves.

Preparing a legal opinion on the client’s (a medical clinic) defence strategy in two separate disputes regarding invalidation of debtor-client transactions on special bankruptcy and general civil grounds. The project is complicated by the fact that the invalidation of transactions would entail the withdrawal of the client’s main asset for the continuation of medical activities.

Preparing a comprehensive legal opinion for a Russian oil refinery on a potential challenge to a bid by way of which the client acquired property. As a result of our work on the project, we analysed the risks of challenging the bid with practical proposals aimed at preserving the acquired asset in the ownership of the buyer.

Preparing a legal opinion on the prospects for termination of the insolvency case of an oil refinery and risk mitigation options with respect to the insolvency property purchased by the client. As part of the project, the firm’s team also developed a roadmap of actions to terminate the procedure as soon as possible.

Representing a major Kazakh oil and gas company with public ownership in a dispute arising in connection with the client’s contractor’s failure to perform its obligations properly. The case was complicated by the insolvency of the contractor and its filing of several counterclaims.

Representing a foreign beneficiary (an equipment manufacturer) in the insolvency case of a Russian subsidiary in a corporate conflict with a Russian partner.

Representing a Czech bank as collateral lender in the insolvency of an oil company in the Republic of Dagestan with total claims amounting to US$17.2m.

Participating by Maxim Kulkov in the High Court of England as an expert on Russian law (insolvency and corporate law, tort liability, and damages) in Bank of Moscow versus former head of JFC, Vladimir Kekhman, who was accused of receiving two loans worth US$140m and appr. US$4.6m issued by the bank to Mr Kekhman’s entity’s under conditions which concealed important fact that JFC was on the verge of bankruptcy.
Maxim Kulkov’s conclusions and evidence presented to the English court were accepted and served as a basis for the ruling obliging Vladimir Kekhman to repay the bank the full amount of the debt.

Participating by Maxim Kulkov as an expert in cross-border insolvency in a State Court of New York case relating to a claim by a Russian state bank for the recovery of a debt of app. US$30m from an insolvent beneficiary.

Participating by Maxim Kulkov as a Russian law expert in proceedings in the LCIA arbitration relating to a dispute between a UAE state investment company and a Russian property developer over an amount of appr. US$173m.
The dispute arose out of the activities of a joint venture to construct a large residential development in the Moscow Oblast. The Russian partner of the UAE investment company attempted to remove the fund from the project and to take control of the joint venture. Matters arising in relation to the dispute concerned numerous claims by both parties which were presented to experts. The matters included the likelihood and level of influence of the parties to the dispute on the insolvency of the joint venture in Russia, potential claims by the bankruptcy trustee relating to restructuring transactions (sale of several assets, such as uncompleted buildings and undeveloped but potentially valuable land plots, in order to repay arrears) and potential subsidiary liability of the joint venture’s management and shareholders to accept each of the parties’ proposals to rescue the project. Maxim Kulkov also provided an opinion on options for levy of execution over the joint venture’s pledged assets in order to repay the debt to the principal lender, which required early repayment of all loans and intended to gain control over the entire project and, and on several other legal matters.

Preparing an expert report for the High Court of England, in connection with the bankruptcy of a major private bank. The opinion concerns the lawfulness of the recovery from a former shareholder of the bank’s assets worth over app. US$1.5bn which it illegally transferred.

Participating by Maxim Kulkov in the LCIA arbitration as a Russian law expert (on signs of an artificial insolvency and bankruptcy misconduct) in a dispute between shareholders in a major e-commerce platform on the recovery of app. US$500m in losses.