Commission presents practical solutions for the supply of medicines in Northern Ireland under the Ireland / Northern Ireland Protocol, and for sanitary and phytosanitary measures
Barely a month goes by without another story exploding on the myriad of ways the world’s wealthiest are using legal and tax loopholes to keep their activities a secret. From celebrities getting super injunctions to keep their extra-marital affairs off the headlines, to oligarchs using offshore tax regimes to hide their supposedly ill-gotten gains.
The latest ploy to worry transparency activists has been paper companies in obscure jurisdictions using courts in more transparent countries to thwart their competitors or slow down justice, while hiding corporate ownership and hiding conflicts of interest. potentials. At least the super injunctions, one of the most interesting celebrity crazes of the past two decades, require an appeal to the English High Court detailing the case and a judge’s ruling. In contrast, letterbox type legal persons are used to mislead everyone in the legal system, from the judge to the court reporter.
Opaque letterbox companies controlled by mysterious owners are of course nothing new and have sprung up around the world in a multitude of different forms. In some situations, they have been established for legitimate reasons.
Likewise, shell companies – legal persons with no active business activities or significant assets – for example, can play a valuable role in securing different forms of financing or acting as a limited liability trustee for a trust. They also feature prominently in numerous scandals where they are used by businesses and individuals for tax evasion and money laundering purposes, with the scale of this practice demonstrated by the Panama Papers leak in 2016. , as MEPs have pointed out.
Over the past two decades, shell companies have been increasingly used to launder money across jurisdictions, often with the help of compromised judges. The ‘Russian Laundromat’, a high profile money laundering program that operated between 2010 and 2014, involved the creation of 21 grassroots shell companies based in the UK, Cyprus and New Zealand.
Companies were created with ease and without any transparency to demonstrate the dominant minds and financial interests that had everything to gain from being abused. The hidden owners of these companies would then use them to launder money by creating bogus debts between Russian and Western shell companies, then bribing a corrupt Moldovan judge to order the company to “pay” that debt out of pocket. a court-controlled account, which the owner could then withdraw the now-cleaned funds from. Some 19 Russian banks participated in the program, which moved between € 20 billion and € 80 billion out of Russia through a network of foreign banks, mostly in Latvia, to simulate companies incorporated in the West.
While the Laundromat was eventually closed, those behind it have had years to clean up and move tens of billions of ill-gotten or otherwise compromised fortunes in the Western banking system. Businessman and former Moldovan deputy, Veaceslav Platon was appointed architect of the Russian laundry by the Moldovan court. He remains the only person convicted to date following criminal investigations into the program in multiple jurisdictions. The linchpins of the whole project were the Western justice systems which, while operating in good faith, did not require sufficient transparency as to who supported the companies that accessed these courts.
As the laundromat was closed, dark shell companies found a new way to exploit Western justice systems by resorting to litigation in respectable jurisdictions. In 2020, it was reported that Russian oligarchs were using bogus companies to launder money through English courts. The report claimed the oligarchs would sue themselves in English courts using a shell company, located in an opaque tax jurisdiction, of which they were the sole beneficiaries, then deliberately “lose” the case and be ordered to transfer. funds to the company. Using this approach, money from questionable sources could be laundered through a court order and enter the Western banking system as clean money with a seemingly legitimate origin.
Another disturbing development is recent evidence that credible arbitration systems are used as a tool to promote corrupt practices. One such case was brought in London by Process and Industrial Developments (P&ID), a British Virgin Islands company, against the government of Nigeria for the failure of a 20-year contract to generate electricity. P&ID accused the West African state of breach of contract and in 2017 an arbitration panel ruled in favor of the company, awarding them nearly $ 10 billion. It was only when the case was referred to the High Court that it was reported that cash “gifts” in brown envelopes were allegedly paid to officials at the Petroleum Resources Department.
P&ID, co-founded by Irish entrepreneurs Mick Quinn and Brendan Cahill, has vigorously denied the allegations or any wrongdoing. Although the arbitration is far from over, the case has, it was argued, demonstrated how easily the dispute settlement processes can be manipulated.
Another ongoing case in Ireland has further revealed how shell companies can allegedly manipulate Western courts. The Irish High Court has become the final arbiter in a decade-long dispute between Russian companies over ToAZ, one of the world’s largest manufacturers of ammonia, in a case that has seen around 200 affidavits filed with nothing than in Ireland. At the heart of the affair is a battle for ownership of the company between convicted father and son Vladimir and Sergei Makhlai, and Dmitry Mazepin, a rival Russian businessman who owns a minority stake in the company. In 2019, a Russian court found the father-son team guilty of fraud by selling the ToAZ ammonia produced at a price well below market rates to a related company that sold it for ten at a higher market rate. high, allowing the Makhlais to pocket the difference. to the detriment of ToAZ shareholders.
After fleeing Russia before being jailed, the Makhlais are now reportedly using four shell companies in the Caribbean to hold their controlling stake in ToAZ. These four companies have now reportedly used the existence of another Irish letterbox company to file a $ 2 billion damages claim against Mazepin in Irish courts, allegedly without having to reveal who their shareholders are, who controls companies or how they came into being. in possession of stakes in a Russian ammonia company.
While this may seem like a working day for your standard Russian oligarch legal dispute, and hardly a matter of concern to the general public, it does indicate the worrying increase in the number of shell companies. used as fronts in legal cases. In general, it seems that the notion of open justice is a mockery for Caribbean shell companies to have access to reputable common law courts to have their cases heard, to use procedural bickering to slow down proceedings and prevent justice. execution elsewhere while being able to hide their owners and control the minds of the public and the courts. While the current examples relate to very wealthy individuals allegedly using these tactics against wealthy others, there is no principle or precedent that would prevent unscrupulous interests from using shell companies to hide their involvement while they prosecute ordinary citizens, NGOs or journalists.
A Brussels-based financial expert said: “For Western justice systems to pay more than lip service to the principle of open justice, basic standards of transparency must be applied to parties seeking access to court. As a long overdue first step, private foreign companies should be the first target of new litigation transparency standards. A clear view of the dominant minds and commercial beneficiaries of litigants is in the public interest and, more importantly, in the interest of justice.