For years, jurisdictions such as Cyprus, Luxembourg and Jersey served as major hubs for Russian capital. However, Russia’s invasion of Ukraine, coupled with shifts in European policy and legal framework, has pushed more businesses to explore onshore alternatives within Russia, including the Special Administrative Regions and the “international company” regime introduced in 2018. As a result, redomiciliation to Russia has become an increasingly common trend.
The redomiciliations, however, have been far from smooth. Since 2022, Russia-related companies have found it nearly impossible to complete the move. EU and UK restrictions, and the resulting extreme caution among auditors, banks and service providers, have left these companies unable to formally remove from European states’ registers.
To escape this trap, Russia has introduced a simplified, accelerated redomiciliation procedure. In exceptional cases, the President may issue a decree under which a company is deemed to have been removed from the foreign register. This mechanism has already been used, among others, by companies such as Russia’s top gold miner, Polyus Gold, and fertiliser giant PhosAgro. However, in practice, this mechanism is employed only in exceptional cases.
Unsurprisingly, emerging trends and new hurdles have sparked a surge in court battles worldwide. Some disputes directly challenge redomiciliation processes, while others serve as leverage in broader commercial conflicts.
A prominent example involves the lengthy dispute between Oleg Deripaska, founder of the aluminium giant Rusal, and his former partner, Vladimir Chernukhin, a former deputy chairman of Russia’s state-owned lender Vnesheconombank.
In the main proceedings, an award required Mr Deripaska to buy out Mr Chernukhin’s stake in Navio Holdings Ltd, which owned valuable Moscow real estate. As security, Mr Deripaska undertook in 2018 that shares in his company En+ would remain enforceable. En+ then redomiciled from Jersey to Russia. In 2019, Mr Chernukhin responded with a contempt application in the English courts, claiming the move made the shares harder to enforce and thus breached the undertaking. These accusations, however, remained unsupported. The court, having carefully considered the facts of the case, ruled that the change of domicile, which is what redomiciliation entails, does not constitute asset disposal and therefore does not violate the undertaking.
A more recent example arises from another ‘famous’ cross-border dispute between Uralchem, a major Russian fertiliser producer, and Sergey Makhlai, the former owner of Togliattiazot, Russia’s leading ammonia producer.
In 2019, two Cyprus companies linked to Uralchem, Uralchem Holding PLC and CI-Chemical Invest Ltd, undertook before the Cyprus court to maintain at least $1.75 billion in assets. In 2021, they initiated redomiciliation to Russia, and the companies linked to Makhlai accused them of breaching the undertaking and contempt of court. According to the applicants, Uralchem had allegedly shifted the Cyprus companies’ assets into newly formed Russian entities under the guise of redomiciliation, leaving the Cyprus entities empty.
However, as in the Deripaska case, the Cyprus court rejected that argument, concluding that redomiciliation does not entail a transfer of assets, but rather represents a mere change in the companies’ domicile and therefore does not violate the undertaking.
These cases show that while redomiciliation to Russia is on the rise, it remains legally complex, yet courts consistently rule that changing a company’s domicile alone does not transfer assets unlawfully.
