Malta court upholds $240 million claim on Erdogan’s jailed enemy

A Maltese court has turned down the appeal of an Azerbaijani billionaire whose shipping empire is being targeted by creditors since his arrest in 2020 in Turkey in connection with the Gulen coup against strongman Recep Erdoğan.

The court upheld a decision by the Malta Arbitration Centre, to enforce the decision of its London counterpart in a claim brought by SOCAR, the Azerbaijani state-owned gas company, against Palmali International Holding Company.

SOCAR demanded the enforcement of a London arbitration decision of 2021 to force Mubariz Mansimov to pay ver $240 million in compensation over a failed joint venture with Palmali. Mansimov appealed the request to enforce the decision in Malta, in the Maltese courts.

Turkish-naturalised Mansimov based his shipping empire almost in entirety in Malta for its friendly tax laws for the maritime industry. Since then his assets in Malta were also placed under an asset freeze in an another injunction filed by creditors Sberbank, of Russia.

In 2023, the London Arbitration Centre rejected Mansimov’s appeal and ordered the registration of its arbitration decision in Malta. Mansimov followed up with an appeal in the Malta Arbitration Centre, which he lost, and then in the Maltese Appeals Court, claiming he was denied a fair hearing in London.

In Malta, the Arbitration Court refuted Mansimov’s claim that he was not subject to its purview because he was not a citizen of Malta. “It is not relevant whether Mansimov had property or funds in Malta on which the award may be executed… Mansimov has assets (shares) in Malta since he is a shareholder in Palmali Holding Company, a company registered in Malta.”

The Appeals Court agreed, saying the Londeon decision targets the assets found in Malta, and that this was not dependen on whether the owner is a resident of Malta or not. It also agreed that there was no fair trial breach for Mansimov, who remains under arrest in Turkey and is unable to personally participate in the court proceedings, but that his company remains operational while his lawyers, Preston Turnbull, refused to participate in the online hearings of the Arbitration Centre in Malta.

Billionaire arrest

Azerbaijani native Mansimov became a naturalised Turkish citizen in 2006 and took on the name Mübariz Gurbanoğlu. He founded the Palmali Group of Companies in Turkey in 1998.

Once deemed an Erdoğan ally, Mansimov was arrested in one of the highest-profile detentions of a crackdown against suspects linked to the 2016 coup by a network tied to U.S.-based Muslim cleric Fethullah Gulen, which Erdoğan blames for the failed putsch in which about 250 people died.

Mansimov’s Malta-based companies are dozens of ships and major holding companies such as the Palmali International Holding Company, Palmali International Holding Two, Palmali Logistics, Palocean Shipping, Paloffshore Oil Services, Palriver Shipping, Palsea Shipping, Tampal Trade, Pal Food, Palchem Holding, Palmali Dry Cargo, Palmali Voyager, Caspian Holding, Pal Air, Pal Gas Holdling, Barge Oil Services, GMM Shipping & Trading, and GMM Holding.

Mansimov was listed by Forbes as being worth $1.3 billion in 2015, with interests in dairy products, media, resorts and planes, as well as having a fleet of oil tankers.

According to a MaltaFiles exposé in 2017, Mansimov’s Pal Shipping was beneficially owned by the family of Recep Tayyip Erdoğan – Turkey’s prime minister at that time, and now its controversial president. The Erdoğans’ offshore network included the ownership of a $25 oil tanker, the Agdash, part of which had been financed by Mansimov.

Sberbank Malta case

In 2023, a Maltese judge found in favour of Sberbank against a number of Maltese shipping companies owned by the Palmali shipping group.

The court found that Palmali had carried out bad faith transactions in a bid to fraudulently bankrupt the shipping companies in Malta, in a bid not to repay a series of Sberbank loans, and called out the malicious scheming of Mansimov in the entire saga.

Sberbank made four loans to two Russian companies – Palmali Caspian Offshore Project and Palmali Company, which loans were secured by Palmali Holding (PHL). The bank had accepted the guarantee as it was aware that PHL owned several ships, all held under subsidiaries in Malta such as Palmali International Holding, Palmali International Holding Two, Palmali Logistics, Palriver Shipping, Palocean Shipping and Palsea Shipping.

As security for the loans, Sberbank obtained a personal guarantee from Mansimov, his Turkish companies, as well as 47 naval hypothecs in the Russian maritime registry over ships belonging to Palmali.

Eventually, Palmali defaulted on the loan and Sberbank turned to the guarantor to pay the €164 million balance. But this was never repaid.

As a result of this, Sberbank obtained precautionary warrants from the Maltese courts, seizing shares owned by Palmali in its direct subsidiaries, as well as opening an arbitration in London courts.

But it was here that Sberbank learnt that a few days after the precautionary warrants were issued, Palmali Holding transferred all its shares in its direct subsidiaries, in favour of Mansimov’s Turkish company Gunesli. This effectively decimated the finances of Palmali Holding.

In turn, Gunesli’s shares were acquired by another Mansimov-controlled company, Palmali Holding AS in Turkey, just a few days after Sberbank filed proceedings in Malta.

Sberbank successfully argued that had been was a fraudulent transfer intended to diminish the capital of Palmali’s direct subsidiaries, with 35 Malta-flagged ships being transferred to the indirect possession of Gunesli.

Sberbank said that Palmali’s deregistration of its 56 companies in Malta had been an “obvious attempt” to prevent or lengthen notification procedures, done in bad faith, illicitly and with fraudulent intent, to prevent Sberbank from recovering the debts due.

Mr Justice Neville Camilleri ordered the repayment of a US$ 10 million tranche to Sberbank.