There is an “enormous risk” that assets of two Russian-owed aircraft and ship lessors will be dissipated if liquidators appointed to them have to apply to the Irish Central Bank for sanction derogations on an “asset by asset basis”, the High Court has been told.
Therefore, the joint liquidators, who were appointed over Dublin-based GTLK Europe Capital DAC and GTLK Europe DAC in May, are asking the court to declare that the liquidators, rather than any Russian entities, have effective control of the companies and their assets.
The two companies form part of a group that had assets of about US$4.5 billion (€4.11 billion), making them what are thought to be the largest winding-ups in the history of the Irish State.
The Russian parent of the two firms is the subject of international sanctions that have been imposed on Russia since the invasion of Ukraine last year.
James Doherty SC said every step taken by his clients– liquidators Damien Murran and Julian Moroney of Teneo Restructuring Ireland– has required an expenditure of funds, which cannot occur without applying to the Irish Central Bank.
The current process of applying to the regulator for sanction derogations on a “transaction by transaction” basis is “extraordinarily time-consuming”, he said.
There is an “urgent requirement” for the liquidators to be able to exercise appropriate control over the assets held in various subsidiaries, including 70 aircraft and 19 vessels, for the benefit of non-Russian creditors and bondholders, he said.
His clients have “real concerns” about the risk of assets being dissipated, he added.
The court heard the Irish GTLK entities have only been hit by the freezing regulation as they have been presumed to be controlled by their sanction-hit parent.
However, he said, their winding-ups under the 2014 Companies Act should have legally severed this presumed control.
There is a “very strong argument” that, as a matter of legal analysis, the sanctions fall away when the Irish companies are under the control of the liquidators, he said.
John Breslin SC said the European Commission is clear the Central Bank, his client, is the body tasked with factually analysing the companies’ situation in relation to sanctions. However, the regulator would be grateful to the court for “valuable” legal clarity on the liquidation’s effects on the control of the firm and its assets.
Mr Breslin said his legal team does not believe the legal question has been addressed before by an Irish court or by a common law court in the European Union. If the court makes the orders sought the regulator can then conduct a factual analysis as mandated by the commission, he added.
After hearing submissions from other interested parties, Mr Justice Michael Quinn said he would rule on the issue on Tuesday.
The two Irish-based entities were wound up in late May by order of the High Court following a petition from four creditors who say they are owed more than $178 million (€162 million). The GTLK entities opposed the winding-up orders and claimed they were solvent despite the economic sanctions.
The court refused the GTLK firms’ petition for examinership, which would have enabled them to restructure their debts.
