Armenian Government Faces $1.2 Billion Lawsuit From Foreign Investor

A Cyprus-registered shell company that owns a minority stake in Armenia’s largest mining enterprise has filed a $1.2 billion lawsuit against the Armenian government, alleging a serious violation of its “legitimate shareholder rights.”

The compensatory damages sought by the company, Walnort Finance Ltd, are equivalent to roughly one-quarter of the government’s annual budget.

The arbitration case brought before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) stems from the October 2021 takeover of the Zangezur Copper-Molybdenum Combine (ZCMC) by entities linked to Russian billionaire Roman Trotsenko. The latter bought 75 percent of the ZCMC stock from a German metals group and immediately gifted a quarter of that stake to the Armenian government.

The government subsequently increased its share in the mining giant to almost 22 percent after securing a similar “donation” from Armenian minority shareholders prosecuted for tax evasion. It never gave clear answers to questions raised by the lavish donations highly unusual for the country.

Armenia – Prime Minister Nikol Pashinian meets Russian businessman Roman Trotsenko.

The ZCMC management was until then controlled by those shareholders at odds with Prime Minister Nikol Pashinian. Campaigning for the June 2021 parliamentary elections, Pashinian pledged to punish ZCMC’s “corrupt shareholders” and make sure that their shares are “returned to the people.”

Meanwhile, Walnort, which owns the remaining 12.5 percent of ZCMC, challenged the legality of the 2021 change of ownership. It claimed that the ZCMC charter entitled it to a right of first offer that was violated by the former majority shareholder.

Walnort failed to have Armenian courts invalidate the deal before its owner, former Russian Health Minister Mikhail Zurabov, sold the company to the Geneva-based firm Bell Capital Switzerland in November 2023. Bell Capital reportedly specializes in international finance litigation.

Walnort announced this week that it has sued Pashinian’s government for “serious breaches” of an agreement on protection of mutual investments signed by Armenia and Cyprus in 1998.

Belarus — Russian ambassador to Ukraine Mikhail Zurabov (R) is welcomed upon his arrival for talks in Minsk, September 5, 2014

“Walnort’s investment in Armenia’s largest mining company, Zangezur Copper Molybdenum Combine Closed Joint Stock Company (ZCMC), has been undermined by the Government’s politically motivated campaign to obtain a significant shareholding in ZCMC,” it said in a statement. “In particular, the Government prevented Walnort from exercising legitimate shareholder rights in ZCMC which have resulted in damages of at least USD 1.2 billion (subject to quantification expected to be significantly higher).”

According to the statement, the government has ignored Walnort’s offers to negotiate an “amicable” settlement and cracked down instead on the Cyprus-based company’s Armenian subsidiaries.

As of Thursday evening, the government did not react to the biggest ever lawsuit filed against Armenia by a foreign investor. Earlier in the day, its press office told RFE/RL’s Armenian Service to submit relevant questions in writing.

Based in the southeastern town of Kajaran, ZCMC employs about 4,000 people. It has long been one of Armenia’s leading corporate taxpayers.