A Cyprus-registered shell company holding a minority stake in Armenia’s largest mining enterprise has filed a $1.2 billion lawsuit against the Armenian government. The company, Walnort Finance Ltd, claims that the government has seriously violated its “legitimate shareholder rights.”
The amount sought by Walnort in damages is equivalent to about one-quarter of Armenia’s annual budget. This arbitration case, submitted to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), arises from the October 2021 takeover of the Zangezur Copper-Molybdenum Combine (ZCMC) by entities linked to Russian billionaire Roman Trotsenko. Trotsenko acquired 75% of ZCMC from a German metals group and immediately transferred a quarter of that stake to the Armenian government.
Subsequently, the government increased its share in ZCMC to nearly 22%, following another “donation” from Armenian minority shareholders who were prosecuted for tax evasion. The government did not provide clear explanations for these generous and unusual donations.
Prior to this, ZCMC was managed by shareholders who were at odds with Prime Minister Nikol Pashinyan. During his campaign for the June 2021 parliamentary elections, Pashinyan vowed to punish ZCMC’s “corrupt shareholders” and ensure their shares were “returned to the people.”
Walnort, owning the remaining 12.5% of ZCMC, disputed the legality of the 2021 ownership change. It argued that the ZCMC charter entitled it to a right of first offer, which the former majority shareholder violated.
Walnort’s attempt to have Armenian courts annul the deal was unsuccessful. In November 2023, former Russian Health Minister Mikhail Zurabov, Walnort’s owner, sold the company to the Geneva-based Bell Capital Switzerland, which specializes in international finance litigation.
This week, Walnort announced it has sued Pashinyan’s government for “serious breaches” of an investment protection agreement between Armenia and Cyprus, signed in 1998.
“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,” said Walnort in a statement. “In particular, the Government prevented Walnort from exercising legitimate shareholder rights in ZCMC, resulting in damages of at least USD 1.2 billion (subject to quantification expected to be significantly higher).”
The statement added that the government ignored Walnort’s offers to negotiate an “amicable” settlement and instead targeted the Cyprus-based company’s Armenian subsidiaries.
Based in the southeastern town of Kajaran, ZCMC employs about 4,000 people and has long been one of Armenia’s leading corporate taxpayers.
