A Landmark Win for Majority Shareholders
AGPLAW is proud to announce a significant legal victory for our clients, Respondents 1 and 2, in a high-profile arbitration case before the London Court of International Arbitration (LCIA). This complex shareholder dispute involved allegations of minority oppression and breaches of a Shareholders' Agreement (SHA) under Cyprus law. AGPLAW's Cyprus and UK legal teams, led by Managing Partner Angelos Paphitis, Partner Maria Constantinou, and UK Senior Counsel Timothy Frith, successfully represented our clients and achieved a decisive outcome that protects the rights of majority shareholders in Cyprus.
The Arbitration Overview
The LCIA arbitration centered on claims brought by a minority shareholder (the Claimant, being a group company of a well-known Russian Group related to a Russian oligarch) against our clients, who are majority shareholders in Cyprus Company (the Company). The Claimant alleged that our clients had conducted the affairs of the Company in an oppressive manner, in violation of their obligations under the SHA and principles of good faith. The Claimant sought remedies, including a winding-up order of the Company or an order requiring our clients to be bought out by the Claimant.
Throughout the arbitration witness examinations and submission stages, our team at AGPLAW vigorously argued, amongst other arguments raised, that there is no legal precedent under Cyprus Companies Law (Cap. 113) for a minority shareholder to buy out a majority shareholder but only the other way around. This argument has ultimately formed the cornerstone of our defense strategy, and we are pleased to announce that the Arbitration Tribunal, comprising of a Sole Arbitrator (a KC), accepted our submissions and ruled in favor of our clients.
Key Findings of the Tribunal
The Tribunal's Partial Final Award, issued on 5 September 2024, represents a significant legal precedent in shareholder disputes under Cyprus law although tried under English law before LCIA.
Key findings from the award include:
Jurisdiction Confirmed
The Tribunal confirmed its jurisdiction over the Claimant's minority oppression claims under section 202 of the Cyprus Companies Law. This affirmation allowed the arbitration to proceed under the LCIA Rules, with London as the seat and English as the language.
No Winding-Up Order Issued
Our team successfully argued against the issuance of a winding-up order for the Company. The Tribunal found that while there was evidence of oppressive conduct by the majority shareholders, the facts did not justify the drastic remedy of winding up the Company. This outcome was crucial in safeguarding our clients' interests and maintaining their control over the Company.
Buyout Remedy Ordered in Our Clients' Favor
The Tribunal, deciding on our favor and against the Claimant's requests to the alternative, ordered a buyout of the Claimant's shares by our clients, the majority shareholders. This decision aligns with the strategic argument advanced by AGPLAW that under Cyprus law, there is no basis for a minority shareholder to compel a buyout of majority shareholders. The Tribunal's decision to order the buyout of the Claimant's shares by our clients validates our legal strategy and underscores the strength of our arguments in defending our clients' rights.
Breach of Shareholders' Agreement
While the Tribunal found that our clients were in breach of certain provisions of the SHA, these breaches were deemed insufficient to justify the Claimant's radical demand for a buyout of our clients. Instead, the Tribunal focused on establishing a fair buyout price for the Claimant's shares, ensuring that our clients retained control of the Company.
Valuation and Mechanism for Buyout
The Tribunal carefully considered the appropriate mechanism for determining the buyout price, including adjustments for loss of profits and other relevant financial considerations. This aspect of the award ensures that our clients will not only retain control of the Company but also achieve a fair and equitable resolution to the dispute.
Legal Implications and Significance
The Tribunal's decision in this case sets a significant legal aspect in Cyprus regarding shareholder rights, the interpretation of shareholder agreements, and the remedies available in cases of minority oppression. The award confirms the principle that, under Cyprus law, there is no established legal basis for a minority shareholder to buy out a majority shareholder, reinforcing the protection of majority shareholders' rights.
This outcome highlights AGPLAW's expertise in dealing with complex cross-border legal disputes and our deep understanding of Cyprus corporate law. Our success in this case showcases our ability to provide strategic and effective representation in high-stakes arbitrations, ensuring the best possible outcomes for our clients.
A Strategic Victory for AGPLAW and Our Clients
This arbitration award marks a significant victory for our clients and a testament to the legal acumen and advocacy of AGPLAW. Our team's diligent efforts, extensive knowledge of Cyprus law, and strategic approach in this case were decisive in achieving a favorable outcome for our Clients, Respondents 1 and 2.
The Tribunal's decision to order the buyout of the Claimant's shares by our clients — despite finding them in breach of certain provisions of the SHA — proves the effectiveness of our argument that there is no precedent for a minority shareholder buying out a majority shareholder under Cyprus law. By securing this outcome, we have successfully protected our clients' rights as majority shareholders and preserved their control over the Company.
Conclusion
AGPLAW is dedicated to providing our clients with top-tier legal representation in even the most complex disputes. Our success in this LCIA arbitration is a clear demonstration of our commitment to excellence and our ability to achieve strategic legal victories.
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