Case comment: unwinding shell company structures with Russian elements for Turkish creditors

In advising creditors with Russian-linked exposures, one pattern recurs across instructions from Turkish law firms: the assumption that a multi-layered shell structure assembled outside Russia will insulate a debtor's Russian assets from judgment creditors. A line of decisions from Russian commercial courts — arbitrazh courts — has tested that assumption, with results that foreign counsel instructing Russian lawyers need to understand before initiating or recommending a recovery strategy.

Turkish trade relationships with Russia have grown substantially over recent years, driven by a combination of geography, EAEU-adjacent supply chains, and bilateral commercial ties. Where those relationships have soured — through non-payment, fraudulent misrepresentation, or outright asset stripping — Turkish creditors often discover that the Russian counterparty has placed its principal assets behind one or more intermediate holding entities: companies incorporated outside Russia, typically in jurisdictions offering nominee ownership or bearer-share structures, but whose underlying assets — real estate, receivables, equipment, or shares in Russian operating companies — remain squarely within Russian jurisdiction.

The scenario that generated the decision discussed here involved a Turkish trade creditor holding a commercial arbitration award against a Russian-linked obligor. Enforcement attempts revealed that the direct obligor was an empty vessel: its assets had been transferred to a related entity incorporated in a third country, which in turn held shares in a Russian operating company. The creditor, instructed a Russian counsel to pursue the Russian assets directly, arguing that the interposed structure should be disregarded. The case raised a question that Russian courts have answered inconsistently until recently: on what basis, and under what procedural framework, can a Russian arbitrazh court pierce through or disregard a foreign corporate layer to reach assets in Russia?

The court held that where a foreign intermediate entity is demonstrably devoid of independent commercial activity — no separate management, no staff, no operational purpose beyond asset-holding — and where the timing of asset transfers to that entity coincides with the emergence of the creditor's claim, the interposition does not create a genuine jurisdictional barrier to enforcement in Russia. The court applied the concept of economic ownership alongside Russia's sham-transaction doctrine, treating the series of transactions through which assets were moved as a single artificially disaggregated transfer. Russian insolvency legislation contains provisions allowing the reversal of preferential and suspicious transactions; but in this matter the court reached a comparable outcome in a non-insolvency enforcement context by deploying broader civil-law principles of bad-faith dealing.

"[The court's reasoning confirms what practitioners have observed for several years: Russian commercial courts are increasingly willing to look through formal corporate structure where the economic reality is plainly different, and to apply that analysis across jurisdictional lines." — Elizaveta Razina, Senior Lawyer, Practice Lead – IP Enforcement, Vetrov & Partners]

Two features of the decision are particularly significant. First, the court did not require the creditor to initiate winding-up proceedings against the Russian operating company or to establish insolvency — the enforcement route remained a civil claim. Second, the court accepted evidence of the foreign shell's nominal existence in documentary form: corporate registries, bank account statements showing inactivity, and a pattern of intra-group transfers timed to pre-empt enforcement. This evidential threshold — substantial but not prohibitive for a well-prepared creditor — represents the operative standard for counsel planning a similar strategy.

If you are advising a Turkish client on enforcing against Russian-linked assets, we are available to discuss procedural strategy and evidence mapping as instructing counsel — info@vetrovpartners.com | WhatsApp/Telegram: +7 (983) 510-38-76

For Turkish law firms and foreign counsel more broadly, this decision recalibrates the risk calculus around shell-structured Russian exposures in three respects.

First, the forum question. Russian arbitrazh courts — not Turkish courts, not international arbitration tribunals — are the operative forum for enforcing against assets physically located in Russia. Where the debtor has structured its affairs through a foreign shell, the Russian court's willingness to look through that structure is the critical jurisdictional fact. Counsel should not assume that a foreign judgment or award against the shell entity will translate automatically into enforcement against the Russian assets; a separate Russian enforcement proceeding, properly constructed, is typically required. The Asset Tracing & Recovery practice at Vetrov & Partners regularly acts as instructed Russian counsel in exactly this configuration.

Second, the evidence question. The court's approach privileges economic substance over legal form. For foreign counsel preparing instructions, this means that the pre-litigation evidence-gathering phase is not a preliminary formality — it is the substance of the case. Corporate registry searches, banking correspondence, transfer documentation, and the chronological relationship between asset movements and the creditor's emerging claim are all material. Where Turkish creditors have conducted their own preliminary investigations, those materials should be shared with Russian counsel at the outset. See also our related analysis of legislative amendments affecting the unwinding of shell company structures in Russia and our practitioner overview of shell company unwinding with Russian elements for the broader framework within which this decision sits.

Third, the timing question. The court's reasoning treated the temporal relationship between asset transfers and creditor exposure as central. Creditors who allow significant time to pass between discovering a fraudulent transfer and initiating Russian proceedings give debtors the opportunity to conduct further restructuring, move assets within Russia, or initiate voluntary insolvency proceedings that alter the available remedies. Instructions to Russian counsel should be given as early as the creditor's own analysis permits.

For matters of this nature documented in our practice, the firm has acted as Russian counsel coordinating with Turkish and other foreign law firms on evidence strategy, procedural sequencing, and the relationship between foreign arbitration outcomes and Russian enforcement steps.

• Legislative amendments affecting the unwinding of shell company structures in Russia
• Unwinding shell company structures with Russian elements: a practitioner overview
• Asset tracing and recovery in Russia: an overview for foreign creditors

Q: What does this ruling change for foreign creditors pursuing Russian-linked assets through shell structures?

A: The ruling confirms that Russian arbitrazh courts will apply an economic-substance analysis to interposed foreign entities and, where those entities lack genuine independent activity, will treat the underlying Russian assets as reachable without requiring a separate insolvency filing. The practical change is one of procedural pathway: creditors who previously assumed enforcement required winding up the intermediate entity in its home jurisdiction can now pursue a direct civil claim in Russia, provided they can demonstrate the shell's absence of real economic activity and the bad-faith timing of the asset transfers. This is a meaningful shift from the earlier, more formalistic approach some circuit courts had applied.

Q: What should foreign companies and their advisers do in light of this decision?

A: Foreign counsel advising Turkish or other creditors with Russian-linked exposures should take three immediate steps. First, assess the corporate structure of the debtor and its affiliates to identify any interposed entities and the assets they hold in Russia. Second, secure all available evidence of asset transfers — timing, value, and intra-group relationships — before initiating any Russian proceedings, since this evidence is central to the court's economic-substance analysis. Third, instruct Russian counsel with experience in non-insolvency enforcement against structured entities before limitation periods in Russia begin to run. Early instruction allows counsel to advise on forum, interim measures, and the coordination of any parallel foreign proceedings.

Vetrov & Partners is a Russian boutique law firm established in 2009. The firm is recognised by Pravo-300 — Russia's principal legal directory — for eight consecutive years, and is listed as a trusted adviser by the German Consulate General in Novosibirsk.

The firm's Asset Tracing & Recovery practice advises foreign creditors — including Turkish trade creditors and institutional investors — on recovering assets located in Russia through civil enforcement, sham-transaction claims, and coordinated cross-border proceedings. The team acts as instructed Russian counsel for foreign law firms, providing procedural strategy, evidence mapping, and court representation across Russian commercial courts.

Enquiries: info@vetrovpartners.com | WhatsApp / Telegram: +7 (983) 510-38-76 | t.me/vitvetcom

To discuss instructions on a Russian enforcement matter involving shell-structured assets, make an enquiry: info@vetrovpartners.com | WhatsApp/Telegram: +7 (983) 510-38-76

This publication is provided for informational purposes only and does not constitute legal advice under Russian or any other applicable law. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Vetrov & Partners is a Russian-qualified law firm. For matters governed by foreign law or requiring local admission in another jurisdiction, we collaborate with trusted counsel in the relevant jurisdiction. For advice regarding your particular situation, please contact info@vetrovpartners.com.

— Elizaveta Razina Senior Lawyer, Practice Lead – IP Enforcement, Vetrov & Partners vetrovpartners.com/razina/