Sanjeev Gupta’s GFG Alliance metals empire has launched an action in London’s high court in a last-ditch attempt to reclaim a prized aluminium smelter in northern France from a US private equity fund.
Two GFG Alliance companies have filed a legal claim against a fund controlled by American Industrial Partners (AIP), which has run the smelter in Dunkerque since October after gaining approval from the French government.
The claim is centred on a complex series of loan agreements, but GFG’s court filings suggest the case may prompt further scrutiny on operations controlled by Gupta. AIP alleged in September that it was unable to accept payments from GFG related to the loans because of an allegation that GFG companies may have broken Romanian law, the court filings suggest.
The complex battle over ownership of the smelter has added to the pressure on Gupta amid protracted financial problems that were triggered by the collapse of its main lender, Greensill Capital, in March last year. Before its collapse, Greensill had employed former prime minister David Cameron, who repeatedly lobbied government ministers on its behalf.
Gupta’s companies are also facing criminal investigations in several countries. The UK’s Serious Fraud Office (SFO) is investigating “suspected fraud, fraudulent trading and money laundering” in relation to GFG and Greensill, while Paris prosecutors have said they are looking into several allegations of misuse of corporate assets and money laundering. German authorities are also investigating.
The Dunkerque smelter, thought to be the largest in Europe, was an important asset for Gupta because it was still profitable, and high aluminium prices in recent months have made it even more attractive. However, days after announcing that they had taken control in October, AIP executives arrived at the site and informed surprised managers that they were the new owners. They have been running the site ever since.
In the particulars of a claim signed by Gupta, the GFG companies argued that AIP was acting “in bad faith, oppressively and/or otherwise unconscionably” in order to “appropriate” the smelter.
AIP has not yet filed its response to GFG’s claims. However, GFG’s filing said that AIP claimed it was unable to accept a loan repayment because of “an unparticularised allegation that Romanian law had been contravened”.
The filing also described four separate requests for “KYC” (know-your-customer) information from GFG by AIP between July and September. KYC checks are required by companies under anti-money-laundering (AML) laws.
The court case comes amid scrutiny of GFG’s operations in Romania, where it runs a large steelworks in Galati, a port city on the river Danube. A Czech government minister last year called for an investigation into the sale of carbon credits worth £40m from a Czech steelworks to GFG’s company, Liberty Galati.
The Financial Times on Thursday reported that GFG companies had routed transactions through a Romanian bank owned by Gupta, the Bucharest-based Banca Romana de Credite si Investitii (BRCI).
A GFG Alliance spokesperson said: “None of the funds tendered to repay the [loan] facility with AIP had any connection with BRCI.”
The spokesperson said it was GFG’s opinion that AIP had “unlawfully expropriated the valuable aluminium smelter”, and said GFG had been able to “pay all liabilities owed to AIP under a financing agreement”.
In a statement, BRCI said it was a “completely independent banking institution with a fully independent board of directors”. It also said it has “a strong AML and compliance function that has served it well over many years”.
GFG says it employs as many as 35,000 people across the world in steel, aluminium and energy, with 5,000 people in the UK. However, several key assets are under threat, on top of the criminal investigations. HM Revenue and Customs this month filed in the courts to shut down four Liberty Steel companies in the UK over unpaid tax.
A spokesman for AIP declined to comment.