“Pandora Papers”: Is Fraport circumventing sanctions?

The Frankfurt airport company Fraport plays an opaque role at Pulkowo Airport in Saint Petersburg. Is it involved in evading sanctions against Russian companies?

Thalita Trading is the name of the holding in which various states, banks and funds from all over the world come together because they hold shares in the Russian airport Pulkowo in Saint Petersburg. Right in the middle: Fraport AG, the largest German airport group, slightly more than half of which belongs to the state of Hesse and the Frankfurt municipal utilities.

Also in the thick of it: the group of companies of the Russian state bank VTB, which was sanctioned by the USA after the annexation of Crimea. The sanctions should cut the VTB off from the financial markets. Financial transactions with the bank should become more difficult. In fact, VTB is still closely related to the German Fraport – through Thalia Trading, in which Fraport holds a 25 percent stake. VTB holds about the same number.

Is a German corporation, more than half of which is owned by the taxpayer, involved in ensuring that sanctions against a Russian bank can be circumvented? The “Pandora Papers” that WDR, NDR and “Süddeutsche Zeitung” together with hundreds of journalists now allow for the first time a deep insight behind the scenes of Thalita and into the role that Fraport plays in the nested company structure around Russia’s third largest airport.

Legal experts charged with examining the risk of sanctions

The documents show that the question of whether sanctions are being violated here evidently gave the operators a headache as well. Because in 2018 one of the largest international law firms was specially commissioned to tap into sanction risks. Client of the report: Northern Capital Gateway (NCG) – a wholly-owned subsidiary of Thalita. The mandate to the highly paid lawyers literally states that they should identify “potential risks with regard to sanctions” – in the “day-to-day business” of the operating company.

Spicy: The “existing, challenging cases in relation to the sanctions” had apparently been included in the delivery and particularly problematic ones had already been identified. When asked, Fraport did not want to answer which “challenging cases” were involved in “day-to-day business”.

For Marc Pieth, one of the most recognized criminal lawyers and criminologists at the University of Basel, however, the nature of the assignment already raises doubts:

If you already come up with deals that you know yourself to smell, the desired result is clear.

Everything in harmony for Fraport

On request, Fraport emphasizes: Everything is in accordance with the applicable sanction regulations. That would have shown the reports of the international law firm. Incidentally, they have nothing to do with Pulkowo airport operations – they only provide advisory services. The fact that Fraport announced to its shareholders in 2016 that it was the “main operator” of the airport is only understood by Fraport as a technical term.

Indeed? The “Pandora Papers” show: The group has signed a so-called “Operator Agreement”, ie a company agreement and an “Agreement on technical support” with NCG. It was also contractually agreed that Fraport would each nominate the airport’s CFO and the head of operations for NCG. Almost everyone worked at Fraport before. And although these managers are then employees of NCG, there is a note in the documents that part of the bonus should continue to be paid by Fraport, which Fraport denies. According to our own documents, that is not true.

Even if there are no direct violations of the rules of sanctions, Mark Pieth is critical of Fraport’s commitment in St. Petersburg: “I think that one is violating the spirit of the sanctions.” That raises the question of whether the sanctions are too soft when they can be circumvented so easily. This is particularly problematic for a company that is majority owned by the public sector.

Di Masi: The supervisory board should have intervened

With more than 50 percent ownership, “the public sector would have access rights, otherwise such public participation would not be needed,” says Fabio di Masi, who sat for Die Linke in the Bundestag. In his opinion, the Group’s supervisory board should have intervened long ago.

From Hesse it is only said that the Hessian Finance Minister Michael Boddenberg, as chairman of the supervisory board of Fraport AG, is regularly informed by the Fraport management board about significant developments in the international holdings. “Dealing with the topic you mentioned did not result in any particular findings.”

Stadtwerke Frankfurt, the second public shareholder in Fraport AG, points out that supervisory board meetings are generally not open to the public. Therefore, one will not comment on “whether and to what extent certain topics were the subject of the agenda or debate in individual sessions”.