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FINALE OF THE SOVCOMPLOT – UK JUDGE DISMISSES APPEAL AGAINST $72 MILLION IN PENALTIES AND COSTS; REJECTS RUSSIAN BANK SURETY; ORDERS IMMEDIATE CASH DOWN-PAYMENT

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By John Helmer, Moscow

 It’s the job of the Dorchester doorman to know his hotel guests’ sins; cater to them discreetly; but  keep them under his top-hat, forever secret.

During more than a decade of Sergei Frank’s trips to London to direct High Court litigations against the men he succeeded at Sovcomflot, the Russian state shipping company, he could count on the discretion of the hotel doorman.  After the final ruling came down on Thursday, Frank, chief executive of Sovcomflot (lead image, right), can’t be sure that his humiliation by more than a dozen British judges will not now make him a laughingstock.

In a new 4-page judgement , Frank’s appeal against $72 million in compensation and costs to be paid to Sovcomflot’s ex-shipping partner, Yury Nikitin, has been dismissed, and he has been ordered to start paying immediately, with a down-payment of £1 million.

“There is no doubt,” ruled Sir Stephen Males, the presiding judge, “that, overall, the defendants [Nikitin’s companies] were the successful party. They obtained a judgment for US $59.8 million on the inquiry.” More than that, according to Males, the award of the costs of litigating should be paid to Nikitin, plus interest on further delays the shipping company takes. Not to do so, according to the judgement, “would fail to recognise the overall success which the defendants achieved.”

The Sovcomflot story has been regarded as a shipping saga of such complexity it cannot be understood outside the maritime industry.  The outcome has proved to be simple: the British court judgements have attacked the shipping company and its chief executive for dishonesty in their evidence, and for pursuing a personal vendetta.  A near-total blackout of Russian media coverage, the  manipulation of the Oslo and London maritime media, and a campaign of personal threats and intimidation by London libel lawyers have buried the story.  For details of the shipping company’s allegations, and the vindication of Nikitin;  Dmitry Skarga, the former Sovcomflot chief executive;  and Tagir Izmaylov, former chief executive of Novoship, the Russian shipping rival Frank took over, start reading here [2]. The book of the Sovcomplot, and the musical comedy of the book, will be shorter, and appear with less delay than the 11-year litigation —  or the 63 years of Gilbert & Sullivan’s  plot.

 

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In rulings issued on August 26 and October 7 of this year, Justice Males cut Nikitin’s compensation claim by 50%; in this week’s costs award, the judge has also cut Nikitin’s claim by 50%. Read the full judgement here [4].

Sovcomflot and its management “seek permission to appeal on a number of grounds,” Males has added.  “Although I have examined these grounds and the claimants’ [Frank] submissions in support of them together with the defendants’ [Nikitin] response, no useful purpose would be served by setting them out or responding to them here. I will merely say that, so far as I can see, they appear largely to consist of challenges to my findings of fact while, to the extent that they appear to involve legal issues, I doubt whether any issue of principle really arises. In my view the proposed grounds have no real prospect of success. I refuse permission.”

Anicipating that Sovcomflot’s lawyers, David Allen QC (below, left) and  Dominic Dowley QC (right), will be instructed to press on regardless, and apply for the Court of Appeal to overrule Males, the judge told Frank he will not allow him to provide a Russian state bank promissory note.

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“The claimants seek a stay of execution pending the determination of their application to the Court of Appeal for permission to appeal and (if permission is granted) the appeal itself, on condition that they provide a guarantee from VTB Capital Plc, a Russian state owned bank in London, in the full amount of the judgment together with interest.  I am not prepared to grant such a stay.”

According to Males, despite the dismissal of Sovcomflot’s allegations in the British courts, Russian prosecutors have continued the vendetta with criminal charges that are pending in the Russian courts, with arrest warrants still current against Nikitin, Skarga, and Izmaylov.  For the time being, the Swiss authorities have accepted the request from the Russian Prosecutor-General to freeze about $200 million in Nikitin’s bank accounts in Switzerland. The legality of that freeze for what Males condemned this week as “vexatious repeat litigation” is expected to be tested in the Swiss courts soon.