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By John Helmer, Moscow

New evidence has surfaced from the Russian state shipping company Sovcomflot showing that the current chief executive Sergei Frank ordered the company’s lawyers to continue their attempts to prosecute his predecessor Dmitry Skarga in the London and Moscow courts, while telling the General Prosecutor in Moscow they were dropping their case against him.

Last week Frank’s eight-year campaign against Skarga came to an end when the Supreme Court, the highest of the English courts, dismissed Sovcomflot’s application to appeal against two High Court judgements and one Court of Appeal judgement, all exonerating Skarga of Sovcomflot’s allegations, and requiring Sovcomflot to pay more than £8 million ($13 million) in compensation of his costs. The latest episode of that story was reported here.

In February 2011, Justice Andrew Smith of the UK High Court issued a sealed order to Sovcomflot to stop the company pursuing the same claims as those before him in London from being prosecuted at the same time in the courts of Russia or Switzerland, or anywhere outside the European Union. At that point in time, Smith had been presiding for six years in the main case Sovcomflot, through its UK subsidiary Fiona, had brought against Skarga, former Sovcomflot chartering partner Yury Nikitin, and former Novoship chief executive Tagir Izmaylov. Part state-owned, Novoship was taken over and merged into Sovcomflot during 2007.

Smith’s prohibition against running the same case in different courts can be read here. Explicity, Sovcomflot was ordered not to “commence (or re-commence) or pursue or procure or assist the commencement (or re-commencement) of pursuit of any proceedings to prosecute the Disputes in any court or tribunal other than the High Court or Court of Appeal of England or Wales”. Sovcomflot was also ordered to “forthwith announce in writing to the relevant authority or authorities in Russia that they are withdrawing, and that they agree to the withdrawing of, the Russian Civil Claims.” The judge set a deadline for Sovcomflot to do that of February 16, 2011.

mednikovOn February 10, Sovcomflot sent a letter to A.V. Maltsev, who is identified in the header as a judicial adviser to the Investigative Committee of the Russian Prosecutor-General. The letter is signed by two Sovcomflot executives, including its chief lawyer, Vladimir Mednikov (right) Mednikov has been a maritime lawyer all his career, but not a criminal lawyer, nor a specialist in torts, or civil wrongs as these are prosecuted in non-Russian courts.

Here is the full text of the Sovcomflot letter. The operational words are in the first paragraph, where Sovcomflot says: “In pursuance of the Order issued by Judge Andrew Smith of the High Court of England and Wales, February 9, 2011 (the ‘Order’), we hereby declare in writing to you that we are withdrawing and agree to withdraw what is called in the Order ‘the Russian civil suits’. ‘ Russian civil suits’ are defined in the Order as follows, and when we use the phrase ‘the Russian civil lawsuits’ in this letter, we accept this definition.”

The Investigative Committee is the criminal law enforcement arm of the Russian procuracy; a spokesman of the Investigative Committee makes plain that his agency does not have jurisdiction to investigate or prosecute civil claims.

Smith left open in his injunction the meaning that a criminal prosecution of Skarga in Russia for the same disputes as were before the London court was also prohibited. According to the judge, he intended his order to cover “the disputes”, which he defined as meaning “the disputes between the Respondents [Sovcomflot] and the Applicants [Skarga, Nikitin, Izmaylov] that are, or were prior to the Judgement of this Court delivered on 10 December 2010, the subject of the Sovcomflot, Novoship and/or new Actions”.

In other words, Smith ordered, and Sovcomflot agreed, not to pursue in Russia or elsewhere the bribery and misconduct allegations against Skarga, which Smith had dismissed in his December 2010 judgement. But the wording of the Sovcomflot letter implies a narrower interpretation. It told the criminal prosecutors it was dropping civil claims which, the Sovcomflot lawyers knew, the Investigative Committee could (and would) resurrect in a fresh criminal case.

The Smith injunction does not allow Sovcomflot to “assist the commencement (or re-commencement) of pursuit of any proceedings to prosecute the Disputes.” The operational word there is “assist” – Frank, Mednikov and their associates were ordered not to do anything to enable the Investigative Committee to go after Skarga on the same claims Sovcomflot had failed to substantiate in the English courts.

By then, Sovcomflot had sought to have Smith apply English law to substantiate its bribery allegations against Skarga because Russian law set a different evidential and legal standard, and disallowed the type of claim Sovcomflot was trying to make. Smith applied Russian law and English evidential standards – tested in six months of courtroom hearings – and in the judgements of December 10, 2010, and March 24, 2011, the judge dismissed Sovcomflot’s case. Smith also ruled in the second judgement: “I consider that none of the proposed appeals stands a real prospect of success, and there is no other compelling reason for an appeal to be heard.” Sovcomflot persisted, and got leave to argue its case before the UK Court of Appeal. That court rejected the claims in March 2013. The Supreme Court has now endorsed that ruling and the earlier ones.

According to the December 2010 judgement, the judge ruled that if Sovcomflot had taken its allegations and claims to a Russian court under Russian law, there would have been “formidable, and in my judgement insuperable difficulties”. In addition, Smith decided: “the defendants [Skarga, Nikitin, Izmaylov] would be protected by different limitation periods, which appear generally to be more favourable to them [in Russia] than those available under English law.” For the alleged bribery to be proved in a Russian court, the judge ruled that Russian law would have been more favourable to the defendants than to Sovcomflot. “In so far as the claimants [Sovcomflot] might seek to rely upon a claim in bribery because, under English law, it is presumed that the bribe influenced the recipient to enter into relevant transactions or to cause the principal to do so, any issue about Mr. Skarga accepting a bribe would be governed by Russian law, and the claimants would not be able to rely upon this presumption. They would have to prove influence and causation, and they have not done so.”

In his second judgement Justice Smith pinned responsibility for the entire operation against Skarga on Frank. “Mr. Frank [was] largely responsible for the conduct of the Fiona [Sovcomflot] actions on behalf of the claimants, [and] was, as I concluded in the main judgment, dishonest.” Smith also noted in his March 24, 2011, judgement that “the defendants alleged that these investigations [by Frank] involved unlawful and illegal activities in different countries, including the United Kingdom, but I did not need to determine that.”

The Court of Appeal went further, characterizing the Sovcomflot case as intentionally and personally vindictive towards Skarga. In English jurisprudence, the Court of Appeal is usually restricted to deciding issues of the law applicable to High Court judgements; appellate judges are usually reluctant to retry issues of fact and evidence already decided by the lower court. However, the appeal judges made an exception in order to attack Sovcomflot’s factual claims.

Speaking from the bench on March 5, 2013, Lord Justice Sir Andrew Longmore said: “So we have the slightly curious situation of your clients having suffered no loss but wanting to recover, as I understand it, (a) the amount of the [alleged] bribes.” Sovcomflot’s advocate replied: “Yes.”

“LORD JUSTICE LONGMORE: Which is comparatively small, as found by the judge [Smith] at any rate.
LORD JUSTICE LONGMORE: And (b) what I suppose would be a substantial claim for an account of profits.
MR BRINDLE: Indeed, that’s right, my Lord. I don’t think I would accept that that was curious, but that, nevertheless, is the position. Your Lordship has analysed it correctly.
LORD JUSTICE LONGMORE: So it is a vindictive claim rather than a compensatory claim.”

Justice Smith noticed the same thing. During Frank’s testimony in the High Court witness-box in October 2009, the judge warned him against showing personal animus towards Skarga. Smith told Frank to stick to the evidence of fact and “rein yourself into that”.

On the findings by the London judges that Frank and Sovcomflot had been dishonest and vindictive towards Skarga, there is continuing evidence in Moscow. This is because the Investigative Committee continues pursuing Skarga with criminal charges. According to Skarga, “the prosecutors’ action on the criminal case opened in 2005 and has been prolonged since then every three months. The set and the specifics of the charges are changing from time to time. After the main High Court judgement [2010-2011] they dropped a lot of charges. But this spring and summer, after the failure in the Court of Appeal, they increased their activity. They changed charges and invented a [liability] amount of up to $300 million. After reading their document I cannot understand its substance or the evidence.”

Frank has insisted he’s neither vindictive, nor dishonest, nor even the prime mover of the case. Reversing what the judges have concluded, Frank claims this correspondent and Fairplay, the international maritime publisher, have been vindictive and dishonest. Through Bill Spears, a London spokesman on Sovcomflot’s retainer, Frank has insisted “the decision to litigate is a collective one, endorsed by the whole Sovcomflot Board…. Why is Fairplay so apparently obsessed with Mr Frank (to whom it has consistently demonstrated ill-will and which has in the past lead [sic] to legal action and belated corrections and apologies), and so apparently well-disposed towards Mr Nikitin?”

On last week’s Supreme Court decision, Sovcomflot has not issued an official comment. But a St. Petersburg website called PortNews has this week published a Russian version of material selected from the High Court proceedings, in which Skarga is criticized by the judge, but Smith’s judgement on Frank is omitted. The claims do not appear in the English version of the website. A comment by Sovcomflot in SeaNews, another maritime news website based in St.Petersburg, reported the company “actively cooperates with the investigation and runs one more similar case against Yu.Nikitin, and also his partners…” No mention of Skarga.

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