Nikitin welcomes High Court judgment in Sovcomflot dispute

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RUSSIAN shipowner Yuri Nikitin has welcomed the decision of the High Court in London to clear him of most of the claims made against him by Russian shipping giant Sovcomflot and Novorossiysk Shipping Company (Novoship) with whom Sovcomflot has merged.

The decision comes after a trial spanning six months in which Sovcomflot and Novoship sought to recover approximately $850m they claimed was owed to them as a result of the alleged dishonest actions of Mr Nikitin and others. Mr Nikitin is meanwhile considering an appeal against the finding of the court that his commission arrangements with a number of leading shipbroking firms were unlawful.

All allegations against Mr Nikitin regarding the alleged bribery of, and fraud and conspiracy with, Dmitry Skarga, the former Director General of Sovcomflot, failed completely. All allegations against Mr Nikitin regarding the alleged bribery of, and fraud and conspiracy with, Tagir Izmaylov, the former President of Novorossiysk Shipping Company, also failed completely.

In consequence, the allegations that Mr Nikitin had paid bribes to Mr Skarga or Mr Izmaylov to secure allegedly favourable deals with Sovcomflot and/or Novoship, such as sale and leaseback deals, so-called below-market charters and newbuilding contracts, were all dismissed with the result that the vast majority of the financial claims against Mr Nikitin were also dismissed.

The claim that Mr Nikitin’s commission arrangements, in particular with the brokers Clarksons, Galbraith’s and Norstar, were unlawful, whereby commissions were paid to companies associated with him on some ship sales and purchases, surprisingly succeeded with the net result, after taking into account Clarkson’s and Galbraith’s own settlements with Sovcomflot/Novoship, that some of the defendants had to pay around $32m out of the $850m claim. This comes to less than 5 per cent of the total claims. Mr Nikitin does not accept this part of the judgment.

The vast majority of the claims against Mr Nikitin were found by the court to be based on dishonest evidence from dishonest witnesses employed by Sovcomflot and Novoship. The court accepted that the witnesses who live in Russia, particularly those employed by Sovcomflot or the NSC group, would have felt “great pressure” to support the claimants’ case and that the evidence from the claimants’ key witnesses, Mr Privalov and Mr Borisenko, was “thoroughly dishonest”.

Mr Nikitin’s position has been largely vindicated. Mr Nikitin is considering an appeal in respect of the commission claims. It is his position that he introduced business to the brokers Clarksons, Galbraith’s and Norstar (otherwise there would have been no reason for the brokers to pay him) and that an arrangement whereby brokers pay a party a commission in return for the introduction of business is neither unusual nor unlawful.