Day 43

 

  July 6, 2016 Day 43

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  1. (10.30 am)
  1. MR BIRT: May it please your Lordship.
  1. MR JUSTICE HILDYARD: Yes, good morning.
  1. Good morning everybody.
  1. MR BIRT: Good morning. We are here for closing
  1. submissions, as my Lord knows.
  1. First of all, can I send Mr Lord’s apologies.
  1. I know he sent your Lordship an email during the course
  1. of last week. He’s sorry he can’t be here. As my Lord
  1. may know, his trial continues and he is engaged in that.
  1. He didn’t, and the claimants don’t, want the conclusion
  1. of this trial to be held up for his unavailablity or to
  1. accommodate his convenience, but he certainly doesn’t
  1. intend any discourtesy to you or to Mr Stroilov through
  1. his non‐attendance.
  1. MR JUSTICE HILDYARD: No. I received his email through my
  1. clerk and I’m sorry I haven’t replied to it. I quite
  1. understand if he’s detained elsewhere and I’m grateful
  1. to you for standing in for him.
  1. MR BIRT: Mr Stroilov is here, as my Lord knows. I think,
  1. as was also the subject of some email exchanges
  1. yesterday, the claimants did tender the video link and
  1. indeed the interpreters for Mr and Mrs Arkhangelsky if
  1. they wanted to attend, but that offer wasn’t taken up.

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  1. So we haven’t got that facility and they are not here
  1. through that facility today, my Lord.
  1. MR JUSTICE HILDYARD: Yes. I asked for that to be checked.
  1. Mr Stroilov, the Arkhangelskys are entirely content
  1. with that, are they?
  1. MR STROILOV: They are, my Lord. It is really again,
  1. obviously no discourtesy is meant but we just tried to
  1. be not too demanding and to make life easier for the
  1. claimants. At least there is access to Magnum so they
  1. can follow the proceedings sufficiently.
  1. MR JUSTICE HILDYARD: They have a live feed, do they?
  1. MR STROILOV: They do, yes.
  1. MR JUSTICE HILDYARD: Yes. I only wanted to double‐check
  1. because obviously it is unusual, unless you’re
  1. professionally represented, not to attend the trial at
  1. all at its closing stage, but that is their choice and
  1. so long as they understand it and have accepted it that
  1. is, as I can see it, a matter for them.
  1. MR STROILOV: Indeed, my Lord. That was under discussion
  1. and a lot of things at this trial have been unusual so
  1. I think all sides have been happy to settle that.
  1. MR JUSTICE HILDYARD: Thank you very much.
  1. MR BIRT: My Lord, you’ve received the parties’ written
  1. closing submissions. For our part, we put in quite
  1. a full written closing submission hoping that it would
  1. be a useful source of reference. It has, we fully
  1. acknowledge, turned out to be a long document but then
  1. it has, my Lord, turned out to be a long trial. We hope
  1. that’s been useful.
  1. MR JUSTICE HILDYARD: It has, Mr Birt.
  1. I should say that I’m very grateful for the work
  1. that has been done and I’m sure that in due course and
  1. over the many weeks it will take to consider and write
  1. my judgment, the full details of it will sink in, but
  1. the prospect of a judge, particularly with interruptions
  1. inevitably in a week , being able to fully assimilate
  1. some 700 pages and I think 3,497 footnotes is very, very
  1. far‐fetched.
  1. I have sought to try and understand the main points,
  1. having lived, of course, with you through the trial, but
  1. the mastery of the case which would have been most
  1. helpful I think, I simply haven’t achieved and I don’t
  1. think, with some sort of lightening of my own
  1. expectations of myself, I could reasonably have
  1. achieved. It isn’t to criticise, it’s simply to accept
  1. that the detail which has been provided is formidable.
  1. MR BIRT: My Lord, we acknowledge that.
  1. As I say, we certainly didn’t aim for length as an
  1. aim in itself. There has been a lot of evidence in this
  1. trial, my Lord.

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  1. MR JUSTICE HILDYARD: Yes, there has.
  1. MR BIRT: It seemed to us to be a useful way to digest it.
  1. MR JUSTICE HILDYARD: Yes. As I say, I’m grateful for it
  1. but my questioning of you may not be as acute as I would
  1. have wished, and I should say here and now that, whilst
  1. I will do my best to avoid it, I do not exclude the
  1. possibility in this case that during my deliberations,
  1. if I can pompously call them that, there will emerge
  1. difficulties which I will seek assistance from you on,
  1. if necessary orally. I appreciate that puts a great
  1. weight on you, because by then you will have moved on to
  1. other things and the case will have become a glorious
  1. and golden memory but not something of immediate recall,
  1. but I think that I do just warn that I can just see that
  1. happening, that I think the details are very, very
  1. considerable.
  1. MR BIRT: My Lord, we understand that and of course we will
  1. do our very best to accommodate your Lordship in any
  1. such eventuality.
  1. MR JUSTICE HILDYARD: I’m grateful.
  1. Closing submissions by MR BIRT
  1. MR BIRT: Having put our full written document in, what
  1. I don’t intend to do over these closing submissions is
  1. simply to repeat all of those points or indeed summarise
  1. all of those points, but I hope there are some key

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  1. points that I can bring out and emphasise in a helpful
  1. way. I can hopefully shed some light on some areas of
  1. disagreement that have emerged from Mr Stroilov’s
  1. closing submissions and indeed deal with some of the
  1. points that he makes.
  1. MR JUSTICE HILDYARD: Yes. The latter is of great
  1. importance to me.
  1. Just as a general guidance, at present whilst the
  1. position as regards the guarantees and the personal loan
  1. is to some extent left open, because Mr Stroilov has
  1. explained to me that it had been his intention to put in
  1. formal closing submissions in that regard, but for one
  1. reason or another time crept away, I rather take it that
  1. from the defendants’ point of view they would prefer, if
  1. I can put it that way, to focus on the counterclaim.
  1. One view of the case is that it is very much a case
  1. of two halves in which you say the position on the
  1. guarantees and the personal loan is pretty clear and you
  1. say, if you’re right, that it demonstrates dishonesty on
  1. the part of Mr Arkhangelsky in seeking to evade his
  1. liabilities by a false claim of forgery. That’s the way
  1. you put it.
  1. MR BIRT: We do, my Lord.
  1. MR JUSTICE HILDYARD: But the other half of the game, if
  1. I can put it that way, is almost entirely focused on the

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  1. activities of the Bank and its arrangements with what
  1. I’ll call Renord, by which I mean all the companies
  1. within the Renord umbrella and one or two companies
  1. which, even if not within the Renord umbrella, were
  1. subject to the Bank’s will or that of Mr Savelyev.
  1. MR BIRT: That’s their case, my Lord, yes.
  1. MR JUSTICE HILDYARD: One of the things I’m interested in
  1. is, supposing I were to find that Mr Arkhangelsky did
  1. sign the guarantees and Mrs Arkhangelskaya, knowingly or
  1. unknowingly, did give her spousal consents and that
  1. Mr Arkhangelsky did enter the personal loan, so that the
  1. Bank’s claim as such is established. At the moment I’m
  1. not sure how that would assist me in determining the
  1. rights and wrongs of the second part which is, as I say,
  1. wholly focused on the activities of the Bank and Renord.
  1. That’s one of the matters which I need some guidance
  1. on. It will also be implicit from what I’ve said that
  1. a particular focus for me, and the matter which I can
  1. say now does give me very considerable disquiet, are the
  1. arrangements between the Bank and Renord, and I will
  1. need a lot of help on that.
  1. I shouldn’t think that comes as a surprise but that
  1. is the way, at the moment, I’m looking at the matter.
  1. They are very different matters, in which the honesty or
  1. not of Mr Arkhangelsky doesn’t really bear on the
  1. second.
  1. I know that you also raise a public policy issue
  1. which hasn’t been ventilated before, for obvious
  1. reasons, and I will also need some assistance on that,
  1. if I can call it that, legal defence to the factual
  1. scenario in the second half of the game.
  1. As I say, I just wanted to get that off my chest so
  1. that you can focus your fire power.
  1. MR BIRT: My Lord, yes. I understand those two points as
  1. my Lord says. I will deal with them as I come to them,
  1. in a sense. Indeed, we’ve dealt with them to an extent
  1. in the written closing as well. As I say, I’ll come to
  1. them, and it has always been part of Mr Arkhangelsky’s
  1. case that the forgery, as he calls it, was part of the
  1. conspiracy; it has always been pleaded like that and he
  1. has always insisted that it is like that.
  1. Obviously the fall of his forgery case, as we put
  1. it, goes to his personal credibility and in a sense also
  1. to his credibility in making what we regard as wild and
  1. unsubstantiated allegations left, right and centre.
  1. My Lord, perhaps I can come back to that in its
  1. appropriate place.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: For a note, we made that point in our written
  1. closing at I think paragraph 604, the forgery

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  1. allegations were part of the conspiracy.
  1. My Lord, in terms of dealing with this hearing, we
  1. I think we are listed for four days. The original back
  1. of the envelope thinking was two days and two days.
  1. Given the length and detail in our written closing and
  1. given the, dare I say, comparative brevity of
  1. Mr Stroilov’s written closing and the fact that it has
  1. not dealt with all the issues ‐‐ indeed Mr Stroilov sent
  1. an email saying he anticipated dealing with some issues
  1. orally in response to your Lordship’s email and in terms
  1. the written document says that further submissions will
  1. be made on certain other topics ‐‐ it seemed to us
  1. sensible that we have some time in reply, if only to
  1. deal with points that have not been addressed in writing
  1. but which are addressed orally. So in order to keep the
  1. time split sensible and equitable, and so as not to
  1. squeeze Mr Stroilov and Mr Milner, my outline plan is to
  1. be on my feet today. Whether I get to the end today or
  1. not will just depend how we go. We may or may not get
  1. there, there may be some more points to address in the
  1. morning. But a rough round day. Then Mr Stroilov and
  1. Mr Milner can have their time. I think Mr Stroilov
  1. tells me he anticipates they’ll be two days. They may
  1. go a bit shorter but he doesn’t think we should Bank on
  1. that. That being the case, we would have some time to

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  1. reply after those submissions, whether that is at the
  1. end of Friday afternoon and can be accommodated then, or
  1. whether that requires us to return on Monday, one can
  1. see how it goes, my Lord. But I thought I should sketch
  1. out how the thinking was on this side of the bench,
  1. having talked to Mr Stroilov before we started today.
  1. Then before I start making submissions, I just want
  1. to make an overall point about the defendants’ written
  1. closing submissions. It is notable that many of the
  1. issues raised at trial have not been dealt with in
  1. there. Now, I don’t say that by way of complaint
  1. necessarily, although there will be some points that we
  1. will want to pick up, but real observation.
  1. The main substantive issues that we note have not
  1. been dealt with are relatively numerous. It is the
  1. forgery case; so the guarantees, both personal
  1. guarantees and Scan guarantees and the personal loan,
  1. which my Lord asked about and Mr Stroilov has indicated
  1. he had intended to deal with but hasn’t yet done so and
  1. will address orally. There are various other issues
  1. though. There was previously an issue about whether
  1. certain demand notices were properly sent or were sent
  1. or received by Mr Arkhangelsky. There is, of course,
  1. the factual issue that came up in the evidence of
  1. Mr Arkhangelsky’s corrupt payments to foreign officials

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  1. amounting to, so he said, $160 million. The related
  1. issue of how it is said that the OMG group could
  1. possibly have raised further financing during late 2008
  1. or during 2009 or, we say, at all.
  1. There’s no real engagement on the financial standing
  1. of the OMG companies at all, including Western Terminal,
  1. and what we have described as the financial pyramid on
  1. which the OMG group was built. There was quite a lot of
  1. evidence about that but there’s precious little in
  1. Mr Stroilov’s written submissions.
  1. There is nothing on the apparent transfers out of
  1. the OMG companies, notably City Centre, but the other
  1. ways in which money leaked out, we say, to Mr or
  1. Mrs Arkhangelsky. There are various legal points that
  1. aren’t covered, there are some time bar issues for
  1. example, and some Russian law issues which haven’t been
  1. covered.
  1. Apart from the Western Terminal land, there is no
  1. submission at all about the valuation of the assets, and
  1. we also note that, given the fuss that has been made by
  1. Mr Arkhangelsky during the whole course of this
  1. litigation, there is only a single reference to
  1. Mrs Matvienko, and one wonders whether the burden of the
  1. case has shifted very significantly in that respect.
  1. In some ways, those omissions are surprising but we
  1. do note that at the end of this trial, having had some
  1. two full months since we were last in court, between the
  1. end of the Russian law evidence and the other side’s
  1. written closing submissions being put in, they having
  1. asked for and been granted without objection, the
  1. extensions that there were, and indeed, as we understand
  1. it from the email correspondence, with Mr Milner’s
  1. assistance in relation at least to valuation and Russian
  1. law, we say that whatever they’ve chosen to put in or
  1. out, there can’t really be any complaint that the
  1. defendants haven’t had the opportunity to explain their
  1. case in full.
  1. It may be that some of the points that haven’t been
  1. covered are simply no longer pursued, but we wait to
  1. hear whether any of them are further picked up in oral
  1. submissions.
  1. Insofar as my submissions are concerned, most of
  1. those points, given we haven’t had anything in writing,
  1. I don’t intend to spend too much time on today. I may
  1. have to emphasise one or two points but it’s all, as
  1. my Lord knows, in detail in our written closing.
  1. My Lord, I would first like to say a few things
  1. about Mr Arkhangelsky and his honesty or, as we say,
  1. lack of it.
  1. As a preliminary point, although my Lord started out

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  1. by saying this case divides as a game of two halves, we
  1. say it is not entirely two discrete halves.
  1. Mr Arkhangelsky’s credibility runs through much of the
  1. second half as well as the first. Certainly in the way
  1. Mr Stroilov puts the case in his written closing, the
  1. so‐called conspiracy starts and to a great extent is
  1. premised on the alleged moratorium of six months that is
  1. said to have been agreed in the December meeting. That
  1. is, from his side, wholly dependent on Mr Arkhangelsky’s
  1. credibility and his own oral evidence, because there is
  1. nothing else to support it.
  1. In relation to Mr Arkhangelsky’s evidence on the
  1. many and various points, we’ve dealt with that
  1. throughout the written closing and that’s dealt with in
  1. the context as they arise. For my Lord’s note, there is
  1. also a section towards the beginning of our written
  1. closing, starting at paragraph 42, in which we’ve set
  1. out some general observations on his honesty and his
  1. evidence and his conduct in the witness box and his
  1. character generally {AA3&4/14/31}.
  1. My Lord knows that our general submission is that he
  1. is a dishonest man and was a dishonest witness. That is
  1. not a submission that counsel makes lightly, my Lord,
  1. but here we say it is obvious and clear. I don’t intend
  1. to run through every single example that we have

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  1. highlighted in the written closing submissions but can
  1. I just dwell for a few minutes on one particular example
  1. which goes all the way back to 2008 and was his
  1. misrepresentation of the price at which he had acquired
  1. Western Terminal. We have set this out in some detail
  1. starting at paragraph 242 of our written closing.
  1. {AA3&4/14/148}.
  1. As your Lordship knows, Mr Arkhangelsky acquired it
  1. for about $40 million or about 1 billion roubles
  1. in May 2007. The misrepresentation in the information
  1. memorandum was that it had in fact been acquired for
  1. $220 million, but that’s not a small discrepancy or
  1. a trivial amount, it was a huge misrepresentation. It
  1. was repeated a number of times in the document. It
  1. wasn’t a mistake; it had been inserted deliberately and
  1. indeed with some explanation to back it up.
  1. If we can pick up at 243 of the written closing,
  1. there are some other extracts, we have set those out
  1. from the information memorandum there {AA3&4/14/150}.
  1. It didn’t just say it was $220 million, it went on to
  1. say it was funded by OMG’s internal resources for
  1. 140 million and short‐term debt for 80 million.
  1. Mr Bromley‐Martin said he thought that sounded a lot
  1. but that’s what he was told by OMG. It just wasn’t
  1. true. This was something they wanted to rely upon in

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  1. order to obtain finance. It was acknowledged numerous
  1. times by Mr Bromley‐Martin and indeed it is an obvious
  1. point that it was a relevant factor for any potential
  1. lender. OMG was seeking finance of $300 million, and
  1. whether the terminal in relation to which they were
  1. seeking that funding had been acquired for $220 million
  1. or just $40 million only a year earlier was quite
  1. obviously something a lender would want to have known.
  1. It was a huge and deliberate misrepresentation. It
  1. was, and I don’t shy away from this, a brazen attempt to
  1. mislead the various potential lenders that were going to
  1. be approached. The fact that Mr Arkhangelsky was
  1. willing to tell such a huge untruth for that purpose
  1. demonstrates his complete lack of care for the truth.
  1. He is content, we say, to lie whenever it suits his
  1. purpose, and that itself is a short and easy
  1. demonstration of his dishonesty.
  1. However, it gets worse, because the explanation he
  1. sought to give to explain that discrepancy itself casts
  1. his character into further shadow. We had the quite
  1. astonishing evidence that Mr Arkhangelsky said that he
  1. had paid $160 million in payments to a Russian official
  1. or officials in connection with Western Terminal. This
  1. wasn’t something that he only was tricked into saying
  1. under some careful cross‐examination. It wasn’t
  1. something anybody on this side of the court thought he
  1. would say. He volunteered it, and when he was asked to
  1. explain those payments, he characterised them as bribes.
  1. As we’ve set out in paragraph 251 of our closing, his
  1. explanation was, «Well, you couldn’t do anything in the
  1. port of St Petersburg»:
  1. «… we are not able to do anything because of the
  1. federal things and it’s only the federal government …
  1. and this was normal that we were paying to officials …
  1. «Question: Was it a bribe, Dr Arkhangelsky …
  1. «Answer: Yes, it is. It is.»
  1. {AA3&4/14/153}
  1. He didn’t shy away from it, and he said that
  1. anything he wanted to do, to do with developing the
  1. terminal, he would have to pay a bribe.
  1. He also gave some evidence that there were payments
  1. made under what he referred to as consultancy
  1. agreements. We say that’s simply an euphemism; there
  1. was no consultancy, it was simply window‐dressing to
  1. conceal the corrupt payments that he was making.
  1. Our case, as my Lord will have picked up from the
  1. written document, is that this evidence, that he paid
  1. $160 million of bribes in relation to Western Terminal,
  1. couldn’t have been true and wasn’t true. There was no
  1. evidence that OMG had that sort of money available to it

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  1. in cash or freely available to make those sorts of
  1. payments. Dr Arkhangelsky couldn’t properly explain
  1. where it came from, he just airily said it came from
  1. OMG’s balance sheet, without being able to give any
  1. details, but no evidence of sums of that size
  1. disappearing in that way.
  1. However, the explanation is revealing, that he gave,
  1. and no doubt there was a grain of truth in what he said.
  1. No doubt he had paid some bribes and that’s why he leapt
  1. upon this as the answer to the discrepancy, but it
  1. simply couldn’t have been in the sort of amounts that he
  1. came up with. But probably he did pay bribes and
  1. probably, as he said, he had to pay bribes to develop
  1. the terminal in any way at all.
  1. In fact it doesn’t really matter how much he was
  1. paying in bribes. Going back to the initial
  1. misrepresentation, even if his evidence is to be
  1. believed, that he paid $160 million in bribes, that
  1. cannot go any distance to justify the representation in
  1. the information memorandum that the acquisition price is
  1. 220 million. Assume it was 160 million in bribes, that
  1. doesn’t mean that he had acquired the terminal for
  1. 220 million. It meant he’d acquired it for 40 million
  1. and he’d paid somebody $160 million in bribes. Saying
  1. you’ve acquired it for 220 million is still a complete

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  1. and utter lie.
  1. MR JUSTICE HILDYARD: How was «acquisition cost» defined, if
  1. it was, in the information memorandum in its various
  1. drafts?
  1. MR BIRT: I’m sorry, my Lord?
  1. MR JUSTICE HILDYARD: How was «acquisition cost» defined in
  1. the various drafts?
  1. MR BIRT: My Lord, we can have a look at what it says. They
  1. simply said it was acquired for 220 million. Picking it
  1. up at paragraph 243 of our closing, it was acquired for
  1. 220 million, funded by OMG’s internal resources of
  1. 140 million and short‐term debt of 80 million
  1. {AA3&4/14/150}.
  1. Then subparagraph (2) of 243, the freehold was
  1. acquired by OMG in 2007 for 220 million. Again, under
  1. subparagraph (3), OMG acquired Western in 2007 for the
  1. sum of $220 million which was paid for with cash by OMG.
  1. MR JUSTICE HILDYARD: My memory is hazy on this but, as far
  1. as I recall, Mr Arkhangelsky told me that the payment
  1. was not only to sort of grease the wheels but also to
  1. enable development of a plot of land next door.
  1. MR BIRT: My Lord, yes. I think it’s fair to say that he
  1. didn’t always speak consistently about this but
  1. certainly part of what he said was that it was in order
  1. to obtain the development rights to the extension of

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  1. Western Terminal into a bit of the port. He described
  1. it as a bit covered in water, by which I think he meant
  1. there was a bit which was still the port and he wanted
  1. to extend into it and he needed various federal
  1. permissions to do so. But he also gave evidence that
  1. I just drew your Lordship’s attention to a minute ago,
  1. paragraph 251, {AA3&4/14/154} that effectively he was
  1. saying, «We couldn’t do anything without paying bribes
  1. in the port of St Petersburg». So in a sense, one of
  1. the reasons why he was paying bribes was, so he said,
  1. for the development opportunities of extending the
  1. terminal. But it was also the burden of his evidence
  1. that you had to do this to do anything with Western
  1. Terminal, and indeed he referred to the other port
  1. businesses as well and he said it was much the same.
  1. MR JUSTICE HILDYARD: I’m not saying that this was made
  1. clear but I suppose it might be said that, on its
  1. broadest definition, acquisition costs is the amount you
  1. expend to get to the starting place of being able to
  1. develop what you have acquired, up to a certain point.
  1. For example, if you buy a house and you also have to pay
  1. someone off in order to clear away their interest in it,
  1. that could be said to be an acquisition cost.
  1. MR BIRT: It would be a rather broad and strained reading of
  1. it, my Lord, even if the facts bore it out. My Lord, if
  1. I could just look at paragraph 248 of our closing, which
  1. Mr Eschwege kindly drew to my attention. My Lord, this
  1. is one of the ways in which he tried to explain the
  1. discrepancy saying he had to pay separate funding as
  1. part of a special project in order to acquire this
  1. further territory. He alleged that the share purchase
  1. contract related only to the 8 existing hectares of
  1. land, whereas what he also said was the acquisition
  1. price related to the territory covered in water.
  1. {AA3&4/14/152}. The trouble is, the information
  1. memorandum itself contained reference to the potential
  1. purch of those further 4 hectares which were still to be
  1. reclaimed and that had not yet been acquired and so, we
  1. say, can’t explain the 220 million figure. The
  1. reclaimation and the development of that was one of the
  1. things, perhaps the major thing, that they were seeking
  1. the funding for, my Lord.
  1. In any event, one might think, this document being
  1. a presentation to a western bank, a western bank that is
  1. being told acquisition price of 220 million, I think
  1. could, in no real world, be thought to understand that
  1. one of the possibilities was that actually 160 million
  1. had been paid in bribes and that was what was being
  1. counted towards the so‐called acquisition price. Any
  1. lender would have rightly regarded the amount of the

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  1. acquisition price as a representation of what had been
  1. paid to the seller.
  1. We say, therefore, that his attempt to explain the
  1. figure in the information memorandum therefore not only
  1. shows his true character, someone content to pay bribes
  1. of whatever amount he actually did, but it has also
  1. failed as an attempt to justify the representation as to
  1. acquisition cost in the information memorandum.
  1. There were also various other misrepresentations in
  1. the information memorandum, which we’ve dealt with at
  1. paragraph 274 and following in the closing.
  1. {AA3&4/14/168}. At 275 we’ve set out another extract
  1. which read that they were seeking to raise a certain
  1. amount in long‐term debt, part of which was to repay
  1. 90 million of short‐term debt used to acquire the
  1. terminal in 2007.
  1. Well, that wasn’t true, because they had acquired it
  1. for 40 million so they hadn’t needed 90 million to
  1. acquire it. «Gearing», that bullet point there:
  1. «The parent company has already put in
  1. US$140,000,000 of equity into the facility.»
  1. That just wasn’t true.
  1. Once this was pointed out to Mr Bromley‐Martin, who
  1. hadn’t appreciated that the acquisition price was
  1. actually 40 million, his evidence was very clear. He

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  1. agreed that this was all misleading and he agreed with
  1. your Lordship and your Lordship’s questions that this
  1. would have sent any reputable lender running a mile.
  1. The whole document was put together on a false basis,
  1. with a huge misrepresentation simply with the intention
  1. of misleading potential lenders.
  1. We say that this whole saga, the initial untruths in
  1. the information memorandum and the false attempt to
  1. excuse them with the bribery story, and in fact the fact
  1. that he was content or even happy both to boast about
  1. the huge sums he had paid in bribes, we say,
  1. demonstrates his fundamental lack of honesty and the
  1. unreliability of anything he says.
  1. As I say, that is the single largest point I would
  1. highlight at this stage in that regard and we’ve dealt
  1. with many other points in the written document. But he
  1. is sort of unable to resist telling lies or gratuitously
  1. exaggerating things. The other examples that leap to
  1. mind were at the PTR where he said, «Well, if I have to
  1. come to Paris rather than go to Nice for
  1. cross‐examination, our kids will not be fed, we won’t
  1. stay in a hotel, we will sleep on the court». We’ve
  1. quoted that in paragraph 1171 {AA3&4/14/615} of our
  1. closing. That wasn’t just an innocent exaggeration, it
  1. was a deliberate lie seeking to influence the conduct of

21

  1. this case and an important case management decision that
  1. was before your Lordship. He knew he had enough funds
  1. to pay for a hotel room and to feed his children. There
  1. was never any danger otherwise. It was just a short
  1. example of how easy Mr Arkhangelsky finds it to
  1. exaggerate and to lie.
  1. Another example of his facility to deceive and
  1. indeed willingness to do so, apparently without
  1. considering he was doing anything wrong, is the point we
  1. have dealt with in our written closing at paragraph 1153
  1. to 1156.
  1. I just want to pause before making the submission on
  1. this point, my Lord, because if my Lord can turn up that
  1. page, which starts at page 607 of the written closing
  1. {AA3&4/14/607} there is lots of yellow highlighting.
  1. My Lord will have picked up from the way in which we
  1. started our written closing that this was our way of
  1. dealing with those parts of the evidence that were in
  1. the end given in private.
  1. There’s a short submission I want to make about this
  1. and I don’t know whether, because I’m going to refer to
  1. the evidence, we have to go into private or whether
  1. there is no real objection to this.
  1. If I can remind my Lord how this came about,
  1. hopefully without saying anything in public that
  1. discloses the content, but at the hearing on Day 16, and
  1. it starts at page 121, we went into private because
  1. questions were going to be asked about personal bank
  1. statements and on the open part of the transcript it has
  1. recorded a concern that there may be some items of
  1. a personal nature, for example medical expenses or
  1. something similar, and so out of an abundance of caution
  1. the court went into private at that stage.
  1. The passage highlighted here isn’t really to do with
  1. that at all, it’s simply what we moved on to, and when
  1. we got to the end of it, at Day 16, page 146,
  1. {Day16/146:1} my Lord suggested actually this particular
  1. passage and these passages may be opened up because they
  1. didn’t really go to the questioning that constituted the
  1. reasoning for going into private in the first place.
  1. But, my Lord, I’m quite happy to preserve the
  1. status quo, simply to make a two‐minute submission on
  1. this point if it is felt we need to retain it.
  1. MR JUSTICE HILDYARD: Is this something ‐‐
  1. MR STROILOV: No, I don’t see we need to go into private,
  1. my Lord.
  1. MR JUSTICE HILDYARD: Can we say that whilst it may have
  1. been ‐‐ though I don’t recall ‐‐ kept confidential one
  1. moment, the client does not wish, neither Mr nor
  1. Mrs Arkhangelsky nor the counter claimant wish this to

23

  1. be argued about, they’re perfectly prepared that it
  1. should be opened?
  1. MR STROILOV: Well, no, I think we’ve looked into this in
  1. the course of the trial. The position is the transcript
  1. remains in private but my learned friend will refer to
  1. it in his submissions in open court, and I see no
  1. grounds for objection to that, really. He’ll refer in
  1. the same way as it is done with, say, ex parte
  1. applications for freezing orders; you have a hearing in
  1. private but then the transcript is referred to in open
  1. court. So my understanding is that will remain the
  1. position here ‐‐
  1. MR JUSTICE HILDYARD: We never quite got to the bottom of
  1. what the position in that regard is, as far as I recall.
  1. But I think in a way it’s better just to grasp the
  1. nettle. Insofar as there are details relating to their
  1. personal finances or circumstances, then I shall take it
  1. for the present that they are to be kept private.
  1. Insofar as they are matters which relate, for example,
  1. to the present paragraphs, they do not appear at first
  1. blush to be confidential matters, they appear to be
  1. matters which could and should really be open to public
  1. review. Would you agree?
  1. MR STROILOV: Quite, my Lord. I accept that. At least in
  1. relation to these paragraphs. If we come to any other

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  1. highlighted bits, it may be necessary to raise further
  1. points, but in relation to this particular element,
  1. I don’t see any reasons to object to my learned friend
  1. making submissions in open court.
  1. MR JUSTICE HILDYARD: So it would be fair and appropriate,
  1. as regards to these paragraphs, to proceed on the
  1. footing that, whatever their original confidentiality or
  1. assumed confidentiality, they should now be in public
  1. but we must take it incrementally because there may be
  1. other more sensitive areas.
  1. MR STROILOV: Quite, my Lord, that’s my position.
  1. MR JUSTICE HILDYARD: Does that help?
  1. MR BIRT: My Lord, I’m very content with that. I hope
  1. I didn’t make too much of a meal of it, but I’m cautious
  1. about not mentioning in public things which are in
  1. private.
  1. MR JUSTICE HILDYARD: I’m afraid I don’t know, and can’t
  1. remember, why on earth these were thought at one moment
  1. to be confidential. It may be, having gone into
  1. private, things which were ‐‐ we didn’t quite early
  1. enough say that we’d reverted to public. It may be as
  1. simple as that.
  1. MR BIRT: My Lord, I think it is along those lines, that one
  1. moved between topics, yes. Given we’re in public, if
  1. I go on too much about what the other topics were,
  1. private. That, as it seems to me, is the broad dividing
  1. line which I would be likely, subject to calls to
  1. contrary argument, to follow.
  1. MR BIRT: My Lord, yes. As I say, certainly if I come to
  1. another similar part, I’ll pause and we can have
  1. a similar discussion about that subject matter.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: The passages here that I’ve drawn your Lordship’s
  1. attention to, starting at page 607 {AA3&4/14/607}, to
  1. remind my Lord, this was Mr Arkhangelsky’s evidence that
  1. he effectively falsified the OMGP company stamp on the
  1. document that he presented to this court as containing
  1. the company’s authorisation for him to represent that
  1. company in this litigation. The document was at I20,
  1. tab 21, page 3 with his covering email at page 2.
  1. {I20/121/3}. I don’t know if we can have them both up,
  1. can we?
  1. My Lord may remember, back in the days of the autumn
  1. there was debate about whether OMGP could be properly
  1. represented by a McKenzie friend. We sorted that out in
  1. a judgment your Lordship gave but there remainded a
  1. question about whether OMGP had properly authorised its
  1. representative, Mr Arkhangelsky, who in turn authorised
  1. Mr Stroilov.
  1. There had been an earlier resolution but that was

25 27

  1. I will be talking about things that were said in
  1. private.
  1. MR JUSTICE HILDYARD: No. Go incrementally.
  1. MR BIRT: Yes.
  1. Just on that point, insofar as there are other parts
  1. of the transcript which are in private, I don’t intend
  1. to refer to them, I think, at all. But if it turns out
  1. that I do, I think I will pause in the same way we have
  1. just done to see, and I would hope Mr Stroilov would do
  1. the same. Because we went into private for different
  1. reasons at different points and in relation to different
  1. subject matters. There may be reasons why we went into
  1. private whereas it’s not really appropriate for that to
  1. be lifted in any event, but we can come to those
  1. incrementally as they arise.
  1. MR JUSTICE HILDYARD: In general terms, if the matter is of
  1. relevance to the disposition of the case or to the
  1. credibility of a witness in that regard, my very strong
  1. disposition would be to ensure that it is in public
  1. because the court is a public process and the public
  1. must understand exactly how the decision was reached.
  1. Where there are other matters, for example bank
  1. statements which provide a window into private lives,
  1. which is of no real relevance to the disposition of the
  1. matters in issue, I think that they ought to be kept
  1. before Withers came on and off the record and it was
  1. thought proper that OMG confirmed this, particularly
  1. since OMG’s position in this litigation was said to be
  1. that it couldn’t give any disclosure because
  1. Mr Arkhangelsky had no practical control over it or its
  1. documents.
  1. My Lord made an order for various things to be
  1. provided, including evidence of the authorisation of
  1. Mr Arkhangelsky, and ultimately, after some delay it has
  1. to be said, Mr Arkhangelsky produced this. This is
  1. a document that he relied on to demonstrate that OMGP
  1. had authorised him, and anybody receiving this document,
  1. including the claimants and no doubt including the
  1. court, would have anticipated that the stamp that it
  1. bore was a stamp that had been applied using the company
  1. stampe.
  1. This passage of questioning that I’ve highlighted
  1. was about how he had procured OMGP to stamp this with
  1. its seal, given the evidence that he was also giving
  1. that he did not have the company seal. That was part of
  1. his account, trying to distance himself from the
  1. transfer of Vyborg port, to the company called Akort
  1. which his lawyer Mr Vasiliev had effected. He tried to
  1. distance himself from that, saying he didn’t have the
  1. seal, and we said «You had the seal in December 2015

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  1. when you caused it to be applied to this document to
  1. authorise your representation in this case». He said
  1. «Ah, well, I didn’t, because I just, you know,
  1. photocopied it and stuck it on with some slight jiggery
  1. pokery».
  1. He was trying to give the impression this was
  1. a proper document and in fact it wasn’t. Now, whether
  1. the stamp is required or not as a matter of Russian law
  1. is irrelevant, is one of the excuses he gave, and in
  1. fact the reason why it was produced is irrelevant. It
  1. simply shows that, given half a chance, he would happily
  1. create this sort of false document in order to deceive
  1. people. He could have quite happily written and said,
  1. «I haven’t got the stamp, because it’s stuck in Russia
  1. and they haven’t given it to me, but I can confirm I’m
  1. an authorised director», and he could have explained the
  1. position. But rather than do that, he did something
  1. with a photocopier and a pair of scissors and a bit of
  1. paste, as far as one can tell. We say that shows his
  1. facility to deceive.
  1. MR JUSTICE HILDYARD: I well understand the context in which
  1. you’re making the point but do you make later any
  1. further point in this regard as to whether GP is
  1. properly pursuing the counterclaim?
  1. MR BIRT: My Lord, we haven’t taken a point to say that OMGP
  1. box. It was obviously untrue. We’ve dealt with it in
  1. our written closing at paragraph 826. {AA3&4/14/442}.
  1. MR JUSTICE HILDYARD: That’s an untruth of a different sort.
  1. That’s a sort of wild and baseless claim, isn’t it,
  1. rather than a lie?
  1. MR BIRT: My Lord, yes, and I think that’s how I was trying
  1. to describe it. Really these are examples of different
  1. sorts of dishonesty ‐‐
  1. MR JUSTICE HILDYARD: Unreliability. Or unreliability.
  1. Lack of credibility. Willingness to say things without
  1. caring whether they are true or not, my Lord. Again, to
  1. give an example of something which again may not have
  1. been a lie in quite the same sense but another example
  1. of his willingness to make wild allegations during the
  1. course of this litigation, at the start of Day 5 we got
  1. an email a few minutes before we all came into court
  1. saying that SocGen had been contacted by the Bank of St
  1. Petersburg and consequently all the defendants’ bank
  1. accounts had been blocked completely and all the cheques
  1. were going to be dishonoured. That’s an email that
  1. Mr Stroilov sent to us and copied to your Lordship, that
  1. was all sent on the instructions of the Arkhangelskys,
  1. and it turned out not to be correct at all. Once
  1. a proper explanation had been given, it was nothing to
  1. do with the Bank of St Petersburg. There had been no

29 31

  1. is not a proper party to this litigation.
  1. MR JUSTICE HILDYARD: So you accept that, by some process,
  1. it has been authorised to proceed?
  1. MR BIRT: My Lord, yes.
  1. MR JUSTICE HILDYARD: So the point only goes to the
  1. propensity of Mr Arkhangelsky, as you say is
  1. demonstrated by amongst other things this, to produce
  1. a false document whereby to deceive, amongst others, the
  1. court?
  1. MR BIRT: My Lord, yes. And it’s aligned to the other point
  1. we make in this part of the closing, which I’ve
  1. mentioned earlier, which shows that actually he can get
  1. OMGP to do things and he was wrong to distance himself
  1. from the transfer of Vyborg port. This is the context
  1. in which it all arose.
  1. Another example of the way in which he was just
  1. happy to, we say, make things up as he went along, were
  1. the allegations he came up with during his oral evidence
  1. that the Bank of St Petersburg was bribing the Central
  1. Bank of Russia, an allegation which grew in the telling
  1. as he started to like it a bit more, but there was
  1. absolutely nothing to support it. It was never part of
  1. his pleaded case, never in any witness statement, not
  1. even suggested to any witness, not even those witnesses
  1. that came after Mr Arkhangelsky had left the witness
  1. attempt to interfere with the SocGen account at all and
  1. no contact had been made at all. It was simply the
  1. local bank manager who had said, when there was an
  1. attempt to cash in the life assurance policy, the Bank
  1. said, «You can’t cash that in without the permission of
  1. the court because actually there’s a freezing order».
  1. It’s not a very surprising reaction from the bank.
  1. There was no reason for Mr Arkhangelsky to jump to the
  1. unfounded conclusion that Bank of St Petersburg had
  1. somehow tried to stop all his cheques. But it just
  1. shows how he is happy to bandy about those sorts of
  1. allegations, my Lord.
  1. Again, it’s a different sort of unreliability, and
  1. we say that runs through everything really. The court
  1. cannot rely on his uncorroborated evidence at all and
  1. should treat with great scepticism all of his
  1. allegations because he is prone to, and indeed content
  1. to, lie and to fabricate documents and exaggerate things
  1. and bandy about allegations that have no substance,
  1. without any care as to their truth. This, of course,
  1. arises in certain places, it is relevant to a number of
  1. allegations in the case. On certain points Mr Stroilov
  1. asserts that Mr Arkhangelsky’s word should be preferred
  1. to the word of witnesses of the Bank, for example
  1. allegations as to intimidation, allegations as to the

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  1. moratorium where the guarantees were signed, various
  1. other examples. But the court just simply cannot prefer
  1. Mr Arkhangelsky’s word, he cannot be trusted; nor can
  1. one trust documents he has produced or believe
  1. allegations that he makes. Indeed his dishonesty, as we
  1. can see from the information memorandum, runs all the
  1. way back not just through this trial but through the
  1. conduct of his business going back to 2008.
  1. My Lord, on the forgery case, I don’t want to say
  1. very much about it because we’ve dealt with it at length
  1. in our written document and indeed nothing has been said
  1. against it in the written closing filed by Mr Stroilov,
  1. but we of course say, as my Lord knows, that this is
  1. another demonstration of Mr Arkhangelsky’s dishonesty.
  1. These are longstanding and continued allegations, that
  1. he didn’t sign the guarantees or the personal loan, that
  1. the Bank forged his signature and that of his wife.
  1. Indeed, the forgery case has been a mainstay of his
  1. allegations against the Bank for a long time. It is
  1. something that he has repeated in various jurisdictions.
  1. It is, my Lord, an allegation of the utmost
  1. seriousness. It is a way in which he has sought to
  1. impugn the reputation and the character of the Bank and
  1. of Mr Savelyev person in a very serious way. Quite
  1. frankly, it is not the sort of allegation that one
  1. paragraph 68. {AA3&4/14/44}. All the evidence is there
  1. and I don’t go through it orally, given there’s no real
  1. engagement on any of these points from the defendants.
  1. We say it is just overwhelming; one can just start to
  1. think about all the evidence and the documents which
  1. show he did it. There’s the OMG internal debt schedules
  1. which refer to guarantees. There’s references in the
  1. various loan documents to guarantees being required.
  1. Mr Arkhangelsky accepts that he signed, for example, the
  1. first Onega loan, which records guarantees as being
  1. required. Mrs Arkhangelskaya signed the first Onega
  1. loan spousal consent. Although she said she wasn’t sure
  1. whether she did or not, the experts were in agreement
  1. that it was her signature. Mr Arkhangelsky signed the
  1. memorandum which in terms refers to the personal loan,
  1. and his lawyers reviewed that, so he obviously had
  1. signed it. There is a plethora of internal Bank of St
  1. Petersburg documentation which refers to the guarantees,
  1. all of which would have to be completely false for this
  1. case to be true. The Bank’s witnesses gave evidence
  1. that he signed the guarantees and the personal loan.
  1. There’s even the note of Mr Ameli’s meeting with Mr
  1. Novikov of V‐Bank stating that he gave a guarantee to
  1. V‐Bank, contrary to his own evidence. There were all
  1. the documents with the third party banks, stamped by

33 35

  1. should be equivocal about or indeed that one could be
  1. equivocal about. He knows that he signed the documents
  1. and he’s always known that he signed the documents. It
  1. is not the sort of point that you sometimes get in
  1. trials where you say: well, this is what the point looks
  1. like, we’ll see how it goes at trial. Some legal points
  1. work like that, some factual points work like that, but
  1. not this sort of point. He’s always known the truth.
  1. He has known from the outset that this was a false
  1. defence and he knew he had agreed to give the guarantees
  1. to sign the documents.
  1. Despite the complete absence of evidence, when one
  1. looks back at his witness statement for trial where he
  1. became equivocal about it and then he reversed his
  1. position in his oral evidence, and then we see again no
  1. submissions at all have been put in in writing, we do
  1. say that is quite astonishing, and if it really was
  1. a serious case, surely it would have been pursued
  1. properly. But what is obviously clear, we say, from all
  1. the evidence that has been given, is that he did sign
  1. the guarantees and the personal loan.
  1. As I say, my Lord, we’ve dealt with it in detail and
  1. I’m not going to run through the whole section of the
  1. closing which deals with it. My Lord knows that it is
  1. in part 2 of the written closing, so it starts at
  1. various different banks confirming the existence of the
  1. Scan guarantees, which are also denied. It goes on and
  1. on, my Lord.AA3&4
  1. It is inconceivable, we say, that if he really
  1. thinks that he didn’t sign these documents, if
  1. Mr Arkhangelsy really thinks that, that he hasn’t
  1. drafted anything at all for his written submission after
  1. two months of having the time to do so. The fact that
  1. there’s nothing there speaks volumes, we say.
  1. In the pleading, the forgery allegations were part
  1. of the grand conspiracy case. It was all said to be
  1. part of the way in which the alleged raiding attack took
  1. place. But this sort of pillar of the original
  1. conspiracy just isn’t there. For example, it was also
  1. said that claims were brought in the Russian courts
  1. against Scan on the basis of forged Scan guarantees.
  1. Well, that’s completely untrue, and it is not even
  1. pursued now in the closing submissions.
  1. Of course, the initial point about this is that
  1. there’s no defence to the guarantee claims and the claim
  1. on the personal loan, but it also, as my Lord already
  1. appreciates, I know, goes deeper than that, because the
  1. fact that he has made and has continued to make this
  1. allegation over such a long period of time again
  1. confirms that he is a thoroughly dishonest individual.

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  1. He shows no respect for this court or the process. He
  1. just took the view he could come along and tell bare
  1. faced lies about it, hoping or thinking he might not be
  1. caught out. He just cannot be trusted.
  1. MR JUSTICE HILDYARD: Another problem, which I know
  1. Mr Stroilov will address me orally on, is the various
  1. levels to this. One level is whether he might have
  1. signed unwittingly, which I think became a possibility
  1. that he floated at the beginning of the trial or just
  1. before it. Of course, you would say that it’s odd how
  1. many were done and how crucial they were, but that is
  1. a possibility that he floats. Amongst the problems with
  1. that are that his previous case, that they were
  1. forgeries, has led him to evidence as to why other
  1. people may have referred to the personal guarantees and
  1. it has led him to a depiction of his discussions with
  1. Mr Savelyev and others which isn’t consistent with mere
  1. mistake, it’s consistent with direct assurances that
  1. personal guarantees were not required. It’s also
  1. relevant, of course, because so much of the case
  1. initially revolved around these personal guarantees and
  1. therefore involve tremendous expense. Those are the
  1. sort of issues which I think have to be resolved.
  1. MR BIRT: My Lord, yes, and we wait to hear from Mr Stroilov
  1. on that. My Lord says that there were some occasions

37

  1. when the impression Mr Arkhangelsky gave was that
  1. perhaps he had unwittingly signed them. There was
  1. a hint of that in his witness statement. I think at one
  1. stage in his witness statement he said, «Oh, I signed
  1. lots of documents». But he was adamant he’d never
  1. signed the guarantees. He was adamant he had never
  1. signed any personal guarantee to any bank. He was
  1. adamant he’d been told by Mr Savelyev and others that he
  1. wouldn’t have to. He doesn’t really leave himself any
  1. room for that case, my Lord, even if he is running it,
  1. which of course we don’t know. It is certainly not his
  1. pleaded case. His pleaded case is forgery and, more
  1. than that, forgery as part of a grand conspiracy to
  1. persecute him, and that just cannot stand, my Lord.
  1. Your Lordship is quite right as well, this has
  1. created an enormous amount of work. Mr Arkhangelsky has
  1. changed his expert once because of the whole kerfuffle
  1. with Dr Browne who, my Lord will remember, gave one
  1. account of what Mr Arkhangelsky had told him and
  1. Mr Stroilov put in a witness statement saying something
  1. else. That melted away into history, but it has been
  1. a huge amount of this case. Indeed, it is still a major
  1. issue in this case, much as though, in a sense, one gets
  1. the impression from the other side of the court that by
  1. not engaging or not saying, it might just drift off.
  1. But it hasn’t drifted off. Mr Arkhangelsy has been
  1. given many opportunities to drop this part of the case.
  1. Throughout the autumn, RPC wrote on numerous occasions
  1. saying «You should be dropping this part of the case».
  1. He refused to do so; refused ever to change his pleading
  1. to a nonadmission, which was also urged on him by
  1. your Lordship at one stage, I think.
  1. MR JUSTICE HILDYARD: In case it’s not clear, and for
  1. Mr Stroilov’s guidance, one of the issues floating in
  1. this case has been the suggestion of unfairness and
  1. inequalities, and I have been mindful on every day of
  1. that concern. But it may be that one of the
  1. contributing factors to what the Arkhangelskys might
  1. describe as their predictment has been the way they have
  1. pursued points for years, at great expense.
  1. MR BIRT: My Lord, yes. We would associate ourselves with
  1. that comment.
  1. My Lord, that was all I was going to say on forgery
  1. unless there is anything else I can add at this stage.
  1. Of course, I may return to it later, depending on what
  1. Mr Stroilov says.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: Before coming on to deal with the conspiracy case,
  1. I would just like to pick up one point that arises out
  1. of Mr Stroilov’s closing. I’ll come back to other

39

  1. points later.
  1. MR JUSTICE HILDYARD: Can I just ask this: do you at some
  1. point in your submissions wish to say anything about
  1. Mrs Arkhangelskaya? I mean, I don’t know, I think your
  1. position is that no spousal consent is required under
  1. Russian law, and it’s Russian law which governs. Her
  1. evidence in Paris on this was to the effect that she
  1. can’t imagine her husband signed it because it involved
  1. them in such debt, and she certainly can’t imagine that
  1. she would have wittingly signed any of these spousal
  1. consents or anything else. Do you wish to say anything
  1. about that?
  1. MR BIRT: We’ve already covered it in the written closing.
  1. MR JUSTICE HILDYARD: Is that enough?
  1. MR BIRT: I think it is enough, but in answer to
  1. your Lordship’s point, there’s clear evidence that she
  1. signed the first Onega loan spousal consent. Both
  1. experts are agreed that there’s very strong evidence
  1. about that. As to the others, maybe she signed them,
  1. maybe Dr Arkhangelsky signed them on her behalf. There
  1. was certainly some support for that in the ‐‐
  1. MR JUSTICE HILDYARD: A question was raised in that respect.
  1. MR BIRT: Yes, in the experts thing. She also gave evidence
  1. that sometimes she would just sign documents ‐‐ she
  1. handed a lot of this over to Mr Arkhangelsky, who gave

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  1. her this to sign. She gave evidence that sometimes he
  1. woke her at 3 o’clock in the morning and she would just
  1. sign what he gave to her. That argument rather destroys
  1. her denials that she ever signed particular documents,
  1. because if she has been on occasion in the habit of
  1. simply signing whatever was put in front of her, then
  1. she may well have signed it, my Lord.
  1. MR JUSTICE HILDYARD: Is there an issue as to whether, under
  1. Russian law, spousal consents on an informed or advised
  1. basis are required?
  1. MR BIRT: My Lord, there’s no issue as to that.
  1. MR JUSTICE HILDYARD: It is not suggested they are?
  1. MR BIRT: No, it has never been run as a defence. This has
  1. been raised by your Lordship on two or three occasions
  1. during the course of the trial, and on each occasion
  1. we’ve said it has never been run as a defence and it has
  1. never been suggested that it was. The expert lawyers on
  1. Russian law didn’t address it as a result, and there was
  1. an occasion when I explained the position to
  1. your Lordship, Day 30 something, probably, the reference
  1. is somewhere in here and we can dig it out, where there
  1. was some uncertainty in Russian law for a period of
  1. time as to whether ‐‐
  1. MR JUSTICE HILDYARD: It has been clarified by the Supreme
  1. Arbitrage Court.
  1. and we’re slightly concerned at what may appear to be an
  1. attempt to wind back the clock.
  1. The court did not forward a split trial. We don’t
  1. know whether Mr Stroilov is deliberately seeking to
  1. reverse the position, is suffering from a bad memory or
  1. is just guilty of wishful thinking, but the position
  1. that has been reached is this ‐‐ and this is, of course,
  1. against the background that he did apply for an interim
  1. payment back in November, and that was dismissed by
  1. your Lordship and by the Court of Appeal, and then there
  1. was a split trial application at the PTR which wasn’t
  1. acceded to, and at various points in the trial he tried
  1. to suggest this course again.
  1. MR JUSTICE HILDYARD: The interim payment then was rather
  1. different. The interim payment now would be on, as
  1. I understand it, and of course Mr Stroilov will correct
  1. me if I’m wrong, but my understanding is the premise of
  1. the interim payment which is canvassed in paragraph 11
  1. is if a sufficient case has been demonstrated for likely
  1. success but it’s not capable of careful quantification,
  1. whereas previously the interim payment was by reference
  1. to a requirement for fairness of a trial.
  1. MR BIRT: My Lord, yes. Don’t get me wrong, it has changed
  1. at each stage as the territory has ‐‐ we’ve all moved
  1. through the trial to different stages. It may be we

41

  1. MR BIRT: My Lord, yes. So the answer now in Russian law,
  1. as we understand it, you don’t need a spousal consent
  1. but the previous uncertainty explains why there is
  1. a habit to require them as part of the internal rules.
  1. How it arises is there is no legal defence based on
  1. it at all and no defence which is run. It came into the
  1. case because of the defendants’ allegations that this
  1. showed the conspiracy and the forgery allegation even ‐‐
  1. really, they had to run the Mrs Arkhangelskaya forgery
  1. because they were running the Mr Arkhangelsky forgery.
  1. It is just part of the same factual case, my Lord, but
  1. there’s no legal point which arises.
  1. The point I just wanted it to pick up, because it’s
  1. in a sense structural and trial‐related, arising out of
  1. Mr Stroilov’s written closings, just before turning to
  1. them, conspiracy allegations, is what Mr Stroilov’s
  1. closing says about Mr Popov and Mr Steadman and what he
  1. refers to as «interim payment». He has referred to that
  1. in a number of places, certainly at the end and I think
  1. in paragraph 11 as well.
  1. He’s right to say that the defendants and OMGP
  1. applied to deter the consideration of quantum. That
  1. really should be firmly in the past tense, not in the
  1. continuous past, as though it is still continuing,
  1. because they did apply and they did not succeed in that,

43

  1. just have to clarify the position, but how we understand
  1. the position and how it’s been reached in court, I was
  1. going to refer to it very briefly at paragraph 63 but
  1. there’s a bit more that I want to say ‐‐
  1. MR JUSTICE HILDYARD: Paragraph 63 of yours?
  1. MR BIRT: Yes, but there’s more that I want to say about it
  1. than is set out there. That’s just the starting point
  1. really. {AA3&4/14/42}.
  1. Your Lordship will remember that during the course
  1. of the trial we had a debate about this. The claimants
  1. were prepared to and wanted to call Mr Popov to give
  1. oral evidence. The defendants objected to that course
  1. because they said they didn’t have the funds to pay
  1. Mr Steadman and so he couldn’t come. So they said it
  1. would be unfair if Mr Popov came to give evidence when
  1. Mr Steadman, as they said, could not.
  1. Of course, our position was and has always been that
  1. the defendants could afford Mr Steadman to come if they
  1. really wanted him to do so. Without going back into
  1. them, although we can do if necessary, we said there
  1. were various unsatisfactory accounts of what Mr Steadman
  1. had been asked to do, how much he would charge, whether
  1. there was any real attempt to engage with him, there
  1. were a couple of slightly dismissive letters from
  1. Mr Steadman to Mr Arkhangelsky that were produced to the

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  1. court and the impression was that actually not very much
  1. effort had been made to persuade him or come to
  1. a sensible arrangement.
  1. My Lord may recall that, shortly before the Easter
  1. vacation, the defendants were invited to issue a witness
  1. summons for Mr Steadman so that he would set out his
  1. position directly to the court, and they were urged to
  1. do that promptly. But they refused to follow that
  1. course. They just didn’t do it.
  1. Then we had a number of debates about this before
  1. my Lord and in the end, on 10 April, both parties put in
  1. written notes about it. I’m not suggesting we turn
  1. those up now but I will give my Lord the references in
  1. case this becomes more of a live point. The claimant’s
  1. note is at bundle I27, tab 43, page 2, {I27/43/2} and
  1. Mr Stroilov’s note is at I27, tab 43, page 12
  1. {I27/43/12}. Then this came before the court in
  1. argument on Day 38, which was 14 April.
  1. Submissions were made that one couldn’t just hive
  1. off Popov and Steadman, because of the very many
  1. overlaps between their evidence and other evidence that
  1. was before the court and which would require
  1. determination. My Lord asked Mr Stroilov whether there
  1. would be any objection to your Lordship resolving any
  1. issues which you thought would need to be resolved

45

  1. between Popov and Steadman on paper. Mr Stroilov said
  1. no, he gave an assurance that they didn’t object. That
  1. was at Day 38, pages 21 and 22, {Day38/21:1} that
  1. exchange.
  1. So the position that was reached was that my Lord
  1. would not hear their evidence in the provisional slots
  1. that had been allocated to them in the trial timetable
  1. but would consider, during the course of re‐reading
  1. their reports and re‐reading the written closings,
  1. whether some limited oral evidence might be required.
  1. My Lord had in mind, if anything, having a short hearing
  1. dealing with a limited number of issues for which, if he
  1. was required at all, Mr Steadman wouldn’t need to sort
  1. of completely get up the whole case, and his preparation
  1. and attendance time would have been much reduced. Then
  1. one could have had a sensible discussion about how much
  1. he would charge, and then it would be up to the
  1. defendants to decide whether to commit those funds to
  1. that or not.
  1. Of course, since then they have chosen to spend some
  1. of their funds on this litigation by spending it on
  1. Mr Milner. We don’t criticise in a sense, but it’s all
  1. a matter of choice if this ever comes back to the
  1. surface. But that’s how it was left. It was absolutely
  1. not reduced to an interim payment application or that
  1. my Lord would give judgment on some but not all issues.
  1. All issues are to be determined at the end of this trial
  1. and there still is the possibility that my Lord has kept
  1. open, if you think it is so required, to have a short
  1. amount of oral evidence if there really are issues which
  1. my Lord thinks need to be resolved between the experts
  1. and which you don’t think can be resolved on the reports
  1. themselves, though Mr Stroilov has confirmed he has no
  1. objection to those points being resolved on the reports
  1. themselves.
  1. The reference for this discussion, one can see it on
  1. Day 38, page 43, starting at line 14 {Day38/43:14}.
  1. This is one of the ways my Lord put it ‐‐ we can maybe
  1. go over to page 44, line 3 as well ‐‐ to Mr Lord
  1. {Day38/44:3}:
  1. «… it is not at all what I would prefer, but my
  1. provisional least‐bad solution, if I can put it that
  1. way, is that I should read both, I should then determine
  1. whether I can make head or fair tail of them without
  1. cross‐examination of both, and in that context, I will
  1. also ‐‐ query having read all the other submissions of
  1. the case in writing ‐‐ I will also be able to determine
  1. whether ultimately this business evidence is really
  1. vital in terms of the actual values, because, as I have
  1. said repeatedly, Mr Bromley‐Martin’s evidence was that

47

  1. amongst other things, he saw no practical realistic
  1. possibility of raising funds if people knew of the
  1. payments that are being made to the officials, full
  1. stop.»
  1. That was a sort of summary of where my Lord was and
  1. where we reached. It goes through the following pages,
  1. I won’t go through it all or read it all out. My Lord
  1. emphasised the phrases that command my proceeding
  1. incrementally on this, and it goes up to pages 71 and 72
  1. of the transcript.
  1. It also included the confirmation that the evidence
  1. of Mr Popov and Mr Steadman could be ‐‐ indeed we would
  1. say should be ‐‐ referred to in written closings and
  1. should be relied upon.
  1. In other words, everything is for determination now
  1. and it may still be open the question of if there are
  1. issues that need to be resolved, how are they resolved?
  1. As things stand, my Lord has the written closings and
  1. the determination lies ahead, as it were. But what
  1. there wasn’t is a ruling out of any issues or a hiving
  1. off for a later determination.
  1. I won’t go back over all the submissions we made on
  1. Day 38, but they’re in the note and if we have to we’ll
  1. go back to the transcript, but it was in large part
  1. premised on the fact you just can’t separate them out

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  1. because you need to look at, or at least we say you need
  1. to look at, and we rely on, for example, bits of
  1. Mr Popov’s evidence to deal with issues that are in play
  1. and that would not fall into Mr Stroilov’s hiving off.
  1. MR JUSTICE HILDYARD: The problem with all this is that in
  1. light of the, amongst other things, apparent
  1. discrepancies in the information memorandum, the
  1. misrepresentations, as you put it, the explanation for
  1. the differences between the price paid to the seller and
  1. the amount of costs said to have been associated with
  1. the acquisition, there must be a real doubt whether
  1. funding would have been obtained from lenders if and
  1. when they did their due diligence. As funding, as
  1. I understand it, is the doorway to the business case,
  1. until I have made up my mind on that point it is
  1. slightly futile dealing with business valuations which
  1. are predicated on the business case.
  1. If I were to decide, for whatever reason, that
  1. notwithstanding Mr Bromley‐Martin’s evidence there might
  1. have been lenders out there prepared to lend, such as to
  1. give vitality to these business enterprises, then
  1. I might have to determine at a later stage quite what
  1. the effect would have been. In that context I might
  1. have to have evidence from Mr Popov and Mr Steadman
  1. orally. Of course, in those circumstances, the

49

  1. defendants would be, as it were, cockahoop and possibly
  1. able to make some application for some interim payment
  1. whereby to fund Mr Steadman’s presence. But there is
  1. a lot to overcome before I come to that position.
  1. I hope that’s ‐‐
  1. MR BIRT: That’s why I said, I think this is what my Lord
  1. said on the previous occasion, to proceed incrementally.
  1. My Lord knows our case, which is that given not just the
  1. Bromley‐Martin evidence and the information memorandum
  1. but a host of other evidence we’ve referred to in the
  1. closing, there was no chance at all of obtaining the
  1. sort of funding they would have needed to obtain. So we
  1. say my Lord is going to get to that finding through any
  1. one of a number of different routes, that the business
  1. valuation case doesn’t arise.
  1. MR JUSTICE HILDYARD: My only point is to say, if it were to
  1. arise ‐‐ if it were to arise ‐‐ I can see that we would
  1. have to have another hearing.
  1. MR BIRT: My Lord, I think this is the licence or the window
  1. that my Lord has always spoken of, which is that if,
  1. when you give further consideration to it, you think
  1. there are some issues between the experts which do need
  1. resolution orally rather than being capable of being
  1. resolved on the papers, one would have to then consider
  1. what those issues were and whether an arrangement could
  1. be made for Mr Steadman to attend to deal with them.
  1. But I suppose the point I’m making is that there are
  1. findings which, if one was getting to the stage of, as
  1. Mr Stroilov says, interim payment, he would already be
  1. asking for findings that we say we want to pray in aid
  1. Mr Popov’s evidence against them. For example,
  1. your Lordship knows that some of Ms Simonova’s
  1. assumptions we challenge through Mr Popov’s evidence.
  1. If that’s taken into account at that stage, all well and
  1. good, but that’s, if you like, the overlap that
  1. prevented ‐‐ one of the reasons that prevented the
  1. hiving off at any earlier stage, my Lord.
  1. MR JUSTICE HILDYARD: When I indicated that I couldn’t
  1. exclude the possibility of having to get you back at
  1. some point, one of the things I had in mind was this
  1. overlap in the valuation evidence, if I can put it that
  1. way ‐‐ and this is for Mr Stroilov’s assistance and
  1. direction; a slight lightness of touch in his written
  1. submissions as to the basis on which an invitation to
  1. the court is extended to find that there was a realistic
  1. possibility of funding. At the moment, as I read the
  1. closing submissions on behalf of the defendants, it is
  1. not put higher than that in 2009 there was a level of
  1. interest. Quite how that level of interest would have
  1. been converted into money is more unclear and I will

51

  1. need assistance on that.
  1. MR BIRT: My Lord, yes. This is one of the topics
  1. I highlighted at the beginning as really entirely
  1. missing from the closing submissions. There is no
  1. grappling with the evidence at all.
  1. My Lord, I think where we are on that, I suppose
  1. I can just leave my Lord with: if and when the question
  1. of whether there is any issue to be determined here or
  1. what to do with Mr Popov and Mr Steadman, our note of
  1. 10 April at {I27/43/2} did summarise the points we made
  1. then, which are still as good now as they were then, and
  1. indeed we would say have probably improved. We set out
  1. there that we say there is funds, and there would have
  1. been to bring Mr Steadman to court had they wanted to do
  1. so. As my Lord said in argument, if they’re right about
  1. that, that deals with this whole point.
  1. Secondly, we pointed out there are various routes to
  1. get Mr Steadman to court, most obviously a witness
  1. summons that my Lord urged upon them, which they had
  1. declined to do, and then there was no engagement on how
  1. much he would really charge for the sort of occasion.
  1. We pointed out in those submissions the various
  1. relevances of the evidence to the different issues in
  1. the case, and that’s the various overlap points, which
  1. I simply mention without going back into the detail of

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  1. authorities and the courts and furthering the
  1. conspiracy. Indeed, as we’ll come on to, we would say
  1. that the conspiracy just doesn’t work, given the
  1. involvement of those officials, authorities and courts.
  1. But in the written closing Mrs Matvienko barely makes an
  1. appearance; I think there’s one reference to her, simply
  1. a general reference to, well, she had connections to the
  1. Bank. There has been no attempt to make good the
  1. allegations that were pleaded. In fact, there has not
  1. really been any effort through the trial to put the case
  1. or bring forward actual evidence, rather than innuendo
  1. or speculation, as to any of the allegations of
  1. political influence or anything of the sort.
  1. The pleaded conspiracy also, as we’ve already
  1. mentioned, includes the forgery allegations. It is
  1. pleaded that the forgeries were made in furtherance of
  1. the conspiracy and the personal loan was fabricated in
  1. furtherance of the conspiracy and the claimants
  1. maliciously used the corrupt judicial system of Russia
  1. to procure judgments against the defendants
  1. fraudulently, but that doesn’t make an appearance at all
  1. in the written closing. Also, allegations of corruption
  1. were pleaded against various Russian law enforcement
  1. officials; Colonel Levitskaya, Mr Piotrovsky and
  1. somebody called Mr Keykot(?), who I think we have no

55

  1. mention of during the trial at all, but things are
  2. pleaded against him.
  1. Again, in the closing there is nothing about these
  1. individuals’ alleged roles in the conspiracy. In fact,
  1. we say it is quite difficult to discern a coherent
  1. factual case as to what the conspiracy is said to have
  1. been, when the combination was made, or by whom, or with
  1. what in mind.
  1. My Lord may remember that various amendments were
  1. made on the eve of trial which introduced some
  1. alternative conspiracy claims. Maybe, they said, there
  1. wasn’t a conspiracy in December, maybe it was only
  1. in March, or if it wasn’t then, it was at some other
  1. point, maybe after June, we haven’t quite worked out
  1. when, but at some point before the sales were made
  1. between some of the people. But that doesn’t now appear
  1. to make an appearance in the written closing.
  1. As we read the written closing, the case that is
  1. advanced is in a sense the original case, which is
  1. a conspiracy had started in December 2008, or I think at
  1. one paragraph it said perhaps even before December 2008,
  1. when Renord and the Bank had started to form an idea
  1. about this. But it is all incredibly vague, and at the
  1. end of 42 days of trial, we say that if there was any
  1. substance to this sort of allegation, the defendants

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  1. would be able to do better than that.
  1. Some other points are made in the written closing
  1. which appear to be allegations of conspiracy but which
  1. haven’t really been advanced as such. For example, the
  1. allegation letter, at the moment when the repo
  1. arrangements were made, it is said, responsibilities
  1. within the Bank were allocated in a way to exclude from
  1. decision‐making all people who were not involved in the
  1. conspiracy. He said that at paragraph 67.
  1. It is not entirely clear what that is really getting
  1. at. We wonder whether it relates to the submissions
  1. about the allocation of OMG as a problem debt client to
  1. Mrs Malysheva who, along with Mr Savelyev, are the only
  1. two pleaded conspirators from the Bank who were said to
  1. have been involved all along. Allegations against
  1. others such as Ms Mironova made in respect of one
  1. instance of false evidence.
  1. MR JUSTICE HILDYARD: Against, sorry? Could you say that
  1. again?
  1. MR BIRT: The two conspirators from the Bank who are pleaded
  1. are Mrs Malysheva and Mr Savelyev. Although
  1. Ms Mironova, for example, was named, she was named only
  1. in respect of one instance that was said to be false
  1. evidence. She wasn’t pleaded as a conspirator in the
  1. same way as Mrs Malysheva and Mr Savelyev. So we are
  1. make an appearance in the closing. At the highest, in
  1. the way it’s been put in the pleading, it is simply
  1. asserted they are involved, and the reason they assert
  1. they are involved is they say, «Well, they must have
  1. been involved, otherwise the conspirator wouldn’t have
  1. worked». But that’s circular reasoning at its worst,
  1. and it is a case entirely based on inference.
  1. The main point, and indeed at some stages of the
  1. trial it has been said by the defendants the only point
  1. really on which the inference is sought to be drawn, is
  1. what the defendants refer to as the sale of the assets
  1. at a gross undervalue. They rely on Ms Simonova’s
  1. appraisal of the assets.
  1. I’ll come a bit later to look at some of the details
  1. of the valuation of Western Terminal that are picked up
  1. but before we get there, some slightly more
  1. standing‐back points.
  1. First of all, in terms of inferring a fraud based on
  1. gross undervalue, we say that’s an ambitious point
  1. because it’s not just a question of showing that assets
  1. were sold a bit on the low side, or even that
  1. Ms Simonova’s approach should be preferred to that of
  1. Mr Millard. In order to infer fraud, what the
  1. defendants would have to show is that there is no
  1. explanation for the sale price other than that the sale

57 59

  1. trying to work out what paragraph 67 of the written
  1. closing means, and we assume it means that because OMG
  1. was allocated as a problem debt client to Mrs Malysheva.
  1. But that this was part of the scheme was not
  1. suggested to any witnesses and there is no basis for it,
  1. it is just speculation. And others were involved in the
  1. decision‐making anyway. The loan extensions were dealt
  1. with by Ms Mironova at InvestrBank, Ms Mironova and
  1. Ms Yashkina. Decisions throughout generally went to the
  1. BKK and management board, where various other
  1. individuals were present and had their say. Mr Guz,
  1. Mr Belykh, Ms Volodina, they all came to give evidence.
  1. Ms Kosova had oversight through some of the enforcement.
  1. But none of those people have been excluded from the
  1. decision‐making, so we don’t understand paragraph 67,
  1. but if that’s what it’s getting at, then it’s completely
  1. flawed {AA5/15/32}.
  1. When one stands back and looks at the allegation of
  1. a conspiracy, there is no direct evidence for it at all.
  1. We would say, in the sort of tabloid sense, it is
  1. a conspiracy theory, but no evidence of a plot or plan
  1. or agreement to cause harm. There is no evidence at all
  1. about many of the alleged conspirators, including the
  1. various unidentified Russian officials who the
  1. defendants have pleaded must be involved but who don’t
  1. was a dishonest one. It is no good showing that there
  1. is a range of honest valuations but that Ms Simonova is
  1. obviously right and Mr Millard is obviously wrong.
  1. That’s not good enough for fraud. That’s the approach
  1. to inferences of fraud in the authorities, and I’ll just
  1. flag a couple of those up later but we’ve cited them in
  1. the closing, Paragon and Three Rivers.
  1. If the court is to hold that both the Millard
  1. approach and the Simonova approach were rational and
  1. honest valuations, and even if the court were to hold
  1. that on balance it preferred the Simonova appraisals to
  1. Mr Millard’s valuations, that would not be sufficient in
  1. order to ground an inference of fraud. It would be
  1. nowhere near close enough. At best it would show that
  1. market participants in St Petersburg did their best to
  1. value real estate assets at auction on an approach
  1. comparable to Mr Millard but that they were undervaluing
  1. them. But that simply doesn’t show fraud.
  1. One needs to bear in mind, when one is looking at
  1. the circumstances of the sale and the period, a number
  1. of factors. I’ll develop these a little bit more later
  1. when we come to look at what Ms Simonova said, but one
  1. must remember that the financial crisis hit, and that is
  1. a factor to be remembered in a number of circumstances
  1. in this case. That, of course, hit in the autumn of

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  1. 2008 in a big way. There was some evidence from the
  1. experts about that; I’ll refer to that later. But that
  1. had an effect on all sorts of things throughout the
  1. world, and in particular in Russia, drying up of
  1. liquidity and so on. The property market in
  1. St Petersburg effectively froze; we’ll come to the
  1. evidence on that later as well. But there was
  1. consistent evidence that there just were no buyers out
  1. there for property. There was also evidence that for
  1. these sort of port assets there was a very small market,
  1. there were very few people in the market for these sorts
  1. of assets.
  1. The properties in issue, certainly the ones that
  1. Mr Stroilov focuses on, which are the Western Terminal
  1. assets, but obviously it’s most of the properties, were
  1. sold at auction. Prima facie, an auction tests the
  1. market and will derive the market price. It’s only if
  1. somebody has been shut out from participating in the
  1. auction that that won’t be the case. Here, nobody was
  1. shut out. There’s absolutely no evidence at all that
  1. anybody was shut out. Indeed, the results of some of
  1. the auctions were widely publicised. There were various
  1. media articles that were referred to in the context of
  1. the Russian auction house auctions, they were written up
  1. in the press the next day.

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  1. MR JUSTICE HILDYARD: It is a curious stream of two party
  1. connected auction participants with no one else. One
  1. doesn’t often see that.
  1. MR BIRT: My Lord, one doesn’t often see that. There are
  1. certain features of this case which make that not very
  1. surprising, my Lord. We’ll come to that in greater
  1. detail later. Partly they arise out of the three
  1. factors I’ve just mentioned: the financial crisis, the
  1. freeze in the Russian property market and the fact that
  1. nobody was really in the market to buy these sorts of
  1. assets. But what we haven’t got is any evidence that
  1. people were prevented from taking part.
  1. MR JUSTICE HILDYARD: Where is the evidence as to the
  1. marketing of the property prior to auction? Can you
  1. summarise that for me? The efforts to induce interest
  1. in the market.
  1. MR BIRT: There was quite a lot of evidence from, in
  1. particular, Mrs Yatvetsky about the attempts which had
  1. been made by Mr Smirnov to find purchasers for the
  1. Western Terminal properties.
  1. MR JUSTICE HILDYARD: It wasn’t documented though, was it?
  1. MR BIRT: It largely wasn’t documented. She ‐‐
  1. MR JUSTICE HILDYARD: Was it documented at all?
  1. MR BIRT: My recollection is that she gave evidence she had
  1. been asked to draw up some nondisclosure agreements. We
  1. don’t have those in evidence. I don’t think we have
  1. communications from Renord to prospective purchasers,
  1. but I’ll get the references if I’m wrong about that.
  1. Then again, one wouldn’t necessarily expect that.
  1. Mr Smirnov ‐‐ this was, as the consistent evidence from
  1. those who gave it showed, a relatively small market,
  1. a limited number of people who had the ability and
  1. connections to run part of a port business in
  1. St Petersburg, and they were known to each other and
  1. Mr Smirnov went round trying to get them interested.
  1. The one who did become interested was the person who
  1. ended up purchasing the Onega Terminal assets, which was
  1. the ROK N1 Prichaly company.
  1. MR JUSTICE HILDYARD: Everything ends up in ROK.
  1. MR BIRT: I’m sorry?
  1. MR JUSTICE HILDYARD: It’s brought together in ROK, isn’t
  1. it?
  1. MR BIRT: The Onega Terminal ‐‐
  1. MR JUSTICE HILDYARD: Which is a Renord company?
  1. MR BIRT: No, not at all. Absolutely not. I’m slightly
  1. concerned that my Lord thinks it is. Because there is
  1. absolutely no connection at all. ROK 1 Prichaly is part
  1. of the Sea Fishing Port, which is what owned the next
  1. door plot to Onega. If my Lord remembers, the Onega
  1. Terminal didn’t have its own berth, it was dependent

63

  1. upon having access from the Sea Fishing Port to the Sea
  1. Fishing Port’s berths.
  1. One may think it is not entirely surprising that
  1. that plot of land ends up in the hands of a company
  1. connected to the Sea Fishing Port, but it’s nothing to
  1. do with Renord. I don’t think there’s even a suggestion
  1. that it’s part of the Renord group, but there’s
  1. certainly no evidence about that. I think the closest
  1. Mr Stroilov ever got was suggesting that somebody
  1. connected with ROK N1 Prichaly once knew Ms Volodina.
  1. But it’s not a big place, that’s not surprising.
  1. My Lord, Mr Eschwege has also passed me a note, for
  1. the references, that the Western Terminal property sale
  1. was ‐‐ let me just check this. Yes, so, for example at
  1. paragraph 930(2) of our written closing, {AA3&4/14/492}
  1. this is in relation to the sale of the Western Terminal
  1. assets, that was ‐‐ you know, the rules were followed
  1. for all of them, but this was the Western Terminal,
  1. sales advertised on the website of the regional office
  1. of the Federal Agency for State Property Management in
  1. the Leningrad region. There has never been any question
  1. that the relevant rules were followed, the right
  1. advertisements were placed and people could have come to
  1. bid for the properties.
  1. I mean, if the defendants’ case were right about the

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  1. values of these properties, all of these, Western
  1. Terminal and the land comprising the Onega Terminal,
  1. would have effectively been bargains of a lifetime, just
  1. based on starting prices. People would have been
  1. queueing up to participate in the auctions. And when
  1. the sale prices became clear after the auction, there
  1. would have been an outcry from disappointed potential
  1. sellers who had been shut out. But there is none of
  1. that, none of that at all.
  1. The truth was that there wasn’t anybody else
  1. interested in purchasing these assets, at least in this
  1. period, when people didn’t have money for purchasing
  1. these sorts of assets, and there were no buyers. That
  1. was the sad reality of the St Petersburg property market
  1. during this period, particularly for port assets with
  1. a limited pool of buyers at the best of times.
  1. Mr Millard gave evidence that there had just been no
  1. sales of property over this period.
  1. Unless you can … what the defendants would need to
  1. show in order to invalidate the auction is some actual
  1. evidence that it was not a proper auction and that
  1. people were shut out from bidding. But there is no
  1. evidence of that and, absent that, one has to assume
  1. that the auction finds the market price.
  1. A point the defendants rely upon to say it was

65

  1. improper, they say «We infer it was improper because the
  1. sale was at an undervalue». But that is circular
  1. reasoning, because they’re relying on the same thing to
  1. undermine the auction as they are to, if you like,
  1. destroy the validity of the auction price which
  1. ex hypothesi would obtain the market price. In other
  1. words, their inferences aim to be self‐supporting but
  1. there’s no way in, there’s no solid evidential base to
  1. undermine the integrity of the auction process.
  1. It permeates the defendants’ closing submissions.
  1. They refer to «purported public auction» or to «auctions
  1. purportedly under the control of the bailiff». I’ve
  1. just taken those from paragraph 9(5) {AA5/15/7} and
  1. 125(1) of their written closing. But there is no basis
  1. to doubt that the auctions were real auctions and public
  1. auctions, and no evidence at all to say that the
  1. bailiffs do not control them.
  1. There’s no evidence that they didn’t take place or
  1. that people were kept out. There’s no evidence that
  1. they weren’t run by the proper officials in a proper way
  1. and that they stuck to their duties. There’s absolutely
  1. none.
  1. Evidence from the Bank’s witnesses is that rules
  1. were followed and the various documents have been
  1. produced. We have given those references in
  1. paragraph 930 of the submission. {AA3&4/14/492}.
  1. The suggestion that the prices were somehow set by
  1. agreement with Renord isn’t right. The prices were
  1. determined by the auction process, and that’s the best
  1. way to arrive at the market price. That’s also the flaw
  1. in the suggestion, by reference to some English law
  1. authority that Mr Stroilov relies on at paragraph 98,
  1. {AA5/15/42} that when you’re dealing with an associated
  1. company, as he refers to it, you need to have some
  1. different hurdle to surmount. Whether or not that is an
  1. applicable principle here, and we say it’s Russian law
  1. so it’s not, but at best that sort of principle might be
  1. in play if this was a direct sale. If you have a
  1. liquidator selling some property to his brother, that’s
  1. one thing. But when they’re auction sales when anybody
  1. can come and bid, then the auction tests the market.
  1. That’s why all the rules in Russian law provide for
  1. enforcement of security via an auction, so that you do
  1. get the fair market price. And they’re carried out
  1. under the auspices of the independent auction house
  1. and/or the court and its bailiff service, and there’s no
  1. evidence at all that any of those people did anything
  1. other than fulfil their lawful duty.
  1. It is also worth remembering that Russian law
  1. approaches this sort of point by saying you cannot infer

67

  1. bad faith simply from a low price. We’ve given the
  1. references in footnote 2533, {AA3&4/14/471} Dr Gladyshev
  1. confirmed it in his oral evidence. That is no more, we
  1. say, than common sense, especially when you’re dealing
  1. with an auction.
  1. There’s another reality check, we say, or there’s
  1. a reality check to the auction prices before one comes
  1. to consider anything else, which is to compare the
  1. prices at which Dr Arkhangelsky had purchased the
  1. assets. Remembering that he purchased the assets before
  1. the Russian property market had crashed. So Western
  1. Terminal was purchased for 1 billion roubles in 2007.
  1. The land at Onega was acquired in ’05/06 at around
  1. 136 million roubles. The prices at which those sold at
  1. auction in both cases are broadly comparable to those
  1. prices. They are in the same ball park.
  1. The Western Terminal was lower than that, it was
  1. about 695, wasn’t it? But that is, as Mr Millard
  1. pointed out, an almost exactly 30 per cent crash in the
  1. market that he had seen and experienced in that period.
  1. Whereas Ms Simonova’s valuations, by contrast, were
  1. a million miles away from those acquisition prices.
  1. So the assets sold at auction for roughly the same
  1. sort of price as they were acquired by Dr Arkhangelsky
  1. and there’s no suggestion that the prices for which he

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  1. acquired them were so low that they were redolent of
  1. fraud. There is simply no room to say that the auction
  1. sales were at such an undervalue that fraud is the only
  1. explanation.
  1. There is another reality check, which is to look at
  1. what happened to the Vyborg shipping vessels. We’ve
  1. dealt with this in our closing at paragraph 891
  1. {AA3&4/14/473}. This is another aspect of the story
  1. that the defendants have done their best to forget about
  1. during the course of the trial. It’s not appeared in
  1. the submissions at any stage. My Lord will remember
  1. there was a slight debate in opening about them. We’ve
  1. set out there in paragraph 892 of the closing the
  1. defendants’ position as set out in their email of
  1. 13 October 2013:
  1. «We are prepared to accept, for the purposes of
  1. these proceedings, that the vessels (OMG Gatchina, OMG
  1. Tosno and MOG Molpino) were sold in a proper way, and
  1. will not dispute the adequacy of the price; accordingly,
  1. valuations of those vessels are unnecessary.»
  1. There was an attempt to row back a bit from that in
  1. opening, which we go on to talk about, but that has
  1. always been the position. Even putting to one side the
  1. acceptance of the position there, you’ve got the reality
  1. of the facts, which those three vessels were sold in

69

  1. three separate jurisdictions, pursuant to different
  1. court processes, in each of those court jurisdictions.
  1. They’ve never been challenged. There was never any
  1. evidence that there was anything wrong with those and
  1. there obviously wasn’t. They were vessels that were
  1. arrested because Vyborg Shipping couldn’t pay its bills
  1. and they were sold in the normal way.
  1. It is very telling that they were sold for very
  1. substantially less than the values that the Bank had
  1. recorded for them based on Lair’s valuations. We set
  1. out the figures in our closing at paragraph 895
  1. {AA3&4/14/474}.
  1. Looking at them quickly in turn, the Gatchina was
  1. sold at public auction in France in April 2010 for
  1. 1.2 million euros, which was probably 47 million roubles
  1. at the time. Yet the market value that vessel had been
  1. given on the basis of a Lair valuation, and which the
  1. Bank had recorded, was 410 million roubles. So it only
  1. achieved 11 per cent of its value when it was sold
  1. The Tosno was sold at public auction in Estonia for
  1. 1.7 million euros, which is approximately 66 million
  1. roubles. That vessel had been given a market value by
  1. Lair of 470 million roubles, and that was the basis on
  1. which the Bank had accepted it as security. That was
  1. about 14 per cent of its value then that was achieved at
  1. that sale.
  1. The Kolpino sold at public auction in England for
  1. US$3.3 million, which is about 105 million roubles, and
  1. that had been given a market value of 490 million
  1. roubles, again based on a Lair valuation, so it had done
  1. slightly better, but only 21 per cent of the value given
  1. a security.
  1. None of that is particularly surprising, one would
  1. think, given that they had been valued before the
  1. financial crisis, they were sold after the financial
  1. crisis, they were sold at auction in a forced sale
  1. situation. Distressed goods sold at public auctions do
  1. sell for less than values previously attributed to them.
  1. But the defendants can’t airbrush these out of the
  1. picture. This tells you that one has to be slightly
  1. careful perhaps about valuations, whether from Lair or
  1. anybody else, which were undertaken before the financial
  1. crisis, before the various markets crashed. Valuations
  1. may have been unrealistic on their own account or they
  1. may have just been carried out in a different financial
  1. climate. But what this tells you is that forced sales
  1. in the market that prevailed in the period realise a lot
  1. less than people sometimes think they might.
  1. These are very relevant matters to bear in mind when
  1. one looks at the auctions of the property in

71

  1. St Petersburg. Why is there any reason to think that
  1. those auctions would have fared any better than the
  1. auctions of the vessels, which of course are not and
  1. cannot be challenged?
  1. My Lord, we’ll come back to the detail of some of
  1. Ms Simonova’s points and Mr Millard’s points but we say,
  1. taking a step back and looking at the fact that they
  1. were all sold at auction and looking at the market
  1. factors, looking at the acquisition prices of the land
  1. and looking at how the vessels fared, we are just not in
  1. the territory where you can start to infer fraud from
  1. the prices achieved at auction.
  1. It also, I think, is said that you can infer some
  1. sort of conspiracy because many of the assets ended up
  1. in the hands of Renord. First of all, it’s not correct
  1. to say that everything ended up with Renord. Some
  1. assets never went near Renord. We’ve talked about the
  1. vessels, they’re an obvious examples, but there are
  1. others; the parking spaces, the apartment, the
  1. Pravdy Street offices. Others did go via Renord but
  1. they sold them on. The Onega Terminal assets, as we’ve
  1. already referred to, ended up in the hands of
  1. a different company, ROK N1 Prichaly, and we say it’s
  1. not surprising they ended up being the purchasers of
  1. those assets.

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  1. Western Terminal didn’t end up with Renord, it ended
  1. up with Baltic Fuel, which is a Smirnov‐related company,
  1. it is not, as it happens, a Renord company.
  1. In any event, the fact that some assets ended up
  1. with Renord and others went through Renord is certainly
  1. not a sufficient basis to infer fraud. Renord was
  1. involved from the outset. It was the main original
  1. purchaser. It was the main subsequent purchaser. It
  1. was involved in the process that started with the repo,
  1. and we’ll come on to that process later on. But given
  1. their involvement at the beginning, it is not very
  1. surprising that they remained involved to some extent at
  1. the end.
  1. As we’ve set out in our written closing, the
  1. evidence as to why assets ended up with Renord is quite
  1. clear and consistent, and there was nobody else that
  1. wanted them. Efforts were made, and Ms Yatvetsky
  1. explained in her evidence, an example is in
  1. paragraph 916 of our closing, {AA3&4/14/485} there had
  1. been various attempts to seek a buyer for the Western
  1. Terminal assets, but none were successful.
  1. MR JUSTICE HILDYARD: 916, did you say?
  1. MR BIRT: 916. That’s one of the occasions on which we made
  1. some reference to what she said in evidence about that .
  1. We’ve already referred to the fact that they were put up

73

  1. for auction and there was not a public stampede.
  1. In any event, even those assets that ended up with
  1. Renord rather than a third party, it doesn’t actually
  1. change the underlying dynamics. If Renord had acquired
  1. them for market value it is not evidence of fraud. So
  1. it all comes back again to the gross undervalue point in
  1. which, as we’ve already said, and we’ll come back to
  1. Ms Simonova’s evidence a little bit later, there’s
  1. nothing in it.
  1. Then what else do they seek to use to infer the
  1. conspiracy? Well, Mr Arkhangelsky’s own evidence, he
  1. makes various points in his witness statement and in his
  1. oral evidence. For example he said, we mention this at
  1. 674(2) of our closing, {AA3&4/14/370} that somebody from
  1. the Russian auction house told him that he had been told
  1. to sell his assets by Mrs Matvienko. Quite what that
  1. adds to anything we don’t know, but you just can’t trust
  1. Mr Arkhangelsky’s uncorroborated evidence  I’ve already
  1. made that submission at length.
  1. Apart from this, what is there? The approach seems
  1. to be to find various loose ends or slightly unexplained
  1. circumstances and say: well, that looks like it might be
  1. a bit suspicious or odd, and what might the explanation
  1. be for that? We have, in all the instances where those
  1. points have been made, dealt with them in our written
  1. closing. We’ve explained how the different auctions
  1. arose, how the different sales arose, how the different
  1. transfers arose, how efforts were made to sell and how
  1. difficult it was to find buyers.
  1. We do sense that one of the points that the
  1. defendants have suggested at different points throughout
  1. the case depends upon a sort of false and unsupported
  1. proposition, namely that because the Bank of
  1. St Petersburg is a Russian bank, it must be or is at
  1. least likely to be corrupt and dishonest and prone to
  1. illegal practice, and that the Russian system of courts
  1. and officials is also corrupt. Certainly the latter is
  1. a pleaded allegation, though not followed up in writing.
  1. But there’s absolutely nothing in that sort of
  1. suggestion. We just can’t have that as a start point.
  1. There’s nothing to justify it and there has been no
  1. evidence adduced in support of such a proposition. On
  1. the contrary, all the evidence from those who have given
  1. evidence has been to the contrary.
  1. The trouble is, without such a starting point, it is
  1. quite difficult for their conspiracy theory to get any
  1. traction, because so many parts of the realisation of
  1. the assets were dealt with through official
  1. institutions, or other aspects of their conspiracy case
  1. depend upon court decisions going against them, which

75

  1. they say were corrupt somehow. Well, there’s nothing to
  1. justify any of that. The only premise on which this can
  1. proceed is that the court system, the other officials,
  1. all of the government officials were not corrupt, were
  1. not in on the conspiracy. There’s no evidence that they
  1. are.
  1. It comes back to the starting point, really. If
  1. anyone is obviously dishonest in this story, it’s
  1. Mr Arkhangelsky. He is the one who has put forward
  1. a case involving massive payments of bribes. There’s
  1. just nothing from which to draw the inference that they
  1. seek to draw, that there’s some sort of grand
  1. conspiracy, including the government of St Petersburg
  1. and the various officials at the Bank and its chairman
  1. and a group of reputable St Petersburg businessmen. In
  1. any case, that would be a huge challenge to persuade the
  1. court to draw that sort of inference. There’s just no
  1. material here.
  1. One has to just take a step back and think about the
  1. inherent probabilities and plausibilities. In order for
  1. this conspiracy to work, it would have required the
  1. involvement of a very large number of people. In
  1. a sense testament to that is the large roll call of the
  1. alleged conspirators in the defendants’ pleading, it
  1. goes on for pages. We’ve already given some examples,

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  1. the way the assets were sold through the public auctions
  1. under the auspices of the Russian court. But in order
  1. to set up a sale where it would be sold for a grossly
  1. undervalued and dishonest price, a large number of
  1. people would have to be in on it. Those involved at the
  1. Bank, not just at the Savelyev and Malysheva level but
  1. the individuals responsible for contacting the court and
  1. the bailiffs and setting up the auction, they would all
  1. have to be in on it, otherwise any of them at any stage
  1. could allow it to unwind or spill the beans.
  1. When property is sold through a court, the starting
  1. price is set by an independent valuer and approved by
  1. the court ‐‐ we have given the reference in
  1. paragraph 876 {AA3&4/14/466} of our closing ‐‐ so the
  1. valuer would have to be part of that dishonest
  1. arrangement as well and indeed the court that approves
  1. it. They would all have to be in on it. The same for
  1. the bailiffs who then arrange the auction, they would
  1. have to be in on it to shut out any potential other
  1. people who might come forward to get their hands on the
  1. bargain. Those who conducted the auction would have to
  1. be in on it, they would have to be all making it look
  1. like a public auction, even though it wasn’t; in
  1. Mr Stroilov’s phrase, a purported public auction,
  1. purportedly under the control of the bailiffs.

77

  1. Obviously purchasers would have to be involved. It
  1. all amounts to a vast roll call of people, most of whom
  1. there is no evidence against at all.
  1. MR JUSTICE HILDYARD: You say as regards the auction there
  1. was genuine competition between the two, sometimes,
  1. participants. Do you say that it mattered which of
  1. those Renord companies should succeed?
  1. MR BIRT: It didn’t matter which succeeded. The
  1. requirements of Russian law, there were two registered
  1. bidders and that there was at least one bid at or above
  1. the starting price.
  1. MR JUSTICE HILDYARD: I can understand that that may feed
  1. into your legal point but the purpose of an auction is
  1. to achieve by competitive bidding a market price.
  1. MR BIRT: Yes.
  1. MR JUSTICE HILDYARD: But an auction where there is no
  1. competition, which for two reasons seems to be the case,
  1. one reason being that they were connected companies in
  1. the same group and the other was that the most the
  1. auction ever achieved was a stuttering to the very next
  1. level above the reserve price, do you say that that is
  1. a fair indication of market price?
  1. MR BIRT: Absolutely. It’s just as much a testing of the
  1. market if other people could come in if they wanted to.
  1. What happens in Russian law, as my Lord may remember,
  1. was if you only have one registered bidder, such that
  1. the auction fails, then the next step on the process is
  1. you run the auction again at a lower price and you keep
  1. reducing the price until somebody becomes interested.
  1. So one infers that, if you’ve only got two people
  1. interested, then at least one of them ‐‐ well, both of
  1. them then is willing to bid the starting price but no
  1. higher. Effectively the auction is still testing the
  1. market but the results it is showing is that there is
  1. nobody else out there who is willing to even go to the
  1. starting price. Maybe if it reduced by 15 per cent, you
  1. might have somebody coming in to say, «Well, I’ll buy it
  1. for a bit cheaper» but that doesn’t cast any aspersion
  1. or doubt on the original process, my Lord.
  1. If my Lord wants the decrease in price reference,
  1. I think we’ve covered that in paragraph 878(2)
  1. {AA3&4/14/467}. So we say that all of these people, the
  1. vast roll call of people, would have to be involved if
  1. this was the dishonest conspiracy that the defendants
  1. say it was, but there’s nothing at all to suggest that
  1. any of these people were ever part of any illicit
  1. arrangement and there’s no reason to doubt that they
  1. acted honestly and in accordance with their duties.
  1. In fact allegations of dishonesty were not made
  1. against most members of the Bank’s staff. Nobody was

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  1. alleged to have sought a dishonest valuation from
  1. a valuer or to have rigged the starting price. Nobody
  1. was alleged to have approached the court bailiffs and
  1. said, «We’re going to have a dodgy auction here».
  1. Nobody was said to have made any arrangements to shut
  1. out bidders or to hide the auction. None of those
  1. allegations have been made and quite rightly because
  1. there would be nothing to support them.
  1. MR JUSTICE HILDYARD: I know I’ve asked you this before but
  1. have we got copies of the advertisements?
  1. MR BIRT: My Lord, I think I gave the reference for the
  1. Western Terminal advertisement earlier, it’s all
  1. a question of whether I can find the right note.
  1. MR JUSTICE HILDYARD: You can give them to me later, that’s
  1. all right.
  1. MR BIRT: I think at paragraph 930(2) of our closing
  1. {AA384/14/492}. The document reference I’m told is
  1. {B173/2891/1}.
  1. Just thinking further about the allegations in the
  1. forgery case ‐‐ in the conspiracy case, insofar as
  1. forgery is said to have been part of it, one can only
  1. imagine how many members of the Bank staff would have
  1. had to have been involved if all those signatures and
  1. all those documents had been forged and all those
  1. internal Bank records had been falsified and all the

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  1. board minutes had been falsified, but it wasn’t alleged
  1. that anybody was dishonest apart from Mr Savelyev and
  1. Mrs Malysheva.
  1. MR JUSTICE HILDYARD: Can I take it that those were the only
  1. advertisements?
  1. MR BIRT: I’ll have to check, my Lord.
  1. MR JUSTICE HILDYARD: Need I be concerned as to the
  1. rationale for there having to be a basic minimum of two
  1. participants? On your theory, the fact that it has been
  1. properly advertised and everyone has a chance would hold
  1. good even if there was just one person.
  1. MR BIRT: My Lord, there was some Russian law evidence about
  1. this. There’s a case that Professor Maggs drew your
  1. attention to, from memory it’s called the NIK‐TRAST case
  1. and I’m sure we have a reference to it somewhere in
  1. here, I’ll try to dig it out ‐‐ paragraph 879 I’m told
  1. {AA3&4/14/467} ‐‐ which is that it’s not a breach of the
  1. Russian auction rules.
  1. MR JUSTICE HILDYARD: Yes, that goes to the question of
  1. whether it’s disqualifying that they be affiliated.
  1. MR BIRT: Yes.
  1. MR JUSTICE HILDYARD: But why do you need more than one on
  1. your theory? If competition at the auction isn’t really
  1. relevant because it’s a matter of whether anyone turns
  1. up, what is the theory behind having to have at least

81

  1. two?AA3&4
  1. MR BIRT: In a sense that’s a question for those who drew up
  1. the rules for Russian auctions. My recollection is that
  1. you needed to have two registered bidders but only one
  1. of them had to make a bid. I’ll have to check the ‐‐
  1. MR JUSTICE HILDYARD: Yes, only it isn’t an ingredient under
  1. Russian law, a sine qua non if you like, that there be
  1. competition?
  1. MR BIRT: No.
  1. MR JUSTICE HILDYARD: Because of the Professor Maggs ‐‐ you
  1. could be as cosy as you like?
  1. MR BIRT: The rule is you need to have two registered
  1. bidders but you only need one of them to make a bid at
  1. or above the starting price ‐‐
  1. MR JUSTICE HILDYARD: It appears on that footing just to be
  1. a formality.
  1. MR BIRT: The case that Professor Maggs drew attention to,
  1. which Dr Gladyshev didn’t really have any problem with,
  1. is that the fact that the two bidders are associated or
  1. affiliated is not in and of itself a problem. They
  1. still count as two registered bidders for the purposes
  1. of the rules. There’s two points really here, slightly
  1. different points. One is, were the rules followed? And
  1. that is the point we’re on when we’re looking at, were
  1. there two registered bidders and did one of them make
  1. a bid? The second point is, when you look at the
  1. auction price, can you rely on it as a price which has
  1. been market tested? We would say, well, actually, in
  1. order to be a market‐tested price, it would suffice,
  1. assuming it had been advertised, that there was one
  1. bidder. As it happens for the rules you needed two.
  1. That doesn’t mean that it wouldn’t have been
  1. a market‐tested price if there had been one bidder and
  1. everybody else had stayed at home.
  1. Just going back to my theme on how wide the
  1. conspiracy would have had to be if it ever wished to
  1. succeed, it’s also notable that Mr Arkhangelsky alleged,
  1. although again this wasn’t really suggested to any
  1. witness, corruption within the court system and in
  1. particular that Mrs Matvienko had intervened in
  1. a particular appeal. We gave the reference for this at
  1. 774 and following of the closing {AA3&4/14/415}. So he
  1. alleges that the Bank sought to influence the Russian
  1. courts, decisions were part of the conspiracy and
  1. a result of the intervention of Mrs Matvienko or
  1. judicial competence(?) and/or unlawful political
  1. influence.
  1. There is absolutely nothing to support those
  1. suggestions although it is telling, we say, that the
  1. defendants have felt that they needed to make them

83

  1. because of course the involvement of the courts in all
  1. these steps show that this was in fact a normal and
  1. bona fide enforcement process governed by all the normal
  1. rules and all the normal officials doing what they
  1. properly do.
  1. It is telling actually that the court in which he
  1. lost, which he says must have been because of
  1. Mrs Matvienko’s influence, was the Federal Arbitrazh
  1. Court of the north west region which was, when he gave
  1. some evidence about the decision of that court in
  1. a different case on a point of law, Dr Gladyshev picked
  1. out as a court of particularly high repute. We’ve dealt
  1. with that at 777(2) {AA3&4/14/416}. He said:
  1. «… I was there on many cases, the level is …
  1. very high.»
  1. The judges are considered to be very good and it has
  1. a good general reputation.
  1. So if one gets down to the specific allegation,
  1. there is absolutely no evidence at all that the court
  1. was corrupt in the way Dr Arkhangelsky suggests in his
  1. uncorroborated evidence. But the evidence from
  1. Dr Gladyshev is actually it is a court of high repute.
  1. It is just implausible that the court was dishonest in
  1. the way Mr Arkhangelsky alleges; the only evidence is
  1. that in fact it was reliable.

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  1. We’ve given a reference in our written closing at
  1. paragraph 15 {AA3&4/14/15} to an extract from the
  1. Pugachev case where Mr Justice Mann said that:
  1. «This court will not give much, if any, credence to
  1. wild and unsubstantiated allegations of political
  1. interference of the nature alleged [in that case], and
  1. in particular to allegations that a foreign court is
  1. subject to corruption or political interference which
  1. affects its independence.»
  1. If the court is to make any such finding it requires
  1. proper and cogent evidence of it, but there is none
  1. here.
  1. So we say there is an inherent improbability in the
  1. whole conspiracy case. It would require very powerful
  1. and compelling evidence to get home against those
  1. inherent improbabilities but there is none. There is no
  1. direct evidence and the inferences don’t fall to be
  1. drawn.
  1. Can I just pick up that last point before we get to
  1. the adjournment, to pick up a point on inferences and
  1. the drawing of them. We’ve dealt with that at
  1. paragraph 636 of the written closing {AA3&4/14/349}.
  1. We’ve cited there a passage first from Lord Millett in
  1. Three Rivers. If facts are consistent with innocence it
  1. is not open to the court to find fraud. Effectively, as
  1. absence or silence of a witness. It is not clear to us
  1. whether this is relied upon or not. It doesn’t appear
  1. in the written closing as such. It is simply
  1. a commentary that Mrs Malysheva didn’t attend but
  1. my Lord knows the background to Mrs Malysheva’s
  1. non‐attendance and that her witness statement in the BVI
  1. went in under a Civil Evidence Act notice and that she
  1. left the Bank in February 2015 and thereafter refused to
  1. provide a witness statement or cooperate or otherwise to
  1. give evidence. We’ve set out the facts relating to that
  1. at paragraph 630 of our written closing {AA3&4/14/347}.
  1. Mr Savelyev gave evidence at Day 30, page 112
  1. {Day30/112:1} that her leaving was nothing to do with
  1. OMG or these proceedings. It related to the rouble
  1. crisis and as a result of what she did then he lost
  1. confidence in her so they agreed that her employment had
  1. to be terminated. Mr Guz confirmed that her departure
  1. had absolutely nothing to do with OMG matters. That was
  1. Day 7, page 100 {Day7/100:1}.
  1. It is also relevant to note, we say, that certainly
  1. at the time when she left the Bank, that was before she
  1. had been named as a conspirator in the defendants’ case,
  1. she had not by that time assumed in the pleadings or the
  1. evidence the role that she subsequently came to have
  1. during the trial. We need to remember that it was only

85 87

  1. I think it has been put in this court before, fraud is
  1. the last inference to be drawn.
  1. Then there’s also a quotation from a different part
  1. of Lord Millett’s judgment in Three Rivers that we’ve
  1. set out under subparagraph 2, which is probably worth
  1. reading. I may just leave my Lord to read that to
  1. yourself. (Pause)
  1. MR JUSTICE HILDYARD: Yes. That’s the re H really.
  1. MR BIRT: It’s the re H test about the more improbable the
  1. event the stronger must be the evidence that it did
  1. occur. But it’s also in a sense looking at the
  1. parallels between the situation before Lord Millett and
  1. some parallels with this case, where in that case of
  1. course the depositors were alleging deliberate or
  1. reckless wrongdoing on the part of a large number of
  1. officials at different levels of seniority over a long
  1. period.
  1. «This would involve wholesale wrongdoing on
  1. a spectacular scale in the public service. Absent any
  1. plausible motive for such conduct it is an extravagant
  1. allegation. It will require evidence of the most
  1. compelling kind to establish.»
  1. My Lord, we say the same applies.
  1. Then the third point in relation to inference is any
  1. potential inference which is to be drawn from the
  1. on the eve of trial, literally on the eve of trial, that
  1. she was named as one of the officers through whom the
  1. Bank acted in the alleged conspiracy.
  1. So the position was that she had left the Bank,
  1. there was nothing that the Bank could do about it ‐‐ to
  1. attend. Mr Savelyev asked her to give evidence but she
  1. refused to do so. He also explained that Russian
  1. employment law did not permit including, as a term of
  1. her resignation agreement, obligations not set out in
  1. the Labour Code, so it wasn’t up to bargaining as a term
  1. of her resignation that she agree to continue to assist.
  1. So we say there’s no reason to draw any inference,
  1. if one is suggested, against the claimants as a result
  1. of her non‐appearance as a witness. She no longer works
  1. at the Bank, there’s no ability to get her to give
  1. evidence, she was out of the jurisdiction. The basic
  1. point I suppose is this was not some sort of manoeuvre
  1. to keep her away from the court, no reason not to accept
  1. Mr Guz’s and Mr Savelyev’s evidence about all that. The
  1. reason that she left wasn’t really challenged in
  1. cross‐examination, if truth be told. But in terms of
  1. coming to give evidence, she was asked, she refused.
  1. She is not compellable.
  1. The authorities we have dealt with, or the authority
  1. really, at paragraph 636(3) but it’s really over the

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  1. page, page 350 {AA3&4/14/350}. The first point we make
  1. is:
  1. «The party seeking to draw the inference must adduce
  1. some evidence, however weak on the matters in
  1. question…»
  1. In other words you need to have a case to answer on
  1. the issue before you even get into this.
  1. Then second:
  1. «If the reason for the witness’ absence or silence
  1. satisfies the court, then no such adverse inference may
  1. be drawn. If, on the other hand, there is some credible
  1. explanation given, even if it is not wholly
  1. satisfactory, the potentially detrimental effect of
  1. his/her absence or silence may be reduced or nullified.»
  1. In other words, we say here, well, there is
  1. a satisfactory reason why she’s not here and that’s the
  1. end of the point.
  1. But even if not wholly satisfactory, there is
  1. certainly a credible explanation and really there is no
  1. room here for any inference. There is certainly no
  1. prima facie case to answer in any event. Really in our
  1. subparagraph (c) there, we expand on the point. I know
  1. it’s only shortly before the short adjournment but we’ve
  1. given reference to some of Lord Justice Brooke’s
  1. discussion of the point in the Wisniewski case. In the
  1. into the detail, there is a point I would like to pick
  1. up from Mr Stroilov’s closing at paragraph 226,
  1. {AA5/15/90}.
  1. Having made some submissions about valuation
  1. methodology, Mr Stroilov says Mr Millard had arrived at
  1. the market value of $21‐odd million. The sale price was
  1. quite similar, he says. Then the submission is:
  1. «For such an admittedly wild arrow to hit the bull’s
  1. eye so precisely is too good to be true.»
  1. He goes on to say that the valuation has been
  1. contrived or at least calibrated to fit a pre‐conceived
  1. idea of what the right value ought to be.
  1. What is being said here is that Mr Millard has not
  1. undertaken a proper exercise, by which he means not
  1. a true and honest exercise. What is said it is is that
  1. this is a false valuation. «Too good to be true» means
  1. it is not true; that it is contrived or calibrated.
  1. That is, with respect, an outrageous thing to
  1. suggest. It is an allegation for which there is no
  1. basis and it should not have been made. It is certainly
  1. not a suggestion that Mr Milner saw fit to put to
  1. Mr Millard when he was being cross‐examined.
  1. If this was an allegation that they intended to make
  1. and if Mr Milner thought there were grounds to make it,
  1. it obviously should have been put to him. The fact that

89 91

  1. footnote, we’ve just set out some of the things he said
  1. as he was discussing the earlier cases.
  1. What one gets out of those quotations in footnote
  1. 1845 {AA3&4/14/350} ‐‐ and we’ve underlined the relevant
  1. words ‐‐ is that what this is really about is when
  1. a party has chosen not to call a witness and it is
  1. seeking to hide them from the court. But where it
  1. doesn’t really apply is where a witness is unavailable
  1. or refuses to cooperate because then it’s not a question
  1. of the party choosing to hide a witness, and that’s
  1. certainly not the case here.
  1. My Lord, that probably conveniently takes us to
  1. 1 o’clock.
  1. MR JUSTICE HILDYARD: How are you doing on time? Are you
  1. about where you expected to be?
  1. MR BIRT: Largely. Perhaps slightly behind but we’ll see.
  1. MR JUSTICE HILDYARD: That’s fine. 2 o’clock.
  1. (1.00 pm)
  1. (The short adjournment)
  1. (2.00 pm)
  1. MR BIRT: My Lord, I said I’d come back to make some more
  1. points about the valuations of the property. Can I just
  1. flag up first of all where we have dealt with this in
  1. the closing, in the written closing, it’s part 11. That
  1. starts at paragraph 1020. {AA3&4/14/533}. Before going
  1. Mr Milner didn’t feel able to do so speaks volumes.
  1. Mr Millard was clearly a professional doing his best to
  1. assist the court and had performed genuine and honest
  1. valuations of the property.
  1. It is not clear to us who has drafted this part of
  1. the defendants’ closing submissions, whether Mr Stroilov
  1. or Mr Milner. It is only Mr Stroilov’s name that
  1. appears on it, even though emails over the last month or
  1. so have suggested that Mr Milner might be assisting in
  1. it. If this is something that Mr Milner subscribes to,
  1. he will have to explain, when he comes to make oral
  1. submissions, what the basis for it is and why it was not
  1. put to Mr Millard, and how he thinks it can now be
  1. persisted in given that it was not put to a professional
  1. expert appearing before this court. We say it really is
  1. an outrageous thing to submit and it ought to be
  1. withdrawn.
  1. MR JUSTICE HILDYARD: Mr Stroilov, you’ve heard what is
  1. said. I don’t wish to pry as to who drafted it, but it
  1. wasn’t put to Mr Millard, it is a very serious thing to
  1. say of a professional man, that he has contrived an
  1. expert report or a result of valuation which is
  1. contained in an expert report, and I would hope that on
  1. reflection it will be withdrawn.
  1. MR STROILOV: Yes, my Lord. Well, I or Mr Milner will come

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  1. to this in due course. I think for the moment all
  1. I will say is that obviously this written submission is
  1. signed by myself, and I take responsibility for what is
  1. rightly or wrongly in there and really, in my
  1. submission, it is inappropriate to speculate who may
  1. have drafted a particular bit.
  1. MR JUSTICE HILDYARD: That’s what I said, but whoever was
  1. responsible for it, it’s there, and what is there was
  1. not put, so Mr Millard had no chance to rebut it, and
  1. that would of itself be sufficient I think, in the
  1. circumstances. But it goes a little beyond that, which
  1. is that accusing professional people of, in effect,
  1. producing a false report, despite the oath they’ve given
  1. me and their duty, is a very serious thing.
  1. If you wish to consider the matter, well and good,
  1. but I’ve indicated that in all the circumstances
  1. I suspect that the better course, and the only course
  1. really available, is to put it down to exuberance and to
  1. withdraw it with grace. I will leave you to cogitate,
  1. if you would prefer.
  1. MR STROILOV: My Lord, for the moment I will submit that
  1. this was not intended to suggest any dishonesty on the
  1. part of Mr Millard. Rather it is an attack on the
  1. overall credibility of his valuations as a matter of
  1. fact. Other than that, we will consider this matter and

93

  1. come back to this in our own oral submissions.
  1. MR JUSTICE HILDYARD: Right. Well, there you are, Mr Birt.
  1. I think in the circumstances I will leave it there until
  1. later. I will want this addressed.
  1. MR BIRT: My Lord, yes. We will wait to hear what is said,
  1. though we do say that if it is not an allegation of
  1. dishonesty and not giving a true valuation, which we say
  1. it plainly is on its terms, then it doesn’t amount to
  1. anything. It simply amounts to saying he ended up with
  1. a valuation that is close to the auction price. It
  1. certainly doesn’t go to his credibility.
  1. My Lord, Ms Simonova’s valuations, we say, just
  1. standing back, were far in excess of any other figures
  1. that have featured in this case in respect of Western
  1. Terminal and Onega, and they were calculated in complete
  1. isolation from the actual Russian property market and
  1. the relevant trends in the market. Now, that may be
  1. because she had no relevant experience of that market.
  1. My Lord will remember that she said she hadn’t bought or
  1. sold property in the relevant markets, save for
  1. assisting some relatives with flats on the domestic
  1. side, or because her methodology simply didn’t allow
  1. room to factor in the local market, but that is the
  1. starting point.
  1. In relation to the market, and I’ve alluded to some
  1. of these points already, at the end of 2008 there was
  1. a crash in real estate prices in Russia, and bank
  1. lending for commercial property development dried up.
  1. We’ve given some of the references in paragraph 857 of
  1. the written closing {AA3&4/14/458}. There are various
  1. footnote references to what Ms Simonova said and what
  1. Mr Millard said and also what Ms Saltykova said in
  1. a statement given in support of Mr Arkhangelsky in the
  1. French proceedings. She was the chief accountant at OMG
  1. and it is entirely consistent with what the experts say
  1. in general terms:
  1. «As a result of the 2008 crisis, the prices of real
  1. estate, which was the main security for the debt,
  1. dropped by almost half.»
  1. Ms Simonova, in footnote 2462, also made the comment
  1. that during 2007/2008 prices had increased to what were
  1. to prove to be unsustainable levels. We say it is quite
  1. telling that what you’ve got is the rise and then the
  1. fall of the market, and it is with that background that
  1. one needs to assess things like the acquisition price
  1. for the terminal, as well as the ultimate prices
  1. achieved at auction.
  1. It is also apparent from these paragraphs, we get
  1. the point that distressed assets were appearing on the
  1. market in 2009, and at paragraph 858 we’ve got the

95

  1. reference to Mr Millard explaining the complete lack of
  1. buyers in the property market during this period, which
  1. for good measure was something that Mr Savelyev also
  1. said in evidence. We’ve given the reference at 859.
  1. At 860 {AA3&4/14/459} we made the point which I’ve
  1. also made today, which is that sales at auctions are in
  1. any event forced sales, they are likely to depress the
  1. press, and that is obviously exacerbated when there is
  1. no real market or liquidity.
  1. Another relevant point is that the market for buyers
  1. of port assets in St Petersburg is small, and we give
  1. the reference under 861 of the written closing.
  1. Mr Millard explained that the ownership of most of the
  1. St Petersburg port is concentrated in the hands of two
  1. or three people who, as a result, have significant
  1. bargaining power. He also said that to operate in the
  1. port you need to have administrative connections and you
  1. may have to make certain payments in relation to that.
  1. The purchasers have a «high degree of bargaining power».
  1. That was Mr Millard at Day 37, page 92, lines 8 to 23.
  1. {Day37/92:8}. So it was effectively a buyer’s market.
  1. We’ve also got the evidence from Mrs Yatvetsky that
  1. we set out under at paragraph 861; there is a «narrow,
  1. closed circle of people who are participants of this
  1. very narrow port business». So her evidence is entirely

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  1. consistent with that of Mr Millard in this respect.
  1. Mr Popov also gave similar evidence in his report.
  1. He said it was a relatively closed market and there were
  1. significant regulatory barriers to entry for owning port
  1. assets. That’s in his second report at paragraph 4.8 at
  1. {E5/17/21}.
  1. Mrs Simonova also referred to the fact that Western
  1. Terminal and Onega were in ‐‐ she referred to it as
  1. a combined military zone. She also referred to various
  1. customs restrictions. In other words, access, you
  1. needed special permission for access. She said that on
  1. Day 36, page 159. {Day36/159:1}. She also commented
  1. that this reduced the potential pool of buyers. She
  1. said «We call this a weak market». That’s Day 36,
  1. page 160, line 11. {Day36/160:11}. We’ve given those
  1. references in the closing as well.
  1. That all goes to support the point that we made in
  1. writing and we made earlier today, that there weren’t
  1. many buyers, there weren’t many potential purchasers.
  1. It is not surprising that few people came forward. The
  1. property market had crashed generally, exacerbated by no
  1. liquidity in the market and that these were forced sales
  1. in a sector where, even at the best of times, there
  1. weren’t many people in the market.
  1. MR JUSTICE HILDYARD: The size of a market is not

97

  1. necessarily an indication one way or the other, is it?
  1. I mean, a small pool may be a small pool of voracious
  1. bidders.
  1. MR BIRT: It’s an indicator. Ms Simonova’s terminology,
  1. «a weak market», gives something away about it. If
  1. you’ve only got a small number, two or three people, who
  1. might at the best of times be interested in these
  1. assets, when you choose to put this particular property
  1. on the market there is obviously a greater chance that
  1. at this particular time none of them will be interested.
  1. If there are normally 100 people interested, there is
  1. a greater chance that at least some ‐‐
  1. MR JUSTICE HILDYARD: Is there any evidence that any of them
  1. were approached?
  1. MR BIRT: The evidence is as I mentioned earlier, it’s the
  1. witness evidence, and as far as I know there aren’t
  1. documents which demonstrate approaches to them, but
  1. Mrs Yatvetsky, for example, says that Mr Smirnov
  1. approached them and had ‐‐
  1. MR JUSTICE HILDYARD: No, she didn’t. She says she was
  1. convinced that he had.
  1. MR BIRT: I’m sorry?
  1. MR JUSTICE HILDYARD: She says she was convinced that he
  1. had.
  1. MR BIRT: I think I gave a reference earlier to

98

 

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  1. at 931(3)(a) {AA3&4/14/494} from GVA Sawyer, which
  1. valued it at 709 million and 830 million respectively,
  1. so that’s some sort of benchmarking at least in terms of
  1. looking at what the Bank had on file as valuations at
  1. that time.
  1. As a result, we say one has to look slightly
  1. sceptically at her values, which didn’t derive from real
  1. estate values but derived from a complicated model that
  1. uses all sorts of different assumptions about the
  1. business.
  1. With that as a background, it needs to be borne in
  1. mind how the defendants seek to use the valuation.
  1. I know I’ve made this point already but they seek to use
  1. it to infer fraud and to say that the prices the
  1. properties achieved at auction are so low that they are
  1. only consistent with fraud. Because if the price is
  1. also consistent with another non‐fraudulent explanation,
  1. then they can’t draw that inference.
  1. So they would need to show not only is Ms Simonova
  1. right in her appraisals and right in all her
  1. assumptions, but also that Mr Millard must be so wrong
  1. that his valuations are out of the range of any honest
  1. and rational valuer, looking at the properties in the
  1. context of this particular market at this particular
  1. time. Because if different honest valuers or appraisers

101

  1. could have different views about values within this
  1. range, you just can’t infer fraud.
  1. My Lord, Mr Eschwege is pointing me to another
  1. reference to give your Lordship, just picking up on one
  1. of the questions about the evidence. At paragraph 916
  1. {AA3&4/14/485}, there is a reference there to
  1. Mrs Yatvetsky’s evidence at footnote 2607, that one
  1. potential buyer was a neighbouring shipyard but that had
  1. proved not to be interested. She said there were other
  1. potential buyers, but all negotiations did not advance
  1. beyond the initial stages. There is a cross‐reference
  1. to paragraph 924 there, {AA3&4/14/489} which says that
  1. one potential purchaser was the company adjacent to
  1. Western Terminal, the state owned North Shipbuilding
  1. Company, which could have used it for further docks, but
  1. the negotiation was unsuccessful. And that was evidence
  1. given by Ms Mironova.
  1. MR JUSTICE HILDYARD: I mean, there’s a funny sort of
  1. problem here of which universe one is operating in to
  1. some extent. This was a case where there was an actual
  1. sale, and you only get really to valuation if the actual
  1. sale could be impugned.
  1. MR BIRT: Yes.
  1. MR JUSTICE HILDYARD: Which is why you say you can’t go to
  1. the valuation as a means of impugning the sale per se,
  1. because the market is the market.
  1. MR BIRT: My Lord, yes.
  1. MR JUSTICE HILDYARD: All the stuff about TRP, which was
  1. important I thought in the valuation world, is not
  1. necessarily relevant unless you’re entitled to enter
  1. that world.
  1. MR BIRT: My Lord, that is right.
  1. MR JUSTICE HILDYARD: I say this partly to clear my thought
  1. but partly to assist Mr Stroilov in his task.
  1. MR BIRT: My Lord, yes. I’ll make some comments on
  1. methodology. I’m coming on to them. But it’s the point
  1. which my Lord has picked up from what I inadequately
  1. said just now, which is if it’s right that there are two
  1. different valid methodologies and if it’s right that one
  1. of them may be getting closer than the other one, that
  1. doesn’t go anywhere near where Mr Stroilov would need to
  1. go for the purpose of inferring fraud.
  1. MR JUSTICE HILDYARD: It’s not only that. It’s just ‐‐
  1. MR BIRT: Or impugning the auction, my Lord.
  1. MR JUSTICE HILDYARD: Unless you unsettle the sale price,
  1. the sale price is the value.
  1. MR BIRT: My Lord, precisely. I couldn’t put it better.
  1. MR JUSTICE HILDYARD: It may be a disappointing value.
  1. Unless there was something wrong with the sale, it’s the
  1. value.

103

  1. MR BIRT: My Lord, that’s right, and the one thing you can’t
  1. rely upon to unsettle the sale is to point to the price.
  1. MR JUSTICE HILDYARD: No. It gives room for concern, but it
  1. isn’t proof of the pudding.
  1. MR BIRT: My Lord, quite so. In this case, we would say
  1. there’s no room for concern for the matters we’ve
  1. addressed, but your Lordship is right that even if there
  1. were some factors, one has actually got to be able to
  1. undermine the auction itself because otherwise that is
  1. the best demonstration of the market price.
  1. MR JUSTICE HILDYARD: The sale process, anyway.
  1. MR BIRT: As we say, actually, it is not that surprising
  1. when one looks at the other objective factors, such as
  1. the state of the market and the acquisition prices of
  1. both properties and so on.
  1. MR JUSTICE HILDYARD: The only reason I cavil, just so you
  1. should be clear, is the fact that under Russian law the
  1. auction result may only be impugned by suing the
  1. auction, those responsible for the auction, the bailiffs
  1. et cetera, would not be relevant, because that may
  1. simply demonstrate a forced process. But even stripping
  1. that out, you’ve got to unsettle the sale.
  1. MR BIRT: My Lord, yes.
  1. Just touching on ‐‐ sorry, my Lord.
  1. Just touching on my Lord’s point about the

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  1. differences in methodology of valuation, and in a sense
  1. this is only if you get into the stage at which it is
  1. relevant, of course there are different methods of
  1. valuing property: market approach by way of comparables;
  1. income approach by way of future cash flows; a cost
  1. approach. In a perfect world they would all give you
  1. the same value because they’re all aimed at getting the
  1. same thing, namely the market price, what this would
  1. exchange between a willing buyer and a willing seller
  1. for.
  1. There is something, we would say, of a red herring
  1. about whether or not the property was properly
  1. characterised as trade‐related property, TRP. There was
  1. quite a lot of debate about it but we say it doesn’t
  1. really go anywhere because, as Mr Millard explained,
  1. whether something is a TRP or not does not dictate
  1. whether you have to use a market approach or an income
  1. approach. You can value a non‐TRP on an income approach
  1. and equally you can value a TRP on a market approach
  1. using comparables; you have to look at each circumstance
  1. and work out what might be the most appropriate
  1. methodology in each circumstance, and it may be
  1. appropriate to use the other as a cross‐check. We’ve
  1. given some references in paragraphs 1030 and 1032. But
  1. the aim is always to find the market value.
  1. of value to his business but it would not necessarily be
  1. of value to the property. Personal contacts would move
  1. with the business and not stick to the property.
  1. That sort of factor may be important here, where
  1. Mr Arkhangelsky said he would cultivate particular
  1. relations with various officials, and of course he says
  1. through large payments, but whether there were payments
  1. or not in this sense doesn’t matter.
  1. No consideration to this sort of point appears to
  1. have been given in Ms Simonova’s valuations. We
  1. explained some points about this at paragraph 1037
  1. {AA3&4/14/543}.
  1. There was quite a lot of detail in Ms Simonova’s DCF
  1. calculation, which we have again made detailed
  1. submissions on, starting at paragraph ‐‐ when one gets
  1. to look at the key assumptions and inputs we start at
  1. paragraph 1054 {AA3&4/14/552}. It is all there and I’m
  1. not intending to run through it point by point, but just
  1. to pick one point out by way of example, under
  1. subparagraph 2 on page {AA3&4/14/553} we deal with her
  1. assumption of a total capacity of half a million TEUs
  1. per annum. We say that is just implausible. This was
  1. a 8‐hectare site and her valuation, of course, doesn’t
  1. take into account any increase to the site.
  1. We look at some figures here. The first container

105 107

  1. We have addressed whether or not this was a TRP at
  1. paragraph 1050 {AA3&4/14/540} but, as I say, it’s a bit
  1. of a red herring in the sense that I don’t intend to go
  1. through it now in more detail.
  1. What we do say is that one of the difficulties with
  1. using the income approach, and particularly one based on
  1. a discounted cash flow method, is that it is very
  1. vulnerable to its own assumptions. That’s one of the
  1. reasons why doing a DCF calculation on its own, without
  1. a cross‐check against any comparables, is unlikely to be
  1. robust. It is also why it is good practice to carry out
  1. a sensitivity analysis. That was something that
  1. Ms Simoniva said she had not undertaken. We’ve dealt
  1. with that in paragraph 1035.
  1. Also in relation to calculating on the income
  1. approach, it is important to distinguish between the
  1. value of the property and the value of the business
  1. that’s run from that property. We’ve made some comments
  1. at paragraph 1031(3). {AA3&4/14/541}. To take as an
  1. example, the goodwill of a business or another value
  1. attached to its branding, for example, doesn’t
  1. necessarily attach to the property. Or if a proprietor
  1. who has a business has a specific relationship with the
  1. authorities or has managed to obtain, through his
  1. personal contacts, specific approvals, that may well be
  1. terminal at the port had a 74‐hectare site and at that
  1. point in time handled a million TEUs, at the time of the
  1. information memorandum. So the idea that the Western
  1. Terminal, a site almost ten times smaller, with only one
  1. functioning berth, could have handled half as much in
  1. terms of containers, we say is the sort of «Surely not»
  1. point that really ought to strike somebody. Certainly
  1. anybody thinking of buying this, if they were doing this
  1. sort of calculation at all, would not be operating on
  1. that sort of assumption.
  1. We’ve dealt with a lot of the other detail in that
  1. paragraph.
  1. The overall point, as well as the points of detail
  1. on the unsafety of the assumptions, is that all of this
  1. is uncertain and there was no sensitivity analysis to
  1. check. She didn’t cross‐check against the real prices,
  1. and I’ve already made reference to the acquisition
  1. price. She also didn’t factor in any of the payments
  1. that Mr Arkhangelsky said had to be made to develop and
  1. operate the facility in the port, by which of course I’m
  1. referring to his evidence about bribery. But if
  1. properly valuing this property through her business
  1. income approach, that would have had an impact in at
  1. least three ways.
  1. First, if the continuation of operation of the

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  1. business is dependent on that sort of relationship, as
  1. Mr Arkhangelsky suggested, that injects a high degree of
  1. risk into the business. You are effectively choosing to
  1. operate outside the law and in an area where you have
  1. less protection as a result. So, for example, if your
  1. personal contact changes jobs or is removed, you may
  1. find you have to start again, or you may find that you
  1. can’t do what you want to do, or you may find you have
  1. to pay more money.
  1. Secondly, it was effectively a personal
  1. relationship; nothing to suggest that that sort of
  1. benefit, that sort of protection could be transferred
  1. with the property. It may attach to Mr Arkhangelsky or
  1. to his businesses, but that can’t attach to the
  1. property. Anyone new coming in has to establish that
  1. sort of relationship themselves. But part of the
  1. problem is separating out the business from the
  1. property.
  1. Third, if nothing else, these sorts of payments are
  1. effectively a cost of running the business and improving
  1. it, in the way that she says it would have been
  1. improved. They would have to be reflected in the costs
  1. side of the model but they weren’t.
  1. I’ve already made reference to the fact that her way
  1. of valuing it doesn’t factor in at all various factors

109

  1. that were pointed out, including by her in her evidence,
  1. including the military zone or what she referred to
  1. herself as the weak market.
  1. So we say really her valuation is just too unsafe
  1. and speculative to rely upon, entirely dependent upon
  1. its assumptions, which themselves are too speculative
  1. and, we say, obviously unsustainable. There was no
  1. cross‐check to give one any comfort that she was in the
  1. right sort of range. In fact, any cross‐checks show
  1. that she just was not.
  1. Mr Millard’s approach was, of course,
  1. a comparables‐based approach and he frankly recognised
  1. that direct comparables were hard to come by but he did
  1. his best to apply a rational and sensible methodology,
  1. working on the basis of values of property that had
  1. actually been achieved and doing his best to adjust them
  1. according to a methodology that he explained.
  1. One may stand back and think that’s not ideal
  1. because there’s the lack of lots of direct comparables
  1. but it was grounded in reality, in real prices that had
  1. been achieved in this area rather than in speculation.
  1. Again, standing back, his results were consistent with,
  1. for example, the acquisition price and the other
  1. valuations that the Bank had on file in 2011, and the
  1. acquisition price, we say, is generally recognised as an
  1. indicator of market value. Mr Bromley‐Martin said so
  1. himself. We’ve given that reference at 1045 in the
  1. closing {AA3&4/14/548}.
  1. The detailed points are all in part 11. Also in
  1. part 11 we’ve dealt with the valuation of the other
  1. property, including the property at the Onega Terminal
  1. and the other assets the defendants have formally put in
  1. issue. But there is, of course, nothing about any of
  1. that in the defendants’ closing. The closest they get
  1. is paragraph 227, {AA5/15/90} simply to say similar
  1. criticisms apply to Mr Millard’s valuation of Onega
  1. Terminal.
  1. We say that really isn’t good enough, given the
  1. amount of time they had for their closing, and it’s all
  1. more surprising since at least at one point it seemed to
  1. be suggesting that Mr Milner would be assisting with the
  1. drafting of this part, but it is not for us to peel back
  1. that particular curtain perhaps.
  1. In any event, we’ve dealt with all those points
  1. relating to the properties in part 11 and I don’t intend
  1. to go into them further, given where we are in terms of
  1. time and given there’s nothing to respond to.
  1. My Lord, having done that, I intend to go back and
  1. make some comments about December 2008 and what is
  1. referred to as the alleged December 2008 agreement, and

111

  1. then move on to make some submissions about the repo
  1. transaction.
  1. The alleged December 2008 agreement is, in the
  1. defendants’ closing, really the centrepiece of their
  1. case. It is where the conspiracy is said to have been
  1. first implemented.
  1. I mentioned earlier that in their pleading
  1. amendments they sought to introduce alternative cases as
  1. the conspiracies being formed later on in the
  1. chronology, but what appears to now be the case is that
  1. there was one overarching conspiracy which started
  1. in December 2008 or earlier. For example, in
  1. paragraph 9.4 of their closing {AA5/15/6} there is
  1. reference to the Bank or Renord being interested in the
  1. Western or Onega Terminals and so on, and that
  1. apparently is an intention that was formed at an early
  1. stage, probably even before December 2008.
  1. That is of course, at this stage, a very vague and
  1. imprecise allegation and not, from their point of view,
  1. a promising one. But as far as we understand it, that
  1. is when they say the conspiracy was formulated.
  1. In relation to the alleged December 2008 agreement,
  1. there is a factual question whether a six‐month
  1. moratorium was agreed at all and whether any agreement
  1. reached in the December meeting was intended to be

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  1. legally binding. We have dealt with these points within
  1. part 4 of our written closing, starting around
  1. paragraph 316 {AA3&4/14/186}. That’s where we deal with
  1. the allegation that there was a six‐month moratorium.
  1. There’s quite a lot that is said there and the
  1. evidence is pulled together there. It is explained how
  1. it is that allegation is inconsistent with the
  1. documentary record. I’m not going to run through all of
  1. the references and all of the evidence, but we do say
  1. that if it really were the case that a six‐month
  1. moratorium had been agreed or even was important to
  1. Mr Arkhangelsky, surely it would have been committed to
  1. writing at some stage? That surely would have happened
  1. either at the meeting itself; or in the memorandum which
  1. was drawn up shortly afterwards as an aide memoire to
  1. what had been agreed, in a sense that would have been
  1. the ideal place for it; or perhaps in an email sent in
  1. the last week of December 2008 after the meeting, from
  1. one party to the other, confirming it had been agreed;
  1. or perhaps from Mr Arkhangelsky or his lawyers saying
  1. «This isn’t in the memo but just to confirm this has
  1. been agreed»; or in the process of negotiating the
  1. formal extension agreements to the loans, again, that
  1. would have been an obvious point when it would have been
  1. recorded or raised; or, indeed, when the balloon went up

113

  1. and the debts started to be called in, one might have
  1. expected an email or a letter saying, «Well, what about
  1. the agreement that we wouldn’t have to pay anything
  1. until the end of June?» But there’s none of that.
  1. All of those opportunities to have said there is an
  1. agreed six‐month moratorium, and none of them taken. If
  1. it really had been agreed, and Mr Arkhangelsky really
  1. did think that he had a legally enforceable agreement in
  1. those terms, it would inevitably have been recorded in
  1. one or more of those ways. The fact that it wasn’t
  1. demonstrates the truth: it was never agreed.
  1. The addenda that extend the loans are the place
  1. where, if at all, one would see this. If he really had
  1. reached this agreement, then the OMG group would not
  1. have signed up to a written addenda which recorded
  1. a different agreement as regarded extension of time. It
  1. would have been quite bizarre of them to do that. If
  1. Mr Arkhangelsky had come back from the meeting on
  1. 25 December and said, «We don’t have to pay a cent or
  1. a kopek until the end of June, they’re going to send you
  1. some agreements» and then they come in and some of them
  1. extend time until different dates in March and they all
  1. think, «That’s all right». Of course they wouldn’t have
  1. done. You would see emails going back saying, «No, no,
  1. no, we agreed June». You would have Mr Arkhangelsky
  1. going bananas about it. Somebody who wasn’t shy to make
  1. a fuss about things when he thought there was ‐‐ well,
  1. even when there wasn’t cause, but when he wanted to.
  1. But you don’t see any of that. Instead, they all sign
  1. up to the agreements giving the dates that had in fact
  1. been agreed.
  1. Even Mr Stroilov’s closing recognises that the
  1. purpose of the addenda was to record the terms of the
  1. restructuring which had been already agreed in December
  1. 2008. He says that in paragraph 29(3) {AA5/15/12}. And
  1. the purpose was indeed to record those extensions which
  1. were agreed .
  1. We just cannot understand how it can be said why
  1. those addenda would not have recorded the six‐month
  1. agreement, if that had in fact been the agreement.
  1. The defendants try to avoid the burden of their case
  1. by saying that Mr Arkhangelsky asked for a six‐month
  1. moratorium. Well, he may well have done, but that
  1. doesn’t mean that the Bank agreed to it. On the
  1. contrary, the witnesses were clear and consistent that
  1. it had not been agreed to.
  1. Mr Stroilov, in his written closing, tries to turn
  1. it round to say, «Ah, it’s up to the Bank to show when
  1. and how the request was rejected». He says that in
  1. paragraph 35. {AA5/15/15}.  But that’s not right. It

115

  1. is his case seeking to establish a contract, and they’ve
  1. got to prove it was made. In any event, it’s clear from
  1. the evidence that the request was not accepted; it
  1. wasn’t accepted in the meeting, it wasn’t accepted
  1. subsequently.
  1. The evidence is in the written closing but, for
  1. example, we refer in 320(3) {AA3&4/14/189} to
  1. Ms Volodina’s evidence about what she said at
  1. the December meeting about PetroLes. They weren’t going
  1. to extend that any further. In fairness, what she said
  1. about that wasn’t really challenged when she came to
  1. give evidence. But we say really the proof is in the
  1. pudding of the formal addenda and the lack of any
  1. objection on OMG’s part to the actual extensions that
  1. were contained in there.
  1. MR JUSTICE HILDYARD: For a lesser period.
  1. MR BIRT: Yes. For shorter periods, my Lord, yes. And
  1. indeed in some cases for a longer period. But there
  1. wasn’t a six‐month blanket moratorium. What was agreed
  1. was in the addenda, my Lord.
  1. Mr Stroilov points in his closing to a couple of
  1. emails after the event where Mr Arkhangelsky said, «Ah,
  1. the Bank is in breach of our agreement». He sends
  1. a particularly emotional one to Mr Belykh, for example.
  1. But he doesn’t even say «moratorium» or say anything

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  1. even analogous to it. Surely, if he had got a legally
  1. binding agreement for a six‐month moratorium, he would
  1. have said so in that email.
  1. It is not at all unlikely that at the meeting on
  1. 25 December there would have been a discussion about
  1. giving Mr Arkhangelsky more time to pay; a discussion,
  1. but not reaching a remit on a precise date for the
  1. extension of time for each loan. Indeed, one wouldn’t
  1. normally expect to go to a meeting with the chairman of
  1. the Bank and conclude orally a legal binding oral
  1. agreement about extensions to loans running to these
  1. sorts of sums, or indeed at all.
  1. The discussion was about not calling an immediate
  1. default on the loans. «We’ll give you some extensions,
  1. not six months on everything, we can’t do that, and we
  1. can’t do six months on PetroLes». Ms Volodina has
  1. explained that. «But you can have some extra time and
  1. we’ll work it out on a loan by loan basis.» Obviously
  1. the Bank hoped that this was going to assist
  1. Mr Arkhangelsky.
  1. MR JUSTICE HILDYARD: And themselves.
  1. MR BIRT: Well, they didn’t want to have to call a default
  1. if they didn’t really need to.
  1. MR JUSTICE HILDYARD: But that wasn’t only a matter of
  1. commerce, was it? They were worried about then the end

117

  1. of the year provisioning.
  1. MR BIRT: During this period it is clear they had their eye
  1. on their reserves position. But they obviously also
  1. didn’t want to call a default unless they had to
  1. because, as they said, calling a default unless they had
  1. to then pushed them into another world. They were
  1. commercial people. Mr Savelyev’s evidence was very
  1. clear; he would always prefer a borrower that repaid
  1. than a borrower that didn’t repay.
  1. When one gets into, as with any lending institution,
  1. this territory where the borrower is in difficulty, it
  1. is a difficult decision for the lender as to when to
  1. pull the shutters down or how much more rope to give
  1. them. There’s a difficult balance to be drawn.
  1. Obviously the Bank hoped that giving him extra time
  1. would assist him, either give him some time to find some
  1. money from elsewhere, and obviously the ultimate aim
  1. would be that he would repay the loans from somewhere.
  1. But Mr Stroilov seeks to make something of the fact that
  1. the Bank cannot have anticipated that OMG would restore
  1. solvency by, for example, March 2009, so that tells
  1. against our case.
  1. But it doesn’t really go anywhere, because one would
  1. say equally there was probably no hope of a restoration
  1. of solvency by June 2009, which is what his case is for
  1. moratorium. What was on the table was a bit more time
  1. where that could be granted. As Ms Volodina said in her
  1. evidence, in January and February, what we hoped to
  1. receive was a financial recovery plan. That’s what we
  1. expected would be coming forward. That’s what she said
  1. at Day 8, page 74. {Day8/74:1}. Of course, they didn’t
  1. get that. Of course the Bank weren’t going to offer
  1. some sort of extension in perpetuity in the hope that at
  1. some point he would turn himself around, but they were
  1. prepared to offer him the last chance saloon. He wanted
  1. the chance, and the Bank was prepared to give him some
  1. breathing space. But in return the Bank needed
  1. something and what was offered was the repo. That was
  1. the broad position and that’s what they came out of the
  1. meeting with. There certainly wasn’t a formal agreement
  1. on a six‐month moratorium across the board, agreed
  1. orally, never committed to writing.
  1. But after the meeting they went away to sort out the
  1. details and the documents, as, frankly, one would
  1. expect. As my Lord knows, it was done in two parts.
  1. The first was the repo and the second was the extensions
  1. to the loans. There’s nothing particularly odd about
  1. that. It’s to be recalled, of course, that this was
  1. approaching the year end and there was some time
  1. pressure in relation to that, and also the financial

119

  1. crisis was coming to bear. Mr Turetsky, I think, gave
  1. some evidence about the fire under their feet at this
  1. time of year across the whole sector.
  1. The evidence was that in order to ‐‐ the Bank had to
  1. change their internal records so as to record that the
  1. loans were not in default by the end of the year, and
  1. there’s evidence about that. But in order to do that,
  1. they obviously needed to know that they were going to
  1. grant the extensions, albeit perhaps the agreements
  1. hadn’t been nailed down yet. But they knew that they
  1. weren’t going to grant any extensions unless the repo
  1. was in place. So the key to this, to the end of year
  1. deadline, was getting the repo in place, because that
  1. was the quid pro quo for not calling the default. Then
  1. the details of the extensions were thereafter written
  1. up.
  1. I’ve already noted, of course, that it’s important
  1. that when they did come to write them up, at no point
  1. did Mr Arkhangelsky or his lawyers start saying, «Hang
  1. on, we didn’t agree until March, we agreed six months».
  1. On the contrary.
  1. Lastly on the moratorium, before moving on to the
  1. repo itself, the case on the alleged six‐month
  1. moratorium and the attempt to run a breach of contract
  1. case based upon it doesn’t actually go anywhere, because

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  1. at best it would have resulted in OMG having until the
  1. end of June 2009 to repay the debts, or at least some of
  1. them. But the evidence is, and we’ve set it out at
  1. length in our written closing, that such was the
  1. financial position of OMG that the additional three
  1. months would have made no difference. Even by the end
  1. of June they wouldn’t have had the ability to make the
  1. repayments, so the Bank would have enforced anyway.
  1. It’s not even addressed in their written closing whether
  1. or not they have another case, but that’s not really
  1. surprising because the evidence all goes one way.
  1. So the six‐month moratorium case, in terms of
  1. a breach of contract case, goes nowhere because it is
  1. a no loss case.
  1. I’ve already pointed up the other points we’ve made
  1. in our written closing. Generally we’ve dealt with the
  1. meeting from paragraph 309 onwards but I don’t intend to
  1. go through all the points now {AA3&4/14/184}.
  1. In relation to the repo transaction itself, I’ve
  1. already explained that this was part of the deal, the
  1. arrangement that was entered into in order to give OMG
  1. more time to pay. It was a deal between the Bank and
  1. Mr Arkhangelsky, and there were commercial reasons on
  1. both sides for it. The reality was that OMG had no
  1. further available assets to offer as security in terms
  1. MR JUSTICE HILDYARD: What does she say?
  1. MR BIRT: «In January and February the Bank hoped to receive
  1. a financial recovery plan from the client …»
  1. MR JUSTICE HILDYARD: Was that any part of the memorandum?
  1. MR BIRT: No. This was just what the Bank anticipated.
  1. Looking at the repo arrangement ‐‐
  1. MR JUSTICE HILDYARD: Just before you get there, the thing
  1. is, on your case Mr Arkhangelsky has nothing left in the
  1. larder. All he’s got is the repo stuff to offer.
  1. MR BIRT: Yes, and I don’t think that there’s any
  1. controversy about that.
  1. MR JUSTICE HILDYARD: So it is his very last defence, and he
  1. presumably knows that actually the Bank is not going to
  1. want to call a default ‐‐ end of year, vision,
  1. reserving, bad reputation, et cetera ‐‐ and he knows
  1. that the winter time, immediately following a world
  1. crisis, St Petersburg probably iced up, et cetera, is
  1. going to mean that the three months is at best kicking
  1. the can along the road and that there will be a crisis,
  1. which he will by then have nothing in the larder to
  1. meet, the winter will still be there and the Bank will
  1. be a little bit stricter now because it’s got out of its
  1. immediate anxiety about financial year ends. But you
  1. say that he didn’t drive a bargain on the six‐month
  1. moratorium then.

121

  1. of a pledge or mortgage, but it needed to offer
  1. something to the Bank if it was to stave off immediate
  1. default.
  1. This was not something that was bounced on
  1. Mr Arkhangelsky or that came as a shock to him at the
  1. 25 December meeting. We’ve explained this at
  1. paragraph 331 of the written closing {AA3&4/14/193}.
  1. Indeed, an arrangement including transfer of shares had
  1. been mooted earlier by Mr Arkhangelsky himself in his
  1. letter of 28 November 2008 to Mr Savelyev, suggesting
  1. some arrangement relating to the Vyborg Shipping shares.
  1. If anything, he certainly had this idea independently at
  1. least.
  1. He’d also discussed the repo arrangement during the
  1. course of December with Ms Mironova, set out there as
  1. well, and Ms Mironova even sent through a draft share
  1. purchase agreement shortly before the meeting.
  1. So to suggest that he was somehow bounced into this
  1. at the meeting would be wrong.
  1. MR JUSTICE HILDYARD: Where is there evidence ‐‐ was it
  1. Ms Volodina ‐‐ that they were just hoping that within
  1. the three months a decent plan would be produced?
  1. MR BIRT: I did have that reference. I did intend to read
  1. it out. I may have not done so. It was Day 8, page 74,
  1. is my note. {Day8/74:1}.

123

  1. MR BIRT: He didn’t. That’s something that he has invented
  1. much later on. Mr Arkhangelsky’s position at the end
  1. of December, on his account, from his evidence, he was
  1. the one holding the whip hand, for the reasons my Lord
  1. gave, and also he gave reasons in his own evidence,
  1. which I’ll come on to the references. But he said,
  1. «I could hold them up for years in the courts», he said,
  1. «They wouldn’t be able to enforce against me».
  1. Basically, «You can mess around». Frankly, you can do
  1. things like make up allegations that people have forged
  1. documents. That was the sort of unscrupulous tactic
  1. that he had in mind. He thought «I have the whip hand».
  1. So there was no question of him being in an
  1. impossible position. All he wanted to do was buy
  1. himself a bit of extra time. Mr Arkhangelsky is the
  1. ultimate chancer, and kicking the can down the road is
  1. a favourite tactic, and buying himself a bit more time
  1. here or there is all that he wanted.
  1. He must have known that his businesses were sunk.
  1. He knew, although he hadn’t told the Bank for example,
  1. that at least one of his vessels had been arrested.
  1. They weren’t actually trading in St Petersburg, they
  1. were trading in warm waters, so the ice point is a bit
  1. of a red herring. But he knew that his Vyborg Shipping
  1. business was a bit of a pyramid scheme and he’d been

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  1. siphoning off the money through Land Breeze for vessels
  1. which he hadn’t purchased and had just disappeared. He
  1. knew all about Scan just being a treasury. And, who
  1. knows, maybe he just wanted a bit of extra time to
  1. finish taking out the money via City Centre, which of
  1. course happened around this time, out of Scan. So what
  1. he didn’t want was the shutters to come down on
  1. 31 December. But frankly, by the time we get to March,
  1. perhaps he doesn’t mind.
  1. It doesn’t really matter what the reasons were, he
  1. was content to kick the can down the road, and there’s
  1. no reasons why he would have signed up to the repo if he
  1. hadn’t actually wanted to do it, if he hadn’t wanted to
  1. buy himself the extra time, and that was his quid pro
  1. quo, my Lord.
  1. MR JUSTICE HILDYARD: There are no internal documentary
  1. notes of the Bank’s meetings, are there?
  1. MR BIRT: Of the 25 December meeting I don’t think there are
  1. any notes, either from the Bank or from Dr Arkhangelsky
  1. or I think it was Mr Berezin who also attended, so one
  1. of those meetings that ‐‐
  1. MR JUSTICE HILDYARD: No one took a note.
  1. MR BIRT: There are no remaining notes, and I don’t think
  1. there’s any evidence that anybody took notes.
  1. Mr Eschwege reminds me there are emails between the
  1. Even more amazing, when they do sign up to an aide
  1. memoire in the memorandum, there’s no breath of it,
  1. my Lord.
  1. So we say ‐‐
  1. MR JUSTICE HILDYARD: Do you say that he got so little, that
  1. if he’d been faced with just, say, a one‐month ‐‐
  1. supposing the Bank on 25 December had circulated
  1. documents which said one month, only until the end
  1. of January, wasn’t there enough of an agreement for
  1. something?
  1. MR BIRT: There wasn’t a legally binding agreement. There
  1. was no doubt a discussion at the meeting and that he’d
  1. get some time, and then ‐‐
  1. MR JUSTICE HILDYARD: But it wasn’t defined?
  1. MR BIRT: It wasn’t defined, my Lord, no.
  1. MR JUSTICE HILDYARD: So the shares went over on the repo
  1. for it might have been a couple of days, it might have
  1. been a couple of months.
  1. MR BIRT: There’s no suggestion that they settled down at
  1. that meeting and looked at each and every one of the
  1. loans and worked out the date. The evidence is that
  1. Ms Volodina said, «I can tell you you’re not getting an
  1. extension on PetroLes». That is the evidence, and that
  1. was the first date to come up, so that in fact may have
  1. been the important one. One may have thought that if

125 127

  1. Bank and OMG lawyers after the meeting dealing with the
  1. drafting of the agreements and the detail. But in terms
  1. of a contemporaneous record of the meeting I think
  1. that’s right, my Lord. Although one has to be slightly
  1. careful with, surely somebody must have taken a note.
  1. My Lord may remember that one of the meetings we asked
  1. about, a meeting between Mr Ameli and Mr Novikov of
  1. V‐Bank was attended by lawyers from Bristows who turn
  1. out not to have taken a note or not to have kept it,
  1. which one might think is a surprising turn of events but
  1. there we go.
  1. MR JUSTICE HILDYARD: It’s just that by then 4 billion
  1. roubles was riding on it.
  1. MR BIRT: That simply supports the point that they didn’t
  1. intend anything at the meeting to have been binding. If
  1. they had settled down and formed an agreement that the
  1. Bank anticipated it was going to be held to, there would
  1. have been a record of it.
  1. If this was something Mr Arkhangelsky was keen on,
  1. he would have made sure there was a record of it, even
  1. if he’d only made his own note or told Mr Berezin to
  1. write it down when they got back. It’s actually
  1. incredible to think he came out of that meeting «I’ve
  1. got an agreement I could go to court tomorrow to
  1. enforce», but it’s writ in water and just evaporates.
  1. that was a problem, it would have been talked about and
  1. maybe he would have had cause to complain if the Bank
  1. had sought to go below that date. But ‐‐
  1. MR JUSTICE HILDYARD: Why? Is it just because it seems
  1. logical?
  1. MR BIRT: I’m just saying as a matter of fact, not as
  1. a matter of complaint as to law. One would expect, if
  1. the Bank had come back saying, «We’ll give you to the
  1. 15th, even though at the meeting we said you’re not
  1. getting an extension on PetroLes beyond March», and then
  1. they’d come back from the meeting and said, «By the way,
  1. everything’s got to be in two weeks», surely you would
  1. have seen something coming back.
  1. It still wouldn’t have given rise to a legally
  1. binding agreement in terms of a moratorium or anything
  1. else because they hadn’t reached one, but whether or not
  1. he would have had some arguments under Russian law to
  1. reverse the repo at that stage because of a breach of
  1. good faith, there may or may not be, but that depends on
  1. an analysis of what would have been agreed and what
  1. would have been proposed in those circumstances.
  1. In the end, of course, it didn’t arise, because the
  1. Bank proposed extensions which were perfectly acceptable
  1. to Mr Arkhangelsky and OMG, as one can see from the
  1. complete lack of objection to the terms proposed.

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  1. It wasn’t something that was all tickety boo and
  1. signed up on the dotted line on 25 December. It
  1. happened in two stages, for the reasons that I’ve
  1. explained. That doesn’t mean that there’s inherently
  1. anything suspicious about it. What one has to remember
  1. is that Mr Arkhangelsky was not some sort of timid lamb
  1. in this situation. I mean, he’s keen now to present
  1. himself as a sort of besieged litigant in person in
  1. Nice, without any framework or structure or support
  1. network. My Lord knows what we say about that, and I’m
  1. not going into that now. But that can’t be said, even
  1. on his case, in December 2008. He had a whole
  1. management structure around him. He had managers, he
  1. had advisers, he had a legal department, and they all
  1. looked at these agreements; and he must have taken
  1. a decision, as he did, «This is okay. I’m happy with
  1. this».
  1. MR JUSTICE HILDYARD: Yes, but you’re confusing the
  1. agreements which emerge. I’m just trying to work out
  1. what the deal was on 25 December. I think your case is
  1. that the deal was Arkhangelsky to procure the transfer
  1. of the shares under the repo arrangements, whereby to
  1. further secure the Bank, thus releasing his last
  1. bargaining chip, on your case, and you say it’s agreed,
  1. and in return for that he gets nothing. He gets the

129

  1. possibility of an uncertain, it might be a day, it might
  1. be a month, it might be three months, nothing is said.
  1. He doesn’t say, «For God’s sake, I’m giving you my last
  1. bit, and it’s on your interests too». On your case,
  1. nothing. Is that right?
  1. MR BIRT: In essence, yes. Although my Lord, I would say,
  1. puts it in a slightly skewed way. There was no legally
  1. binding agreement on 25 December. One can call it
  1. a deal, one can call it the arrangement, one can call it
  1. the plan that they formulated, would be that
  1. Mr Arkhangelsky would enter into the repo, and the other
  1. part would be there would be extensions to the loans.
  1. The Bank wanted the repo entered into before the end
  1. of the year for the reasons I’ve explained, because that
  1. meant that they knew they would be able to give him ‐‐
  1. MR JUSTICE HILDYARD: It’s such an odd conversation. You
  1. say despite his protestation of being a victim now, he’s
  1. quite a sort of forceful chap and he just doesn’t press
  1. it at all, you don’t think. He just says, «Okay, hit me
  1. when you want, that’s fine, just take the shares».
  1. Do you see what I mean? I’m just trying to see the
  1. dynamics of this meeting. It’s odd.
  1. MR BIRT: Is it really that odd, my Lord?
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: One has to go back and look at it in context. He
  1. has offered the shares. As I say, he had a history in
  1. the past, he offered the Vyborg Shipping shares. But he
  1. comes to the meeting and, on our evidence, he’s the one
  1. that says, «I can do the repo transaction and I want
  1. a bit more time».
  1. That’s not a very surprising conversation to have,
  1. and the Bank say, «Okay, we’ll document it and we’ll
  1. give you some more time. PetroLes, we can’t give you
  1. any more time, but we’ll look at all the other deals and
  1. give you some more time». He goes back and talks to his
  1. lawyers ‐‐
  1. MR JUSTICE HILDYARD: And he nods, does he? He doesn’t say?
  1. «When you say a bit more time …»
  1. MR BIRT: He said, «I want six months». That’s what his
  1. evidence is. «I want a six‐month moratorium.»
  1. MR JUSTICE HILDYARD: Six months. Right, he does say six
  1. months.
  1. MR BIRT: That’s his evidence.
  1. MR JUSTICE HILDYARD: Yes. Then what? Everyone goes away,
  1. do they?
  1. MR BIRT: The Bank says, «We’re not giving you a six‐month
  1. moratorium».
  1. MR JUSTICE HILDYARD: They say that, do they?
  1. MR BIRT: Ms Volodina said «You can’t have that. Certainly
  1. not for PetroLes.»

131

  1. MR JUSTICE HILDYARD: Certainly not for PetroLes, but what
  1. about the others?
  1. MR BIRT: As far as the evidence goes, they didn’t get down,
  1. at that meeting, to each of the loans individually.
  1. MR JUSTICE HILDYARD: But they know what he wants, do they?
  1. MR BIRT: He’s asked for a six‐month moratorium, and they’ve
  1. told him at the meeting, «You can’t have a six‐month
  1. moratorium».
  1. MR JUSTICE HILDYARD: For PetroLes.
  1. MR BIRT: At all.
  1. MR JUSTICE HILDYARD: Do they? Where is that?
  1. MR BIRT: Yes. My Lord, I will have to find the evidence.
  1. MR JUSTICE HILDYARD: By all means come back to it if you
  1. want, but do you see what I mean?
  1. MR BIRT: Sorry. Mr Savelyev says ‐‐
  1. MR JUSTICE HILDYARD: Where is he? You see, what you say in
  1. 3242 is the difficulty for this contention is that in
  1. respect of the one loan that was discussed, the PetroLes
  1. loan, which was coming up for repayment in early March,
  1. made clear there could be no extension. {AA3&4/14/192}
  1. That, to the, I dare say, rather innocent abroad
  1. like myself, when you say, «You can’t have that one» and
  1. the person has said, «Look, I want six months and I can
  1. offer you this», the implication is that it will be
  1. granted for the other ones unless the negative is

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  1. stated.
  1. MR BIRT: One has to look back. Going back from 320, we set
  1. out Mr Savelyev’s evidence that it wasn’t possible to
  1. defer all the loan agreements for six months because
  1. they all had different duration, maturity dates,
  1. different amounts, we couldn’t do it. Ms Volodina said
  1. she explained ‐‐
  1. MR JUSTICE HILDYARD: That’s a bit of reverse engineering,
  1. isn’t it?
  1. MR BIRT: Yes, it’s sort of the context, really, that makes
  1. it at least ‐‐
  1. MR JUSTICE HILDYARD: He didn’t think that at the time, did
  1. he?
  1. MR BIRT: ‐‐ that was in the bank’s mind.
  1. MR JUSTICE HILDYARD: When the request came in, it’s not
  1. suggested that Mr Savelyev went through that process, is
  1. it?
  1. MR BIRT: Ms Volodina’s evidence, she goes on, she explained
  1. matters to Mr Savelyev ‐‐ and this was in her oral
  1. evidence, which may explain it doesn’t flow quite as
  1. well ‐‐ that this restructuring was possible. When she
  1. says, «and there was an attendance», I think she means
  1. at the meeting, and it was allowable within the existing
  1. maturity date with respect to the relevant loans, but
  1. extending a loan beyond the loan’s contractual maturity

133

  1. date would have required increase in the reserves.
  1. She then goes on to explain under (2), she was very
  1. much against it but ‐‐ the last sentence is the same
  1. point as I’ve already made really. Then there’s the
  1. PetroLes evidence under (3).
  1. I’ll have to go back and check precisely whether
  1. there was any other evidence about what was said at the
  1. meeting. I thought there was but it may be I can’t
  1. quite track it down now.
  1. MR JUSTICE HILDYARD: That’s fine. I hope I’ve shared with
  1. you my concerns, to try and see what is likely to have
  1. happened at such a meeting. That’s what I’m bothered
  1. about.
  1. MR BIRT: My Lord, yes. It may be that what the witnesses
  1. were clear about, on the Bank’s side, was that there was
  1. no agreement at the meeting or afterwards for
  1. a six‐month moratorium …
  1. Mr Eschwege reminds me of paragraph 312 of our
  1. written closing. I’m very grateful for that.
  1. {AA3&4/14/185}. Under (2):
  1. «The Bank considered with Mr Arkhangelsky the
  1. possibility of restructuring OMG’s loans. No specific
  1. details were discussed at the meeting.»
  1. There’s a footnote to Mr Guz’s evidence and
  1. Mrs Volodina’s evidence:
  1. «… specific extensions were left to be arranged
  1. «The outcome of the meeting was there was to be no
  1. OMG default in December 2008, and the future
  1. restructuring would be discussed and agreed with OMG.»
  1. I’m grateful for that, for putting me in the right
  1. place.
  1. We say that’s not at all a surprising outcome of the
  1. meeting. Indeed, I go back to my point that if there
  1. had been an agreement at the meeting of a six‐month
  1. moratorium, it is very surprising that it’s not
  1. recorded. That really is the most telling point,
  1. my Lord, and it can’t really be reconciled with the lack
  1. of objectional complaint when the loan extensions are
  1. suggested by the Bank or with the lack of any other
  1. documentary record or reference to it.
  1. Mr Arkhangelsky was simply keen to kick the can down
  1. the road and, you know, if they’d come back and given
  1. him an extra two days, he may well have objected and
  1. there may well have been a problem with that. But that,
  1. in a sense, is hypothetical. It is just not the
  1. situation that arose.
  1. MR JUSTICE HILDYARD: Is it the Bank’s case that on
  1. 25 December, as a condition for not calling in loans
  1. immediately, that Mr Arkhangelsky had committed to the

135

  1. repo?
  1. MR BIRT: It is not the Bank’s case that there was any legal
  1. agreement on 25 December. There was not, on
  1. 25 December, an agreement by which he said, «I bind
  1. myself here and now to the repo». The repo took place
  1. in the signing up of the repo agreement, my Lord.
  1. Of course that, as I’m coming on to, took place five
  1. days later. The 25 December was a meeting, it was
  1. a discussion, it was the formulating of: yes in
  1. principle, no in principle, we’ll go away and put it
  1. into action afterwards.
  1. MR JUSTICE HILDYARD: The loan extensions are after the repo
  1. agreement?
  1. MR BIRT: The loan extensions are signed up to during the
  1. early part of 2009, the repo agreement having been
  1. entered into on 30 December. The extensions are
  1. backdated to take effect ‐‐
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: My Lord is quite right, the Is are dotted and Ts
  1. are crossed during January.
  1. MR JUSTICE HILDYARD: Immediately before the res are agreed,
  1. are signed, is there any further commitment on the part
  1. of the Bank?
  1. MR BIRT: There’s not a legal commitment, no.
  1. MR JUSTICE HILDYARD: So Mr Arkhangelsky is still uncertain

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  1. what he’s going to get for his money?
  1. MR BIRT: The only legal agreements in play are the repo
  1. arrangements, which are the share transfer
  1. documentation, and in turn the linked repurchase
  1. documentation and then the loan extensions. That’s
  1. where the legal rights and obligations lie.
  1. Mr Arkhangelsky may well have had an expectation
  1. that he was going to get sensible extensions, and if he
  1. hadn’t got them or he’d had a problem with them, he may
  1. have had some recourse under Russian law to get out of
  1. the repo, on the basis that the Bank hadn’t behaved
  1. properly or something like that. As I say, it’s
  1. hypothetical and one doesn’t really have to ‐‐
  1. MR JUSTICE HILDYARD: It’s not what happened, is what
  1. you say.
  1. MR BIRT: Yes. Because the Bank behaved perfectly sensibly
  1. and gave him extensions, and nobody from OMG caused
  1. a fuss about them. There just wasn’t any objection to
  1. the dates that were proposed.
  1. There was absolutely a two‐stage process, as it
  1. turned out; the repo came first and then the loan
  1. agreements came second. But Mr Arkhangelsky could have
  1. said on 30 December, «I’m not doing this. Where are my
  1. loan extensions?» And the Bank would have had to run
  1. around and do them. But he didn’t say that. He was

137

  1. content to do it, because he knew this was his chance.
  1. He knew he didn’t much mind how much he got and he
  1. didn’t much mind entering into the repo, because he knew
  1. the companies were a busted flush anyway. He’d already
  1. pledged all the assets and he knew how indebted the
  1. business was, Scan and Western Terminal, so really for
  1. him it was a shot to nothing. He was buying himself
  1. some extra time for not very much. All he was giving
  1. away was partly his ability to cause trouble after the
  1. event, but he managed to do that sufficiently anyway,
  1. one might think.
  1. The repo transaction itself; and one has to look at
  1. this as two parts, because although they were two
  1. different, if you like, legal arrangements, the loan
  1. extensions and the repo, they were discussed at the
  1. meeting and they ended up both being implemented, albeit
  1. over a period of some weeks. But the arrangement that
  1. was made gave the Bank some element of protection by way
  1. of the shares being held pursuant to the repo, against
  1. action that Mr Arkhangelsky might take in the future to
  1. avoid repaying his loan or to frustrate enforcement
  1. against the security. That was a perfectly sensible,
  1. rational thing for the Bank to do.
  1. We’ve commented on what was then the well‐known
  1. problem of dealing with unscrupulous borrowers in our
  1. closing at paragraphs 371 and following. We’ve made
  1. some more comments at 380, where we explain that
  1. further, including the problems that banks had started
  1. to face at the end of 2008 as the financial crisis
  1. started to bite.
  1. So this was very much in their minds, that people
  1. were starting to play games when they got into trouble.
  1. Mr Guz gave some evidence about that, as well as
  1. Mr Savelyev.
  1. Indeed, the Bank were right to be worried about this
  1. because Mr Arkhangelsky did turn out to be an
  1. unscrupulous borrower who did not repay his debts. I’ve
  1. already referred to Mr Arkhangelsky’s evidence, and we
  1. give the references in paragraphs 382 to 384
  1. {AA3&4/14/226} where he explained he was very much aware
  1. of the difficulties that he could cause in the course of
  1. any enforcement process. His evidence was, «If I
  1. defaulted, of course I wouldn’t consent to enforcement
  1. against the property, of course I’d make them go to
  1. court. They would have to go through absolutely minimum
  1. two years, and that would give me plenty of time to find
  1. some more money, refinance». Frankly, kick the can down
  1. the road even further.
  1. As he, in his memorable phrase, said, he could start
  1. a war with the Bank.

139

  1. MR JUSTICE HILDYARD: Not if you got rid of the shares.
  1. MR BIRT: He did start a war with the Bank even though he
  1. had passed the shares over in the repo. In the end, it
  1. didn’t stop him causing trouble, but it did give the
  1. Bank at least some ability to enforce against the
  1. property that had been properly pledged to it.
  1. MR JUSTICE HILDYARD: He gave away his biggest weapon.
  1. MR BIRT: Well, he gave away something in return for
  1. something. He was aware what he was giving away. He
  1. was aware what he was doing, my Lord. This is not
  1. a sort of little old lady who signed something blind,
  1. not knowing what ‐‐
  1. MR JUSTICE HILDYARD: No, no. I’m imagining the tough guy
  1. that you invite me to imagine, and I imagine the tough
  1. guy squeaking like a mouse giving up his shares, his
  1. biggest weapon. That’s what’s the problem.
  1. MR BIRT: The thing is, my Lord, he wasn’t squealing to give
  1. away his shares in this way. I say «give away», I mean
  1. put them into the repo, put them into this deal to get
  1. the quid pro quo. The reason he wasn’t squealing ‐‐
  1. MR JUSTICE HILDYARD: What’s the quo? That’s what I’m
  1. getting at.
  1. MR BIRT: The quo is the extensions, my Lord. I’ve
  1. explained that, yes, it wasn’t done apple pie order on
  1. 30 or 31 December. It wasn’t all signed up to then, it

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  1. was not all legally binding at that date. We’ve
  1. explained the reasons for it, I’ve explained the reasons
  1. for it. If Mr Arkhangelsky had been that worried about
  1. it, surely he would have said? But he didn’t. He knew
  1. the Bank would do the decent thing, as indeed they did
  1. by offering him perfectly reasonable extensions. Some
  1. of the loans were extended for another year I think,
  1. which was quite generous, particularly in the financial
  1. crisis, with a borrower who was in some difficulty.
  1. In a sense, this is one of the points where
  1. Mr Arkhangelsky’s forgery allegations also cast this
  1. into some light, because that’s one of the ways in which
  1. he’s messed the Bank around for years and years and
  1. years. If, as we submit you should, you find that has
  1. all been a complete put‐up job on his part, it is
  1. exactly the sort of unscrupulous borrower tactic that
  1. the Bank were concerned about, and they couldn’t seek
  1. protection against that particular tactic but against
  1. other sorts of tactics that they were concerned about.
  1. That was what was in it for the Bank, they wanted at
  1. least some protection against the unscrupulous borrower;
  1. and for Mr Arkhangelsky it was the chance to avoid
  1. immediate default, and I’ve made some submissions about
  1. that.
  1. There is no reason to suppose that he was somehow

141

  1. threatened personally, physically, by Mr Savelyev into
  1. signing up to this deal. We’ve covered this in
  1. paragraph 336 of the written closing. {AA3&4/14/197}.
  1. Without running through all of the points, I can
  1. summarise. The only evidence with these threats is
  1. Mr Arkhangelsky’s own evidence. Nothing corroborating
  1. it. So we say it doesn’t even get off the ground
  1. because ‐‐ well, I repeat all the submissions I made
  1. earlier about his complete dishonesty and unreliability.
  1. The Bank’s witnesses, including of course Mr Savelyev,
  1. deny it. So do the others who were at the meeting.
  1. Also, the relations after the meeting are
  1. inconsistent with the agreements being reached as
  1. a result of threats. We’ve referred to the
  1. correspondence afterwards stressing good relations in
  1. 2009, but it’s an unusual allegation ‐‐ it’s an unusual
  1. threat, where you make a threat at the meeting and then
  1. say, «I’ll send your lawyer the documents, he can look
  1. over them, you can have five days to think about it».
  1. People who physically threaten people into signing
  1. things don’t usually give them a five‐day cooling‐off
  1. period, but that’s exactly what he had.
  1. During that five‐day cooling‐off period, he was able
  1. to, and did, consult others within OMG, including his
  1. lawyers; and we’ve set that out at paragraph 345.
  1. MR JUSTICE HILDYARD: Thank you. I’m sorry, I’ve asked you
  1. questions so I appreciate you’ll be a bit behind.
  1. MR BIRT: We’re doing okay.
  1. (3.20 pm)
  1. (A short break)
  1. (3.30 pm)
  1. MR BIRT: My Lord, I’m sorry I didn’t have that reference to
  1. hand. As far as I can tell from a quick check, it was
  1. the personal loan that was due on 31 December 2008 in
  1. terms of capital repayment. There was also the LPK Scan
  1. overdraft, which was on a 60‐day rolling limit, and
  1. there were also interest payments due at the end
  1. of December, on I think all of the loans. I think
  1. that’s the position. We’ll check overnight in case I’ve
  1. got that wrong.
  1. MR JUSTICE HILDYARD: Thank you.
  1. MR BIRT: Just finishing off on the repo, my Lord, and
  1. really drawing the threads together from what I’ve been
  1. submitting before the break.
  1. Mr Arkhangelsky entered the repo for his own
  1. commercial reasons. He entered it with his eyes open,
  1. knowing that he would get some extensions in return. He
  1. and his lawyers were involved in the process, he knew
  1. what he was doing. He was taking a risk that he would
  1. be able to find money in time to repay the debts as they

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  1. fell due, or to get further financing from somewhere
  1. else, or to persuade his Bank at some date in the future
  1. to extend them even further. But that was the risk he
  1. took and was willing to take, and we say it wasn’t much
  1. of a risk because the companies whose shares he was
  1. putting into the repo were businesses who did not have
  1. any real value beyond the value of the assets which were
  1. already pledged to support the loans.
  1. My Lord, just to give some references from our
  1. written closing as to where we make some other
  1. submissions about the repo arrangements. We’ve analysed
  1. those starting at paragraph 367, {AA3&4/14/219} but in
  1. relation to the effect of their arrangements we deal
  1. with that at paragraph 410 {AA3&4/14/239} of the closing
  1. submissions. We explain the various documents that set
  1. up the arrangements and what the understanding of it
  1. was. Then at 412 {AA3&4/14/240} we explain how it works
  1. in terms of the obligation to retransfer the shares back
  1. to OMGP and GOM, assuming that the various debts have
  1. been repaid.
  1. We explain how Russian law deals with that
  1. through ‐‐ well, there was an express term in the
  1. agreement actually about the third parties acting
  1. reasonably and in good faith, but there is also, as was
  1. noted by the experts, Article 10 regulating the parties’

145

  1. conduct about not abusing one’s rights in any event.
  1. So the arrangement was that the shares were to be
  1. transferred to the original purchasers and they
  1. effectively held them as stakeholders whilst OMG sought
  1. to comply with its obligations under the loan
  1. agreements. But once OMG had defaulted, there was
  1. a slight change in that status, such that no doubt the
  1. Bank would want to enforce the pledges and the original
  1. purchasers would then not stand in their way. That
  1. really was the point of the repo, to allow the Bank to
  1. enforce their security interests, their pledges,
  1. mortgages, without interference. The original
  1. purchasers were effectively a buffer, preventing,
  1. Mr Arkhangelsky from taking steps to prevent enforcement
  1. of the security.
  1. We’ve dealt at paragraphs 397 to 401 {AA3&4/14/232}
  1. with the reasons why the shares were held by the
  1. original purchasers rather than by the Bank itself.
  1. My Lord knows those reasons in outline, but it’s because
  1. this was now the height of the financial crisis. It was
  1. not in the Bank’s interests to consolidate these shares
  1. in their own financial statements. That was a concern
  1. that many of the witnesses noted, and there was some
  1. expert evidence about it as well. Whereas when you have
  1. a repo as part of a listed securities deal that may well
  1. not require consolidation, because that is a different
  1. animal really, but these were not those sorts of repo
  1. arrangements and they would or at least there was a risk
  1. that they would have required consolidation or
  1. a reflection in the accounts. That was the reason why
  1. they used the original purchasers.
  1. There was some evidence about other banks, such as
  1. Sberbank or VTB having Sberbank capital or VTB capital
  1. to do this sort of role, but of course banks in
  1. St Petersburg didn’t have that facility. Like those
  1. banks they didn’t want to take these sort of assets on
  1. to their books, but unlike those banks they didn’t have
  1. the facility of the SP capital. They just didn’t exist.
  1. So they entered into these arrangements with original
  1. purchasers who effectively did a favour for long
  1. standing business partners and people who they no doubt
  1. wanted to continue doing business with.
  1. As Ms Yatvetsky described it really, and we set this
  1. out at 415 {AA3&4/14/243} of the closing, the original
  1. purchasers were really holding the ring between the Bank
  1. and OMG until OMG could pay back its debts. That was
  1. really their role at the outset. Of course, once the
  1. default took place, the Bank was entitled to enforce.
  1. We’ve set out at 416 and following {AA3&4/14/243}
  1. the arrangements and the relationship with the original

147

  1. purchasers. The original purchasers of course had
  1. binding obligations to OMGP and GOM under the repo
  1. arrangements. So as long as Mr Arkhangelsky did what he
  1. was supposed to do and the debts were repaid, there
  1. would have been no problem in retransferring the shares.
  1. Indeed, there is Russian law evidence that it was pretty
  1. straightforward; you just went to court and got the
  1. order, if they didn’t do it themselves.
  1. The original purchasers held the shares, we record
  1. this at 416(1), effectively in the interests of the
  1. Bank. They are not recorded in writing, absolutely, but
  1. we say not terribly surprising or indeed suspicious in
  1. the circumstances. They were trusted companies, clients
  1. of the Bank, and indeed they had business relationships
  1. and they knew each other very well, going back many
  1. years. So they were trusted by the Bank to perform this
  1. role of effectively holding the ring and a sort of
  1. buffer zone to Mr Arkhangelsky.
  1. We make those points under 416. We make the points
  1. about the Bank trusting the original purchasers in (3)
  1. and we explain in (4) why the Bank regarded a written
  1. record as unnecessary, and part of the reason for that
  1. was of course that the Bank had, and always had, its
  1. rights to the security, which was the only thing that it
  1. was really concerned about.

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  1. I’ve already made the point that nobody thought
  1. there was any additional value in the companies. Really
  1. these were just the keys to the warehouse, as it were,
  1. the shares, so that the Bank could enforce when it
  1. needed to do so.
  1. At the end of the day, my Lord, we say that the repo
  1. arrangement was something that OMG entered into in its
  1. own interest. He wanted additional time to pay, he was
  1. willing to transfer the shares under the repo in order
  1. to get that time. The companies weren’t worth anything
  1. anyway, once you’ve taken into account the pledges over
  1. the assets. He had the OMG lawyers assisting him, and
  1. he freely entered into it after consideration, after his
  1. cooling‐off period. There is absolutely no reason to
  1. think there was intimidation or misrepresentation or
  1. anything like that. He knew the commercial deal he was
  1. getting into. If he hadn’t wanted this deal, he
  1. certainly wouldn’t have entered into it.
  1. My Lord, I’ve alluded to, and I was going to make
  1. some submissions about, the financial state of the OMG
  1. group and its companies. Things have taken a little bit
  1. longer than I anticipated, so I think for present
  1. purposes, and pending hearing from Mr Stroilov on this
  1. matter at all, I will leave it with the pretty detailed
  1. submissions we’ve put in the written closing. My Lord

149

  1. knows the general theme of our case on that, which is
  1. that it was effectively a business built on sand, which
  1. had run out of money in the autumn of 2006. Indeed,
  1. many of the facts supporting that and detailing the
  1. state of it were not even challenged. The Tekno loan,
  1. for example, that the Bank arranged from another client
  1. to give to Mr Arkhangelsky in October 2008 wasn’t
  1. challenged at all.
  1. I’ll leave that in the written closing for now,
  1. although we do say, and I’ve already referred to it on
  1. a number of occasions today, it is important on a number
  1. of issues, not just because the businesses were
  1. worthless so that the counterclaim, in terms of business
  1. value, is never going to recover anything in any event,
  1. but it also goes to the alleged conspiracy to raid
  1. valuable businesses, because we say they weren’t
  1. valuable, there was nothing to raid.
  1. It also goes, we say, the point I’ve just made, to
  1. Mr Arkhangelsky not being too worried about transferring
  1. the shares, because there was no value in them. It also
  1. goes to Mr Arkhangelsky’s credibility as a successful
  1. businessman or rather, we say, not as a successful
  1. businessman, simply as somebody who was able to borrow
  1. money to pay off debts from other banks until the
  1. merry‐go‐round stopped turning.
  1. MR JUSTICE HILDYARD: As regards the initial period of the
  1. repo, that is to say for so long as the original
  1. purchasers have the shares, is it the Bank’s case that
  1. the original purchasers had no interest in those shares?
  1. MR BIRT: Well, no, they were held by the original
  1. purchasers, so they were the owners of them.
  1. MR JUSTICE HILDYARD: To the order of the Bank?
  1. MR BIRT: However one phrases it, the arrangement was that
  1. they were following the Bank’s instructions.
  1. MR JUSTICE HILDYARD: They couldn’t deal with them in any
  1. sense as their own?
  1. MR BIRT: That’s right.
  1. My Lord, yes, to your last question, which I think
  1. I said I’d confirm, but also Mr Eschwege reminds me that
  1. of course they also held them subject to their
  1. obligations under the repo agreement, not to act in bad
  1. faith, and to return them on the appropriate terms.
  1. MR JUSTICE HILDYARD: They would have to account to the
  1. Bank, wouldn’t they, in respect of any activities with
  1. respect to the shares?
  1. MR BIRT: When you say «have to account», there wasn’t
  1. a legal relationship that put on them a legal obligation
  1. to account in a formal way but ‐‐
  1. MR JUSTICE HILDYARD: Surely there was? There wasn’t in
  1. writing.

151

  1. MR BIRT: There wasn’t, and there’s no evidence or
  1. explanation of how any such legal relationship would
  1. arise under Russian law. They were holding them as
  1. a favour and were expected ‐‐
  1. MR JUSTICE HILDYARD: They weren’t theirs.
  1. MR BIRT: In law they were theirs.
  1. MR JUSTICE HILDYARD: They were legal title, as we would see
  1. it.
  1. MR BIRT: I’m not sure, I’ll be corrected if I’m wrong,
  1. there’s not a concept in Russian law in the same way we
  1. have a trust concept. They held them on the
  1. understanding that they were holding them in the
  1. interest of the Bank.
  1. MR JUSTICE HILDYARD: Had the Bank at any moment said,
  1. «Look, we’ve cured the consolidation issue, please
  1. transfer those shares», the original purchasers would
  1. have had no claim to them, would they?
  1. MR BIRT: If the Bank had said, «You must now give the
  1. shares to us and we will hold them, we’re not worried
  1. about consolidation», one would have expected the
  1. original purchasers to do that. But there wasn’t
  1. a legal cause of action that could have been relied upon
  1. for that.
  1. MR JUSTICE HILDYARD: There wasn’t?
  1. MR BIRT: My Lord, no.

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  1. MR JUSTICE HILDYARD: So the Bank gave away some of its
  1. security rights against an expectation, did it?
  1. MR BIRT: It didn’t give away security rights. The security
  1. rights that it had were the pledges over the property
  1. which, and this is what the witnesses said, were always
  1. there, they always had them, they always had the ability
  1. to enforce against the property, whoever held the
  1. shares. So they weren’t giving away anything. What
  1. they were doing was removing control of the shares away
  1. from Mr Arkhangelsky, who they were worried about, and
  1. into the hands of somebody who they weren’t worried
  1. about. Because they couldn’t hold them on their own
  1. account, so this was the next best thing.
  1. Professor Guriev gave some evidence about this,
  1. saying: this is all very strange, it could be a fraud on
  1. the Bank shareholders, it could be in breach of all
  1. sorts of central banking regulations. The one thing he
  1. was very clear about was he didn’t think it was a fraud
  1. on Mr Arkhangelsky.
  1. MR JUSTICE HILDYARD: I ask in part because I was re‐reading
  1. the transcripts of 22 and 23 September and what was said
  1. to me with respect to the difficulties of obtaining
  1. documentation from the original and then subsequent
  1. purchasers.
  1. MR BIRT: My Lord, yes. I haven’t got a perfect recall of

153

  1. what was said on that occasion but I think what I’ve
  1. just been saying is consistent with that, namely there
  1. isn’t a legal right to go to the original purchasers and
  1. demand these documents. Although, my Lord, in the
  1. judgment you gave you came up with what I think you
  1. described as a practical solution in the circumstances,
  1. that certain requests ought to be made and you would
  1. hope that they were complied with, as indeed they were.
  1. MR JUSTICE HILDYARD: It seems so extraordinary, really,
  1. that there should be any question of the Bank not being
  1. able to get the documentation with respect to what, in
  1. a sense, an ultimate sense, was its own property. Under
  1. the repo. It’s so odd.
  1. MR BIRT: When my Lord says what would have been its own
  1. property, that’s not quite right, because it had pledges
  1. over the security which were unaffected by this
  1. arrangement. So whatever rights it had in relation to
  1. the property, the assets, it still had. They were
  1. unchanged by this. As I say, what had changed was that
  1. the potential obstruction of Mr Arkhangelsky causing
  1. trouble as shareholder had been, if not taken out of the
  1. equation, reduced.
  1. MR JUSTICE HILDYARD: So if one of the original purchasers
  1. had said, «You know that chunk of land and that bit of
  1. railway at Western Terminal which we in effect own
  1. through our shareholding, it’s going to be really
  1. difficult about that», the Bank would have had no
  1. recourse?
  1. MR BIRT: The Bank would have been in exactly the same
  1. position as if the repo hadn’t taken place. It was
  1. always the case that the Bank had pledges over some of
  1. Western Terminal but not, as my Lord says, one of the
  1. railways and berth 16. So it was in no better or worse
  1. position in that respect. It would have always had to
  1. enforce against its pledged property and not its
  1. unpledged property as a security interest, and put them
  1. in an auction, even if the shares were still held by
  1. Mr Arkhangelsky. Of course everything is still owned by
  1. Western Terminal and everything is still either pledged
  1. or unpledged, as it was before.
  1. If, to follow my Lord’s example, and of course
  1. there’s no suggestion that this ever would have happened
  1. or even did happen, but if the shareholder of
  1. Western Terminal had said «We’re not going to do
  1. anything with the unpledged property, do what you can,
  1. Bank, in relation to the pledged property», the Bank
  1. would have been no worse off that it was anyway. It
  1. would have just enforced against its pledged property.
  1. Of course, the purpose of doing it was that they
  1. hoped that they would get more cooperation than they

155

  1. would have got from Mr Arkhangelsky had he remained the
  1. shareholder.
  1. MR JUSTICE HILDYARD: In previous contexts you’ve stressed
  1. that the absence of writing suggests that there was no
  1. such arrangement. What should I make of the lack of
  1. writing in this context? In the moratorium, you say: no
  1. writing, therefore no happening. Here, I know it’s
  1. different because there is happening which can’t be
  1. denied, the shares are in the names of the original
  1. purchasers, but what explanation is offered in respect
  1. of the lack of writing?
  1. MR BIRT: Just on the moratorium, what we say about that
  1. is: nothing in writing, so no agreement. There
  1. obviously was discussion at the meeting but nothing was
  1. agreed. We say, if something had been agreed, legally
  1. agreed, it would have been in writing. Indeed, the
  1. position is not that dissimilar with original
  1. purchasers, in that there’s nothing in writing, but if
  1. something had been formally agreed, as in legally
  1. binding arrangements put in place, one would have seen
  1. it there. That simply supports the fact that this was
  1. an informal arrangement between the Bank and the
  1. original purchasers.
  1. We say it’s not that surprising. We’ve covered that
  1. in our written closing at 416; they trusted them, they

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  1. were long standing clients and they didn’t regard
  1. a written record as a priority. That was the evidence
  1. of Mr Savelyev, Ms Kosova and Mr Yatvetsky, who said
  1. under (6) {AA3&4/14/245} that Renord cannot abuse or not
  1. abuse the trust of the Bank. The Bank is the creditor,
  1. if you look at it in general terms, and in a sense
  1. Renord is the borrower, in a sense because we’re not the
  1. shareholder. But effectively it’s a kind of favour to
  1. the Bank because Mrs Malysheva trusted Mr Smirnov.
  1. In a sense that’s what happened. They replaced
  1. Mr Arkhangelsky as shareholder, who they had started not
  1. to trust, with people whom they did trust as
  1. shareholders.
  1. That was something Mr Arkhangelsky was content with.
  1. As we say, and I think I’ve made this point already,
  1. if Mr Arkhangelsky had fulfilled his obligations, then
  1. he had a direct action against them to get the shares
  1. back. So his protection was there. He wasn’t sort of
  1. left high and dry in any sense. But the deal he struck,
  1. by which I mean the arrangements they came to, was that
  1. he was to pay back the loans.
  1. MR JUSTICE HILDYARD: Where do you deal with the transfers
  1. to the subsequent purchasers or are you going to come to
  1. those?
  1. MR BIRT: We deal with them, I’m told, at 570
  1. there in some detail, including enforcement against the
  1. various assets, which now don’t feature in the
  1. defendants’ closing at all, but the overview points in
  1. a sense I’ve already made earlier on today, such as the
  1. crash of the Russian real estate market and the
  1. financial crisis and the other points as to the market
  1. that I made earlier, and the fact that all of these were
  1. at auction, so effectively distressed or forced sales.
  1. We also make the point, of course, that the Bank had
  1. an obvious interest in maximising its recoveries. We
  1. also make the point, at 865, {AA3&4/14/460} a sort of
  1. overview point, that the other participants in the
  1. auction process had their own interest in maximising
  1. recoveries. There was some evidence, for example, that
  1. the auctioneers worked on a percentage of the sale
  1. price. So absent any other evidence, certainly the
  1. inherent probabilities are that the auctioneers would
  1. have wanted to get the best price.
  1. MR JUSTICE HILDYARD: When does the Bank first start getting
  1. anxious about the Lair valuation?
  1. MR BIRT: I’ll have to check when it’s first raised.
  1. MR JUSTICE HILDYARD: I thought it was about June 2009.
  1. MR BIRT: That may be the case. There was some evidence
  1. from Mr Belykh that he had a look at them, so we’ll have
  1. to find that.

157 159

  1. {AA3&4/14/314}, but one probably has to go back to the
  1. beginning of part 7 and 552 {AA3&4/14/308} for the
  1. context, which is of course OMG being in default and so
  1. on, and various other events that happened then. But
  1. 570 is where we deal with the transfer from the original
  1. purchasers to the subsequent purchasers. The
  1. explanations for that are there about Mr Zelyenov not
  1. wanting to drop out and Mr Sklyarevsky agreeing to step
  1. in.
  1. Mr Eschwege reminds me then at 575 {AA3&4/14/317},
  1. as we move on only very slightly through the chronology,
  1. we get the start of legal proceedings and so on
  1. thereafter, by OMG and the Arkhangelskys.
  1. My Lord, the next point I was going to move on, to
  1. but again taking it largely at this stage from the
  1. written closing, having already made submissions in
  1. relation to the auctions on various points, is the
  1. various enforcement processes, and simply draw my Lord’s
  1. attention ‐‐ in fact, that’s all set out in our closing
  1. at part 9, starting at paragraph 852 {AA3&4/14/457}. We
  1. also dealt with various details of the enforcement
  1. proceedings in respect of each loan at 563 to 579 of the
  1. written opening submissions {AA1/7/460]. Without
  1. wanting to walk through all of those paragraphs, which
  1. would take quite some time, I think it is all set out
  1. MR JUSTICE HILDYARD: You see why I’m asking is that, on
  1. that footing, when the default happens in early March
  1. and then the subsequent purchase transactions happen in
  1. late March or early April, the working assumption of the
  1. Bank is that the pledges are of assets with a value
  1. considerably in excess of the debt. That is all going
  1. to inure to the subsequent purchasers, is it, all that
  1. value?
  1. MR BIRT: It’s right to say that the Lair valuations were
  1. the things that were sitting on file, but we’ll have to
  1. look at whether, in the teeth of the financial crisis
  1. in November and December, in reality it was thought that
  1. the assets could still fetch those sorts of amounts of
  1. money.
  1. MR JUSTICE HILDYARD: Is there any suggestion in the Bank
  1. that they ‐‐
  1. MR BIRT: I don’t think we’ve got any direct record that
  1. that was part of the contemplation but, as I said
  1. earlier, it sort of almost goes without saying that when
  1. you get into an enforced sale ‐‐
  1. MR JUSTICE HILDYARD: There was an appreciation of asset
  1. erosion.
  1. MR BIRT: You’re going to have that, aren’t you? We pointed
  1. to the vessels as the obvious example.
  1. MR JUSTICE HILDYARD: What was the cover on the Lair

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  1. figures?
  1. MR BIRT: I’m sorry, my Lord?
  1. MR JUSTICE HILDYARD: How much more on the Lair figures were
  1. the assets worth than the debt?
  1. MR BIRT: I think substantially more. I can’t remember what
  1. the Lair valuations were but we can no doubt look at
  1. that.
  1. Mr Eschwege makes the valuable point that when you
  1. get to December 2008, the Bank cannot have been at that
  1. point accepting those at face value because, if it had
  1. done, it would have thought there’s lots more security
  1. that could be offered here. There’s lots of, if you
  1. like, spare value in the assets which could therefore be
  1. topped up, in a sense ‐‐
  1. MR JUSTICE HILDYARD: No, they’ve already got the assets.
  1. What they’ve not got is the berth and the railway track.
  1. They’ve already got the assets. That’s your case.
  1. MR BIRT: Yes. Yes, they have got the assets, my Lord, yes.
  1. MR JUSTICE HILDYARD: They’re not going to think, «Oh, we’ve
  1. got a lot more assets». They might think, «The assets
  1. we have got are slightly less valuable», or quite a lot
  1. less valuable, and I would quite like references to see
  1. any internal process which suggests that’s what the Bank
  1. were thinking. Though I take your point that a forced
  1. sale and the rather grim days may well have made them
  1. subsequent purchasers; is that right?
  1. MR BIRT: I’ll just have to think that through to make sure
  1. before I agree with that, my Lord. But I’ll give that
  1. some thought and come back to you.
  1. MR JUSTICE HILDYARD: I think it’s what it leads to, but of
  1. course come back.
  1. There was some suggestion, I think by Ms Yatvetsky,
  1. that in some way the subsequent purchasers might have
  1. some residual obligation to count back, but it was never
  1. really made good, that point. Anyway, you see the
  1. point.
  1. MR BIRT: My Lord, yes.
  1. I was simply going to leave the other points to do
  1. with the enforcement process in the written closing,
  1. having already made some submissions about the auctions.
  1. The details are all in there.
  1. We make some submissions just at 882 {AA3&4/14/468}
  1. and following, where we take issue with this description
  1. of the auctions being «purported public auctions, not in
  1. accordance with Russian law». Anyway, we’ve set out
  1. there the various reasons why that’s wrong.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: My Lord, another point that is made in
  1. Mr Stroilov’s closing and has been made during the
  1. course of the trial relates to the ownership of various

161 163

  1. feel that the assets had eroded in value,
  1. notwithstanding the amounts spent on them, as they must
  1. have assumed that these monies were being spent.
  1. They didn’t think that they hadn’t been spent, did
  1. they, on those assets?
  1. MR BIRT: Sorry, my Lord, the loans?
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: The loans had been given over a period of going
  1. back over two years, back to the middle of 2006. And of
  1. course the Bank thought, in relation to Vyborg Shipping,
  1. for example, that some of them were being spent on
  1. ships. Unknown to them, they hadn’t been.
  1. The loans weren’t spent on Western Terminal, if
  1. that’s the point my Lord is getting to. For example,
  1. the fourth Vyborg Shipping loan, which I think was for
  1. just over a billion roubles, was secured against Western
  1. Terminal but it wasn’t a lending to Western Terminal.
  1. MR JUSTICE HILDYARD: My point ‐‐ and I would quite like to
  1. know the comparative figures and any internal
  1. documentation suggesting that the Bank were getting
  1. gloomy about the value of the pledged assets, but the
  1. point is a simple one, isn’t it, that, on the Bank’s
  1. case, pursuant to these trusting but undocumented
  1. arrangements, the excess in value of the pledged assets
  1. over the loan inured not to the Bank but to the
  1. companies. Mr Stroilov took some of the witnesses
  1. through a series of print‐outs from Russian databases,
  1. the SPARK database was one of them. We explained in our
  1. evidence, one has to be slightly cautious with some of
  1. them. Indeed, there are inconsistencies sometimes
  1. between the different databases. But the overriding
  1. submission, as we understand it, appears to be that
  1. a very large group, including the original purchasers,
  1. subsequent purchasers, the entirety of the Renord group
  1. and the Baltic Fuel group, are all in fact owned by
  1. Mr Savelyev or the Bank or by Mrs Malysheva. I think
  1. that’s what the submission is.
  1. We say, in a sense, the fact that one has various
  1. alternatives gives the game away that this is all
  1. speculation and you actually have not got any evidence
  1. for any of it.
  1. There is also a further submission, at paragraph 147
  1. {AA5/15/56} of Mr Stroilov’s closing, that all of the
  1. above that I’ve mentioned, Renord group and the Bank but
  1. also Skif, even if not all owned by Mr Savelyev or the
  1. Bank or Mrs Malysheva, they are in practice part of the
  1. same business. We don’t quite understand that, but we
  1. wait for that to be explained.
  1. As far as we read it, we understand that is an
  1. acceptance that Skif anyway is not owned by Mr Savelyev

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  1. or the Bank or Mrs Malysheva, but in relation to Skif it
  1. simply seems to be that even though it is not owned, it
  1. is somehow part of the same business.
  1. The legal significance of that is not entirely clear
  1. to us of that submission. Needless to say, it is
  1. rejected by us. But in both respects, both the
  1. allegation that this is all in the same beneficial
  1. ownership of whoever it is or the allegation that it is
  1. all the same business, whatever that means, we say
  1. that’s a hugely ambitious contention. What it is built
  1. on is effectively supposition, inference and various
  1. loose ends, innuendo but no actual direct evidence. It
  1. requires disbelieving the evidence of, among others,
  1. Mr Savelyev, Mr Sklyarevsky, Mrs Yatvetsky and
  1. Mr Smirnov.
  1. MR JUSTICE HILDYARD: There was a spreadsheet, wasn’t there?
  1. MR BIRT: There was an internal bank spreadsheet ‐‐
  1. MR JUSTICE HILDYARD: Internal is best.
  1. MR BIRT: ‐‐ Ms Stalevskaya produced, I think that might be
  1. the one your Lordship has in mind, where there was
  1. a column headed «Belonging».
  1. MR JUSTICE HILDYARD: «Founders».
  1. MR BIRT: «Founders» giving the shareholders.
  1. MR JUSTICE HILDYARD: Then a figure which appeared to
  1. correlate to the share capital but she said might be

165

  1. loans.
  1. MR BIRT: I’m not sure that’s quite right, but we have dealt
  1. with this. I’ll just find where. We’ve dealt with this
  1. at paragraph 647 of the written closing, my Lord
  1. {AA3&4/14/355}, and going on from there.
  1. MR JUSTICE HILDYARD: So it’s Stalevskaya against the
  1. spreadsheet, is it?
  1. MR BIRT: The spreadsheet is not entirely clear, we would
  1. say. It is, as she says, incomplete and in some places,
  1. I think she says, inaccurate. She says, and this
  1. I think is the gist of the point, when it comes to the
  1. column described as «Belonging», where it lists either
  1. the «Bank» or «Partner» or both, and she explains that
  1. it doesn’t mean that the relevant company belonged to
  1. the Bank but rather related to the Bank’s financing of
  1. the company’s various projects. If it was funded by
  1. a third partner as well, then «Partner» would be
  1. included.
  1. Then we go on in the next paragraph to explain why
  1. it doesn’t really make sense if it does mean belonged to
  1. the Bank, because of the way the table was constructed.
  1. MR JUSTICE HILDYARD: I’m not sure I’ve followed that.
  1. MR BIRT: We may have to get ‐‐ these were produced at some
  1. point in A3, so it may be that I dig out how easy they
  1. are to see. The point is, maybe I’ll just walk through
  1. it slowly, for each company’s entry, the sixth column
  1. has a number of rows corresponding to the number of the
  1. company’s project, «Bank» sometimes and sometimes does
  1. not appear in each row. It sometimes appears in two or
  1. more separate rows, and at other times appears in one
  1. row only but not in other rows for the company entry.
  1. Where «Bank» appears in a row, that indicates the Bank
  1. funds the particular project listed in that row.
  1. We say, if it was concerned with ownership, then
  1. «Bank» would either appear not more than once in each
  1. company entry or at least wouldn’t change, if you like,
  1. on or off in relation to different entries for the same
  1. company.
  1. There’s a particular example, 1878, {AA3&4/14/356}
  1. which refers to a particular company that has seven
  1. rows, identifying seven projects. The Bank appears in
  1. the sixth column all seven time, for all those projects.
  1. MR JUSTICE HILDYARD: Yes. Thank you.
  1. MR BIRT: If one looks at 1876, referring to the
  1. Sevzapalians entry, «Bank» is listed in the second of
  1. three rows, which shows that the Bank funds that
  1. particular project. But if the Bank owns Sevzapalians
  1. then one wonders why it only appears in the second row
  1. and not in the first one or not in all of them. In
  1. other words, it’s a project‐specific entry rather than

167

  1. a company‐specific entry, my Lord.
  1. What it appears to us that this submission from
  1. Mr Stroilov comes down to is that because Renord
  1. companies and Renord itself is owned through nominees,
  1. or at least in part through nominees, and because
  1. Mr Savelyev has in the past and still owns various
  1. companies through nominees, therefore one has to infer
  1. that Mr Savelyev or the Bank or Mrs Malysheva owns
  1. Renord.
  1. That is simply too great a leap to manage.
  1. Mr Savelyev was cross‐examined an awful lot about how he
  1. had held his shareholding in the Bank over the years and
  1. much was made of this ‐‐
  1. MR JUSTICE HILDYARD: Yes. This is Verniye Druzya.
  1. MR BIRT: Amongst others, my Lord.
  1. MR JUSTICE HILDYARD: «Group of friends» or whatever it
  1. meant.
  1. MR BIRT: I can’t remember. Mr Stroilov will have to remind
  1. us. There was another one called «Board of Directors».
  1. MR STROILOV: Verniye Druzya is «Loyal Friends» and Sovet
  1. Direktorov is «Board of Directors».
  1. MR BIRT: Various database entries were turned up, some of
  1. which were not in English, some of which were only in
  1. English and not in Russian. If I may say, there was an
  1. attempt to make all of this look slightly murky and

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  1. underhand, and at least part of the suggestion seemed to
  1. be that it had been done to keep Mr Savelyev’s
  1. shareholding or control hidden in some way.
  1. Your Lordship may remember that in fact all of this
  1. was laid out in the Bank’s various public records; the
  1. website, the annual reports and the prospectuses that
  1. had been drawn up by various international law firms for
  1. the public share issue projects that had been
  1. undertaken. We’ve given the references to that, in case
  1. my Lord wants it, at paragraph 667. {AA3&4/14/365}.
  1. that has set out all the details of the various ways in
  1. which the shares were held. I think Mr Lord may have
  1. handed up some hard copy bundles of the various
  1. prospectuses as well ‐‐
  1. MR JUSTICE HILDYARD: Yes, I remember that.
  1. MR BIRT: If my Lord hasn’t got those, we can supply further
  1. copies.
  1. Pending what Mr Stroilov says about it, I’m not
  1. intending to make detailed submissions about the various
  1. alleged connections because it’s difficult for us to see
  1. where it goes, but we have dealt with most of them,
  1. certainly those that were traversed in the evidence, in
  1. our written closing anyway. For example, the direct
  1. witness evidence that the nominees controlling Renord
  1. entities were holding on behalf of Mr Smirnov or Renord

169

  1. and were not controlled by the Bank or Mr Savelyev,
  1. we’ve dealt with that at paragraphs 643 and 653.
  1. {AA3&4/14/353}. There is direct evidence concerning the
  1. company called Barrister LLC and its beneficial
  1. ownership, and that company has nothing to do with the
  1. Bank or Mr Savelyev, and we’ve dealt with that at 628
  1. {AA3&4/14/346} and also 671(2)(c) {AA3&4/14/368}. We’ve
  1. dealt with Solo at paragraph 662. {AA3&4/14/362}.
  1. There seems to be an allegation now that Mr Zelyenov
  1. acted on behalf of the Bank as a nominal shareholder or
  1. director, but there is no evidence as far as we can tell
  1. or even a previous specific assertion about that.
  1. There is also extensive evidence, we’ve referred to
  1. this in the closing, on the roles of Mr Lokai and
  1. Mr Maleev, and we’ve dealt with these gentlemen in
  1. paragraphs 662 and paragraph 671(1) and (2)
  1. {AA3&4/14/368} and Mr Lokai, it there says, had no
  1. material involvement in any event after March 2009 and
  1. is not Mr Savelyev’s nominee.
  1. The various business connections that are
  1. suggested ‐‐ and again I’m just going to run through
  1. them, looking at the time, the points are all in the
  1. closing ‐‐ we say they hardly show that the
  1. Bank/Renord/Skif are all the same business, as is
  1. alleged.
  1. Firstly, the fact that Renord was set up by
  1. ex‐employees of the Bank is not terribly surprising and
  1. doesn’t really take anybody very far, nor is it
  1. materially relevant. We dealt with that at 653(2).
  1. {AA3&4/14/359}. In a sense that assists in explaining
  1. the trust that existed between the individuals; they are
  1. people who knew each other and had a history of dealing
  1. with each other. But because some people leave one
  1. business to go and set up another, you simply can’t take
  1. a leap that they haven’t really left at all, they are
  1. just pretending to have left, that is a non sequitur.
  1. More is made in the written closing about the Olimp
  1. building. We’ve dealt with that in paragraphs 677 to
  1. 682 {AA3&4/14/372}. Various witnesses were asked about
  1. this and they all gave roughly the same explanation. It
  1. was a large business centre, my Lord will probably
  1. remember this, which included among other things a large
  1. Mercedes dealership. Yes, Renord has offices there and,
  1. yes, formerly the Bank had some space there. So, no
  1. doubt, did lots of other businesses. Mr Belykh even
  1. said there was quite a reasonable restaurant there as
  1. well. But it doesn’t really add anything. It is hardly
  1. surprising that a business in St Petersburg takes office
  1. space in what turns out to be the same large building,
  1. hosting all sorts of other businesses, as St Petersburg

171

  1. Bank.
  1. There is a suggestion somewhere that Renord is in
  1. fact the investment department of the Bank, but that
  1. appears to us to be a new and, dare I say, unpleaded
  1. allegation. Anyway, we don’t understand it. The Bank’s
  1. accounts are audited and verified by western firms and
  1. they set out the true position in relation to the Bank’s
  1. ownership, its shareholding and its management. We deal
  1. with that in paragraph 667 {AA3&4/14/365}.
  1. There is also various points made in Mr Stroilov’s
  1. closing about the Leasing Company St Petersburg, Gayde
  1. and Leveskaya(?) Management Company, and we’ve dealt
  1. with those as well, for example 668 and footnote 1903.
  1. My Lord, I hope that’s not too much of a gallop
  1. through those points, but if there’s anything that comes
  1. out of Mr Stroilov’s oral submissions that I think we
  1. need to deal with, I’ll deal with it there, but largely
  1. I think we’ve dealt with all those points in the written
  1. document.
  1. The ultimate point is the one I made in the
  1. beginning, that the findings they ask the court to make
  1. are really only based on inferences and require a number
  1. of the Bank’s witnesses to be disbelieved on who was the
  1. beneficial owner of these companies, and there is no
  1. reason for that.

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  1. My Lord, I have some other points to pick up arising
  1. out of the defendants’ written submissions. In part
  1. I may leave some of them for any reply submission,
  1. depending on how they’re dealt with orally. I’ve also
  1. got to deal with another point my Lord asked me to help
  1. with, which was the public policy defence. I see the
  1. time, it’s 4.15. I’m simply working out what to do next
  1. and how long my Lord wants to sit this evening, if
  1. indeed any further at all.
  1. MR JUSTICE HILDYARD: What would assist you all best? It
  1. may be that you would be able to reflect on what else
  1. there is to be done after the canter through today
  1. better in the morning, I don’t know. We’ve got some
  1. time. Monday has been reserved, we’re going to need it
  1. anyway.
  1. MR BIRT: I think we will. My Lord, I’m in your hands.
  1. I can certainly use until 4.30 if it’s worth using.
  1. MR JUSTICE HILDYARD: Which would you find most efficient?
  1. You’ve done a lot today.
  1. MR BIRT: Rather than bite off ‐‐ the public policy defence
  1. is probably not really sensibly doable in 12 minutes
  1. because I will just take my Lord through the
  1. authorities, if only briefly. But maybe I should just
  1. pick up a few more of the points from Mr Stroilov’s
  1. written closing while we’re here and that may be worth

173

  1. making some progress on.
  1. MR JUSTICE HILDYARD: Okay.
  1. MR BIRT: At the outset of his written closing, Mr Stroilov
  1. sets up, if I can say, an Aunt Sally at his paragraph 4
  1. {AA5/15/2} by saying, «Well, the Bank’s case may be
  1. coherent but you pull out any particular straw and the
  1. whole thing falls down», but that’s not the case. True
  1. that a lot of the points there are part of the Bank’s
  1. case but they are not critical in the sense that the
  1. Bank’s case falls away if they fail. For example, the
  1. fact that Arkhangelsky’s business was a financial
  1. pyramid scheme doesn’t fall to the ground just if the
  1. value of the assets turns out to be higher than the
  1. claimants contend. The business was still one that was
  1. kept afloat by further loans to pay off existing loans
  1. and making accounting entries based upon reappraisals of
  1. property values.
  1. Similarly if, contrary to our case, various proceeds
  1. were not in fact siphoned off by Mr Arkhangelsky and
  1. hidden, that makes no difference to the claimants’ case.
  1. We say they were but, even if they were not, this
  1. business was still kept afloat in that way and once
  1. liquidity dried up the business was doomed.
  1. The suggestion that is also made here that one can
  1. tell who was acting in bad faith by asking which of two
  1. individuals was avoiding meeting the other, we say is
  1. just obviously not correct. That’s not the sort of fact
  1. from which one can infer fraud and there may be all
  1. sorts of reasons to avoid a meeting but you don’t need
  1. to really go into them. They are too many to mention.
  1. What you cannot say is that it is more likely you are
  1. conducting fraud simply because you do not want to take
  1. a meeting.
  1. In fact, for the avoidance of doubt, Mr Stroilov
  1. makes the point, he says, «Oh, it was Mr Savelyev who
  1. was avoiding meetings» but that’s not the case. We’ve
  1. set out at paragraphs 457 to 459 {AA3&4/14/263} that it
  1. was in fact Mr Arkhangelsky who was avoiding any
  1. meetings to discuss the situation with the Bank. So
  1. that’s a bit of an Aunt Sally we say.
  1. Mr Stroilov also makes an opening point that the
  1. claimants have been keen to play down, wrongly,
  1. Mr Savelyev’s involvement in the relevant facts but it
  1. is simply not right to say that Mr Savelyev had a close
  1. involvement. His evidence about the meetings he had
  1. was, for the chairman of a bank, we say, unsurprising
  1. and indeed correct. As the chairman of the Bank, it is
  1. hardly surprising that he did not have a hands‐on role
  1. in managing the loans or the accounts of OMG or of
  1. completing the details on documentation or anything like

175

  1. that.
  1. MR JUSTICE HILDYARD: Isn’t that an Aunt Sally? I don’t
  1. think they say he did. I think he say that his
  1. suggestion that he only met him twice is not so.
  1. MR BIRT: There’s quite a lot of points made, I’ll find the
  1. references. I may have gone slightly too far in
  1. saying ‐‐ it may not be said that he completed the
  1. documentation but one wouldn’t expect him to have
  1. a handle on the documentation either. It goes slightly
  1. beyond ‐‐ Mr Stroilov makes slightly more points than
  1. simply saying he had more than the two specific
  1. meetings. We say that actually his account of his role
  1. is entirely unsurprising. One would expect the work to
  1. be filtered down depending on the stage things were at,
  1. the decisions that needed to be taken and so on.
  1. Of course Mr Savelyev came into the story, we don’t
  1. back away from that, and he had two important meetings
  1. with Mr Arkhangelsky. When it became clear that OMG had
  1. become a big borrower in the autumn of 2008 and was in
  1. trouble, those were important meetings. Mr Stroilov
  1. makes much of Mr Savelyev agreeing that he did make
  1. a habit of meeting the big clients personally. That’s
  1. no doubt so, but there’s a timing point. OMG had become
  1. a big borrower by the autumn of 2008 but that had been
  1. built up over time.

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  1. By the time we get to November 2008 or
  1. December 2008, the loans totalled about 4 billion
  1. roubles but, for example, the fourth Vyborg loan had
  1. only been taken out at the end of July and that was
  1. 1 billion roubles on its own. So it wasn’t a case of
  1. Mr Arkhangelsky having been a big borrower for two and
  1. a half years; one wouldn’t have expected Mr Savelyev to
  1. be meeting him from the outset. It’s not surprising, we
  1. say, that he had not had early meetings with
  1. Mr Arkhangelsky.
  1. Mr Arkhangelsky was well served by regular meetings,
  1. not only with Mr Belykh who was already the director of
  1. big clients, but also Mr Guz who was the second most
  1. important person in the Bank or at least one of the next
  1. most important people after Mr Savelyev. We’ve dealt
  1. with those meetings in paragraph 165 {AA3&4/14/106} of
  1. our closing.
  1. The only real so‐called evidence to the string of
  1. earlier meetings which is said to have taken place is
  1. Mr Arkhangelsky’s own uncorroborated evidence and there
  1. is certainly no reason to rely on that or prefer that to
  1. Mr Savelyev’s evidence on the point.
  1. There’s also a slightly odd set of submissions made
  1. about this at paragraph 70 {AA5/15/33} of Mr Stroilov’s
  1. submissions.

177

  1. MR JUSTICE HILDYARD: 70?
  1. MR BIRT: 70. Where he says there seems to have been
  1. a scheme to distance Mr Savelyev from certain decisions
  1. on the basis that a particular consent authorised in the
  1. signed documents but then it’s crossed out and
  1. Mrs Malysheva is substituted and Mr Savelyev’s signature
  1. is missing but the minutes show he was there. If that’s
  1. a scheme to distance Mr Savelyev, it’s a very strange
  1. one because you would have thought that, if they wanted
  1. to distance him, they would say he wasn’t there. So
  1. a slightly strange scheme.
  1. Similarly, the next one referred to records the
  1. decision to enter into the settlement agreement, «Mr
  1. Savelyev was present, but didn’t chair the meeting».
  1. Well, so what, one might say. Again, if it was «Let’s
  1. distance him and keep Mr Savelyev clean», as Mr Stroilov
  1. suggested the scheme is, why is he recorded as being
  1. there at all? So it just doesn’t go anywhere.
  1. Mr Stroilov also seeks to get some leverage out of
  1. a suggestion that the Bank says that Mr Arkhangelsky
  1. insisted in the autumn of 2008 that OMG’s problems were
  1. only short‐term and specific reference is made to the
  1. payment that hadn’t been made in relation to the
  1. delivery of timber to Finland. Mr Stroilov says, well,
  1. the Bank can’t really have believed that. But actually
  1. this brings to the surface an inconsistency in the
  1. defendants’ own case. In his own witness statement,
  1. paragraph 124 {C1/1/31}, Mr Arkhangelsky insisted that
  1. the group’s problems were short‐term liquidity
  1. difficulties and that’s what he said about the position
  1. in late November 2008. So it’s entirely credible that
  1. that is what he was telling the Bank and that is the
  1. story he was telling the Bank when he went to them
  1. during that period of time. Indeed it is consistent
  1. with what the Bank’s witnesses say he was telling them
  1. in relation to temporary problems and so on. We’ve
  1. referred to this in our written closing at 149
  1. {AA3&4/14/95} and 155 {AA3&4/14/98} and then in the
  1. December meetings, 312 and 314 {AA3&4/14/185}.
  1. It is also inherently probable that Mr Arkhangelsky
  1. did seek to play down the OMG difficulties and relate
  1. them to a particular instance of nonpayment. He
  1. wouldn’t have wanted to admit to the full difficulties
  1. he faced at that stage when he was still hoping to get
  1. some extra time to pay.
  1. Mr Stroilov also says that refinancing proposals
  1. were disclosed to the Bank, paragraph 25 {AA5/15/11}.
  1. It’s a slightly odd submission, if I may say, because
  1. all he says is they «were no doubt disclosed to the
  1. Bank». He says:

179

  1. «… the Western Terminal information memorandum was
  1. in the Bank’s disclosure.»
  1. But that’s not really evidence at all. Why is there
  1. no doubt they were disclosed to the Bank? There’s
  1. certainly no documentary evidence of any of it being
  1. sent to the Bank at the time and at this stage saying ‐‐
  1. MR JUSTICE HILDYARD: Where are we looking, paragraph 25?
  1. MR BIRT: Yes, his paragraph 25. We say at this stage «no
  1. doubt» just won’t do.
  1. Mr Stroilov asked Mr Belykh whether he had seen the
  1. information memorandum but he didn’t recognise it. That
  1. was Day 3, pages 93 to 94 {Day3/93:1}. So that’s the
  1. only evidence of anybody from the Bank; Mr Stroilov
  1. didn’t ask anyone else so it’s not really open to him
  1. now to say no doubt it was sent. Although
  1. Mr Arkhangelsky in his witness statement said he talked
  1. to the Bank about his plans and instructed employees to
  1. provide documents, he didn’t provide any documentary
  1. references and there is no documentary record of those
  1. sorts of plans being provided, certainly no reference to
  1. the information memorandum.
  1. The point about it being in the Bank’s disclosure,
  1. well, one, it wasn’t put to any witnesses that it was
  1. sent to the Bank, as I say, apart from Mr Belykh who
  1. said he didn’t recognise it; two, it was in English of

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July 6, 2016 Day 43

 

  1. course, the information memorandum, not in Russian, so
  1. one may think unlikely to have been sent to the
  1. non‐English speakers at the Bank. It is right to say
  1. that there was a copy disclosed by the Bank in the hard
  1. copy disclosure given by Baker & McKenzie, it was a copy
  1. of the July 2008 information memorandum, but it wasn’t
  1. found in any electronic records. Those behind me have
  1. not now been able to tell ‐‐ of course they’re not Baker
  1. & McKenzie, this is a couple of years ago ‐‐ where it
  1. came from but it might easily have arrived at the Bank
  1. through the BVI proceedings because Mr Arkhangelsky
  1. exhibited it to his first BVI affidavit, so it may
  1. simply have been a disclosing‐back point. So in a sense
  1. that doesn’t shed light either way. The real point is
  1. that you can’t start saying at this stage, «No doubt
  1. things were disclosed to the Bank» when they weren’t
  1. actually and no witnesses were asked about that.
  1. My Lord, I think the other points are ones that
  1. I can ‐‐ they’re covered in the written document and
  1. I will wait to see if there’s anything new that needs to
  1. be said in relation to the oral submissions. I’ll deal
  1. with the public policy defence perhaps first thing
  1. unless my Lord is keen that I deal with it now, which
  1. I’m happy to do so if so. But otherwise I see the time
  1. and it may be a convenient moment, my Lord.

181

  1. MR JUSTICE HILDYARD: Yes. Well, thank you very much.
  1. Is 10.30 all right for everybody tomorrow? And you
  1. anticipate being finished by the short adjournment?
  1. MR BIRT: I would anticipate being finished during the
  1. course of the morning, my Lord, yes.
  1. MR JUSTICE HILDYARD: Then do we go straight on or do you
  1. wish to gather yourself for Friday and Monday? Or when
  1. is Mr Milner ‐‐
  1. MR STROILOV: I think just to be on the safe side, we have
  1. pencilled him in for Friday morning simply to be sure he
  1. is in our slot and then we arrange other issues around
  1. his issues. So generally speaking we are quite relaxed
  1. as to how it happens. We do anticipate we will need two
  1. full days and not less, unless your Lordship is going to
  1. indicate, «I don’t want to hear from you on this issue
  1. and that issue and that issue», which will speed things
  1. up, but otherwise I think there is quite enough material
  1. for two full days.
  1. MR JUSTICE HILDYARD: But would you anticipate starting
  1. tomorrow?
  1. MR STROILOV: Yes, immediately after my learned friend is
  1. finished.
  1. MR JUSTICE HILDYARD: Thanks very much. 10.30 tomorrow.
  1. (4.30 pm)

25

  1. (The hearing adjourned until
  2. Thursday, 7 July 2016 at 10.30 am)

3

4

5

Closing submissions by MR BIRT 4

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

183

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July 6, 2016 Day 43

  

A

  

A3 (1) 166:24

AA1/7/460 (1) 158:23

AA3&4/14/106 (1)

177:16

AA3&4/14/148 (1)

13:7

AA3&4/14/15 (1) 85:2

AA3&4/14/150 (2)

13:19 17:13

AA3&4/14/152 (1)

19:10

AA3&4/14/153 (1)

15:12

AA3&4/14/154 (1)

18:7

AA3&4/14/168 (1)

20:12

AA3&4/14/184 (1)

121:18

AA3&4/14/185 (2)

134:20 179:14

AA3&4/14/186 (1)

113:3

AA3&4/14/189 (1)

116:7

AA3&4/14/192 (1)

132:20

AA3&4/14/193 (1)

122:7

AA3&4/14/197 (1)

142:3

AA3&4/14/201 (1)

143:1

AA3&4/14/219 (1)

145:12

AA3&4/14/226 (1)

139:15

AA3&4/14/232 (1)

146:16

AA3&4/14/239 (1)

145:14

AA3&4/14/240 (1)

145:17

AA3&4/14/243 (2)

147:19,24

AA3&4/14/245 (1)

157:4

AA3&4/14/263 (1)

175:12

AA3&4/14/308 (1)

158:2

AA3&4/14/31 (1)

12:20

AA3&4/14/314 (1)

158:1

AA3&4/14/317 (1)

158:10

AA3&4/14/346 (1)

170:7

AA3&4/14/347 (1)

87:11

AA3&4/14/349 (1)

85:22

AA3&4/14/350 (2)

89:1 90:4

AA3&4/14/353 (1)

170:3

AA3&4/14/355 (1)

166:5

AA3&4/14/356 (1)

167:14

AA3&4/14/359 (1)

171:5

AA3&4/14/362 (1)

170:8

AA3&4/14/365 (2)

169:10 172:9

AA3&4/14/368 (2)

170:7,17

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July 6, 2016 Day 43

 

arose (5) 30:15 75:2,2 75:3 135:22

arrange (2) 77:18

182:11

arranged (2) 135:1

150:6

arrangement (17)

45:3 50:25 77:16 79:22 121:21 122:8 122:11,14 123:6 130:9 138:17 146:2 149:7 151:8 154:17 156:5,22

arrangements (17) 6:1 6:20 57:6 80:5 129:22 137:3 138:14 145:11,13 145:16 147:3,14,25 148:3 156:20 157:20 162:24

arrested (2) 70:6 124:21

arrive (1) 67:5 arrived (2) 91:5

181:10

arrow (1) 91:8 Article (1) 145:25 articles (1) 61:23 asked (20) 2:3 9:18

11:5 15:2 23:3 44:22 45:23 54:17 62:25 80:9 88:6,22 115:17 126:6 132:6 144:1 171:14 173:5 180:10 181:17

asking (3) 51:5 160:1 174:25

aspect (2) 69:8 100:3 aspects (3) 54:12,14

75:24 aspersion (1) 79:13 assert (1) 59:3 asserted (1) 59:3 assertion (1) 170:12 asserts (1) 32:23 assess (1) 95:20 asset (1) 160:21 assets (55) 10:19

59:11,13,20 60:16 61:10,12,15 62:11 63:12 64:17 65:11 65:13,15 68:10,10 68:23 72:14,17,21 72:25 73:4,15,21 74:2,16 75:23 77:1 95:24 96:11 97:5 98:8 100:2 111:7 121:25 138:5 145:7 147:11 149:12 154:18 159:2 160:5 160:13 161:4,13,15 161:17,18,20,20 162:1,5,21,24 174:13

assimilate (1) 3:11 assist (7) 6:13 88:11

92:3 103:9 117:19 118:16 173:10

assistance (6) 4:9 7:4 11:8 51:17 52:1 54:25

assisting (4) 92:9 94:21 111:16 149:12

assists (1) 171:5 associate (1) 39:16 associated (3) 49:10

67:8 82:19 assume (3) 16:21 58:2

65:23

assumed (3) 25:8

87:23 162:3 assuming (2) 83:5

145:19 assumption (3) 107:21

108:10 160:4 assumptions (9) 51:8 53:8,16 101:9,21 106:8 107:16

108:14 110:6

assurance (2) 32:4 46:2

assurances (1) 37:18 astonishing (2) 14:21

34:17

attach (3) 106:22 109:13,14

attached (1) 106:21 attack (2) 36:12 93:23 attempt (12) 14:10

20:3,7 21:8 32:1,4 43:2 44:23 55:8 69:21 120:24 168:25

attempts (2) 62:18

73:20

attend (5) 1:25 2:15 51:1 87:4 88:6 attendance (2) 46:15

133:22 attended (2) 125:20

126:8 attention (6) 18:6

19:2 27:9 81:14 82:17 158:19

attributed (1) 71:13 auction (61) 60:16 61:16,16,19,24

62:2,14 65:6,20,21 65:24 66:4,5,9,11 67:4,15,16,18,20 68:5,7,15,23 69:2 70:14,20 71:2,11 72:8,12 74:1,15 77:8,18,21,23,24 78:4,13,16,20 79:2 79:3,8 80:4,6 81:18 81:23 83:2 94:10 95:22 101:15 103:19 104:9,18,19 104:19 155:12 159:8,13

auctioneers (2)

159:15,17 auctions (19) 61:22,24

65:5 66:11,15,15 66:16 71:12,25 72:2,3 75:1 77:1 82:3 96:6 158:17 163:15,19,19

audited (1) 172:6

Aunt (3) 174:4 175:15

176:2

auspices (2) 67:20 77:2

authorisation (2)

27:13 28:8 authorise (1) 29:2 authorised (6) 27:22

27:23 28:12 29:16 30:3 178:4

authorities (6) 55:1,4 60:5 88:24 106:24 173:23

authority (2) 67:7 88:24

autumn (7) 27:18 39:3 60:25 150:3 176:19 176:24 178:21

available (4) 15:25

16:1 93:18 121:25 avoid (5) 4:6 115:16

138:21 141:22 175:4

avoidance (1) 175:9 avoiding (3) 175:1,11

175:13 aware (3) 139:15

140:9,10

awful (1) 168:11

 

B

 

B173/2891/1 (1)

80:18

back (63) 7:21 8:3 13:3,16 16:16 27:18 33:7,8 34:13 39:25 43:2,9 44:19 46:23 48:22,24 51:14 52:25 53:4 58:18 69:21 72:5,7 74:6,7 76:7,19 83:10 90:21 94:1 94:13 99:15 110:18 110:22 111:17,23 114:18,24 126:22 128:8,11,13 130:25 131:10 132:13 133:2,2 134:6 135:9,18 143:25 145:18 147:21 148:15 157:18,21 158:1 162:9,9 163:4,6,9 176:17

backdated (1) 136:17 backed (1) 143:7 background (4) 43:8

87:5 95:19 101:11 bad (5) 43:5 68:1

123:15 151:16 174:25

bailiff (2) 66:12 67:21 bailiffs (6) 66:17 77:8 77:18,25 80:3

104:19

Baker (2) 181:5,8 balance (3) 16:4 60:11

118:14 ball (1) 68:16

balloon (1) 113:25

Baltic (2) 73:2 164:10 bananas (1) 115:1 bandy (2) 32:11,19 bank (182) 6:1,15,20

8:24 19:19,19 23:3 26:22 30:19,20 31:17,18,25 32:3,4 32:7,9,24 33:17,19 33:23 35:17 38:7 54:21 55:8 56:22 57:7,14,20 70:9,18 70:24 75:8,9 76:14 77:6 80:22,25 83:18 87:8,21 88:3 88:4,5,15 95:2 99:16,20 100:24 101:4 110:24 112:14 115:19,23 116:23 117:10,19 118:15,20 119:7,11 119:12 120:4 121:8 121:22 122:2 123:2 123:5,13,21 124:20 125:19 126:1,17 127:7 128:2,8,23 129:23 130:13 131:7,21 134:21 135:15 136:23 137:11,16,24 138:18,23 139:10

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L15/87/49

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187

July 6, 2016 Day 43

 

33:13 36:19 37:10 37:20 38:11 39:20 41:15 43:7,13,16 44:9,12,17 45:9 46:8,20 49:25 60:25 69:10 72:3 84:1 86:14 93:1,17 93:17 100:12,21 105:3 107:6,23 108:20 110:11 111:8 112:18 114:23 119:6,7,23 120:17 122:15 125:6 128:22 136:7 139:16,18,19 142:10 147:9,22 148:1,23 151:15 155:13,16,24 158:3 159:9 162:10 163:6 163:25 176:16 181:1,8 182:5

court (64) 11:2 15:1 21:22 23:8 24:6,11 25:4 26:20 27:12 28:14 30:9 31:16 32:6,14 33:2 37:1 38:24 41:25 43:3 43:10 44:2 45:1,7 45:17,22 51:20 52:14,18 60:8,10 67:21 70:2,2 75:25 76:3,17 77:2,7,11 77:13,16 80:3 83:14 84:6,9,10,12 84:19,22,23 85:4,7 85:10,25 86:1 88:18 89:10 90:7 92:3,15 126:24 139:20 148:7 172:21

courts (7) 36:15 55:1 55:4 75:11 83:19 84:1 124:7

cover (1) 160:25 covered (10) 10:15,17

11:14 18:2 19:9 40:13 79:16 142:2 156:24 181:19

covering (1) 27:15 crash (5) 68:19 95:2

100:17,23 159:5 crashed (3) 68:11

71:18 97:21 create (1) 29:12 created (1) 38:16 credence (1) 85:4 credibility (9) 7:18,19

12:3,10 26:18 31:10 93:24 94:11 150:21

credible (3) 89:11,19 179:6

credit (1) 143:9 creditor (1) 157:5 crept (1) 5:13

crisis (16) 60:23 62:8 71:10,11,18 87:15 95:12 100:17 120:1 123:17,19 139:4 141:9 146:20 159:6 160:11

critical (1) 174:9 criticise (2) 3:20 46:22 criticisms (1) 111:11 cross‐check (4) 105:23

106:10 108:16 110:8

cross‐checks (1) 110:9 cross‐examination (4)

14:25 21:21 47:20

88:21 cross‐examined (2)

91:22 168:11 cross‐reference (1)

102:11 crossed (2) 136:20

178:5

crucial (1) 37:11 cultivate (1) 107:5 cured (1) 152:15 curious (1) 62:1 current (1) 54:4 curtain (1) 111:18 customs (1) 97:10

 

D

 

danger (1) 22:4 dare (3) 8:6 132:21

172:4

database (2) 164:3

168:22

databases (2) 164:2,6 date (8) 117:7 127:21

127:24 128:3 133:24 134:1 141:1 145:2

dates (4) 114:22 115:5 133:5 137:19

day (21) 8:21 23:1,11 31:15 39:11 41:20 45:18 46:3 47:12 48:23 61:25 87:12 87:19 96:20 97:12 97:14 119:6 122:24 130:1 149:6 180:12

Day16/146:1 (1)

23:12

Day3/93:1 (1) 180:12

Day30/112:1 (1)

87:13

Day36/159:1 (1)

97:12

Day36/160:11 (1)

97:15

Day37/92:8 (1) 96:21

Day38/21:1 (1) 46:3

Day38/43:14 (1)

47:12

Day38/44:3 (1) 47:15

Day7/100:1 (1) 87:19

Day8/74:1 (2) 119:6

122:25

days (13) 8:3,4,4,23 27:18 56:24 127:17 135:19 136:8 142:19 161:25 182:14,18

DCF (2) 106:9 107:13 dead (1) 53:21 deadline (1) 120:13 deal (34) 5:4 7:10 8:14

9:19 39:23 49:3 51:1 54:11 99:17 99:19 107:20 113:3 121:20,22 129:20 129:21 130:9 140:19 142:2 145:13 146:25 149:16,17 151:10 157:19,22,25 158:5 172:8,17,17 173:5 181:21,23

dealership (1) 171:18 dealing (10) 8:2,9

22:18 46:12 49:16 67:8 68:4 126:1 138:25 171:7

deals (4) 34:24 52:16 131:9 145:21

dealt (46) 7:11 8:8

pastedGraphic_49.png

 

doubt (19) 16:8,9 28:13 49:11 66:15 79:14,22 127:12 146:7 147:16 161:6 171:20 175:9 176:23 179:24 180:4,9,15 181:15

Dr (12) 15:10 16:2 38:18 40:20 68:2,9 68:24 82:18 84:11 84:20,22 125:19

draft (1) 122:16 drafted (4) 36:7 92:5

92:19 93:6 drafting (2) 111:17

126:2

drafts (2) 17:4,7 draw (8) 62:25 76:11

76:12,17 88:12 89:3 101:18 158:18

drawing (2) 85:21 144:18

drawn (9) 27:8 59:10 85:18 86:2,25 89:11 113:15 118:14 169:7

drew (5) 18:6 19:2 81:13 82:2,17

dried (2) 95:3 174:23 drift (1) 38:25 drifted (1) 39:1 drive (1) 123:24 drop (2) 39:2 158:8 dropped (1) 95:14 dropping (1) 39:4 Druzya (2) 168:14,20 dry (1) 157:19 drying (1) 61:4

due (8) 3:7 49:13 93:1 143:19,20 144:9,12 145:1

duration (1) 133:5 duties (2) 66:21 79:23 duty (2) 67:23 93:14 dwell (1) 13:2 dynamics (2) 74:4

130:22

 

E

 

E5/17/21 (1) 97:6 earlier (17) 14:7 27:25

30:12 51:12 80:12 90:2 97:18 98:15 98:25 112:7,12 122:9 142:9 159:4 159:7 160:19 177:19

early (7) 25:20 112:16 132:19 136:15 160:2,4 177:9

earth (1) 25:18 easier (1) 2:8 easily (1) 181:10 Easter (1) 45:4 easy (3) 14:16 22:5

166:24

effect (8) 40:7 49:23 61:3 89:13 93:12 136:17 145:13 154:25

effected (1) 28:23 effectively (20) 18:7

27:11 53:19 61:6 65:3 79:8 85:25 96:21 109:3,10,20 146:4,13 147:15 148:10,17 150:2 157:8 159:8 165:11

efficient (1) 173:18 effort (2) 45:2 55:10

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July 6, 2016 Day 43

 

full (9) 2:25 3:9 4:22 11:2,12 48:3 179:18 182:14,18

fully (2) 3:1,11 functioning (1) 108:5 fund (1) 50:3 fundamental (1) 21:12 funded (3) 13:21

17:11 166:16 funding (7) 14:6 19:4 19:17 49:12,13

50:12 51:21 funds (8) 22:2 44:13

46:18,21 48:2 52:13 167:8,21

funny (1) 102:18 further (25) 8:11 10:3

11:15 14:20 19:6 19:12 25:1 29:23 50:21 80:19 102:15 111:21 116:10 121:25 129:23 136:22 139:3,23 143:8 145:1,3 164:17 169:16 173:9 174:15

furtherance (2) 55:16 55:18

furthering (1) 55:1 fuss (3) 10:20 115:2

137:18 futile (1) 49:16

future (4) 105:5 135:4 138:20 145:2

 

G

 

gallop (1) 172:14 game (4) 5:24 7:6 12:1

164:14 games (1) 139:7 Gatchina (2) 69:17

70:13 gather (1) 182:7 Gayde (1) 172:11 Gearing (1) 20:19

general (11) 5:8 12:18 12:21 26:16 54:13 55:7 84:17 95:11 100:14 150:1 157:6

generally (6) 12:20 58:9 97:21 110:25 121:16 182:12

generous (1) 141:8 gentlemen (1) 170:15 genuine (2) 78:5 92:3 getting (13) 51:3

57:10 58:16 103:15 105:7 120:13 127:22 128:10 140:22 149:17 159:19 162:14,20

ginger (1) 99:6 gingered (1) 99:12 gist (1) 166:11 give (48) 6:10,19

14:19 16:4 28:4 29:6 31:12 34:10 44:11,15 45:13 47:1 49:21 50:21 53:13 58:12 80:14 85:4 87:10 88:6,15 88:22 96:11 102:4 105:6 110:8 116:12 117:14 118:13,16 119:11 121:21 128:8 130:15 131:8 131:8,10 139:14,21 140:4,17,18 142:21 145:9 150:7 152:18 153:3 163:3

pastedGraphic_51.png

 

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July 6, 2016 Day 43

 

80:20 insolvent (1) 53:19

instance (3) 57:17,23 179:17

instances (1) 74:24 institution (1) 118:10 institutions (1) 75:24 instructed (1) 180:17 instructions (2) 31:22

151:9 integrity (1) 66:9

intend (11) 1:15 4:23 11:19 12:24 26:6 106:3 111:20,23 121:17 122:23 126:15

intended (4) 9:19 91:23 93:22 112:25

intending (2) 107:18 169:19

intention (3) 5:11 21:5 112:16

interest (11) 18:22 51:24,24 62:15 144:12 149:8 151:4 152:13 155:11 159:10,13

interested (12) 6:7 63:10,11 65:11 79:4,6 98:7,10,11 99:18 102:9 112:14

interests (4) 130:4 146:11,21 148:10

interfere (1) 32:1 interference (3) 85:6

85:8 146:12 interim (9) 42:18 43:8

43:14,15,18,21 46:25 50:2 51:4 internal (12) 13:21

17:11 35:6,17 42:4 80:25 120:5 125:16 161:23 162:19 165:17,18

international (1)

169:7 interpreters (1) 1:24 interruptions (1) 3:10 intervened (1) 83:15 intervention (1) 83:20 intimidation (2) 32:25

149:15 introduce (1) 112:8 introduced (1) 56:10 inure (1) 160:7 inured (1) 162:25 invalidate (1) 65:20 invented (1) 124:1 investment (1) 172:3 InvestrBank (1) 58:8 invitation (1) 51:19 invite (1) 140:14 invited (1) 45:5 involve (2) 37:22

86:18 involved (17) 40:8

57:8,15 58:6,25 59:3,4,5 73:7,9,12 77:5 78:1 79:18 80:23 143:1 144:23

involvement (7) 55:4 73:11 76:22 84:1 170:18 175:18,20

involving (1) 76:10 irons (1) 143:10 irrelevant (2) 29:9,10 isolation (1) 94:16 issue (20) 7:2 9:21,24

10:2 26:25 38:23 41:8,11 45:5 52:8

53:4 61:13 89:7 111:8 152:15 163:18 169:8 182:15,16,16

issues (23) 8:8,9 9:10 9:14,20 10:15,16 37:23 39:9 45:25 46:12 47:1,2,5 48:17,20 49:3 50:22,25 52:23 150:12 182:11,12

items (1) 23:5

 

J

 

January (4) 119:3

123:2 127:9 136:20

jiggery (1) 29:4 job (1) 141:15 jobs (1) 109:6 judge (1) 3:10 judges (1) 84:16 judgment (5) 3:9

27:21 47:1 86:4 154:5

judgments (1) 55:20 judicial (2) 55:19

83:21

July (4) 1:1 177:4 181:6 183:2

jump (1) 32:8

June (8) 56:14 114:4 114:20,25 118:25 121:2,7 159:22

jurisdiction (1) 88:16 jurisdictions (3) 33:20

70:1,2

Justice (187) 1:4,17 2:3,11,13,22 3:5 4:1,3,20 5:6,24 6:7 7:23 17:2,6,18 18:16 23:19,22 24:13 25:5,12,17 26:3,16 27:7 29:21 30:2,5 31:3,9 37:5 39:8,22 40:2,14,22 41:8,12,24 43:14 44:5 49:5 50:16 51:13 54:2,7 57:18 62:1,13,21,23 63:14,16,19 73:22 78:4,12,16 80:9,14 81:4,7,19,22 82:6 82:10,15 85:3 86:8 89:24 90:14,17 92:18 93:7 94:2 97:25 98:13,20,23 99:2,5,17 102:18 102:24 103:3,8,18 103:20,23 104:3,11 104:16 116:16 117:21,24 122:20 123:1,4,7,12 125:16,22 126:12 127:5,14,16 128:4 129:18 130:16,24 131:12,16,19,23 132:1,5,9,11,13,16 133:8,12,15 134:10 135:23 136:12,18 136:21,25 137:14 140:1,7,13,21 143:18 144:1,16 151:1,7,10,18,24 152:5,7,14,24 153:1,20 154:9,23 156:3 157:22 159:19,22 160:1,15 160:21,25 161:3,15 161:19 162:7,18 163:5,22 165:16,18

165:22,24 166:6,22 167:18 168:14,16 169:15 173:10,18 174:2 176:2 178:1 180:7 182:1,6,19 182:23

justify (4) 16:19 20:7 75:16 76:2

 

K

 

keen (6) 99:5 126:19 129:7 135:17 175:17 181:23

keep (5) 8:15 79:3 88:18 169:2 178:16

kept (8) 23:23 24:18 26:25 47:3 66:19 126:9 174:15,22

kerfuffle (1) 38:17 key (3) 4:25 107:16

120:12

Keykot (1) 55:25 keys (1) 149:3

kick (3) 125:11 135:17 139:22

kicking (2) 123:18 124:16

kids (1) 21:21 kilter (1) 100:6 kind (2) 86:22 157:8 kindly (1) 19:2

knew (18) 22:2 34:10 48:2 64:10 120:10 124:20,24 125:3 130:15 138:1,2,3,5 141:4 144:23 148:15 149:16 171:7

know (29) 1:9,11 7:2 22:21 25:17 27:16 29:3 36:22 37:5 38:11 40:4 43:4 53:1 64:17 74:17 80:9 89:22 98:16 99:7 101:13 120:8 132:5 135:18 143:23,25 154:24 156:7 162:19 173:13

knowing (2) 140:12 144:22

knowingly (1) 6:9 known (6) 14:8 34:3,8

34:9 63:9 124:19 knows (20) 1:7,21

11:21 12:21 13:8 33:13 34:2,24 50:8 51:7 53:7,18 87:5 119:20 123:13,15 125:4 129:10 146:19 150:1

Kolpino (1) 71:2 kopek (1) 114:20 Kosova (2) 58:13

157:3

 

L

 

Labour (1) 88:10 lack (12) 11:24 14:14

21:12 31:10 96:1 110:19 116:13 128:25 135:13,15 156:5,11

lady (1) 140:11 laid (1) 169:5

Lair (9) 70:17,23 71:5 71:16 159:20 160:9 160:25 161:3,6

Lair’s (1) 70:10

pastedGraphic_52.png

 

168:15 169:10,12 169:16 171:16 172:14 173:1,5,8 173:16,22 181:18 181:23,25 182:5

Lord’s (5) 1:8 12:15 104:25 155:16 158:18

Lord.AA3&4 (1) 36:3

Lordship (21) 1:3,9

4:18 13:8 21:2 22:2 27:21 31:21 38:15 39:7 41:14,20 43:10 44:9 45:24 51:7 102:4 104:7 165:20 169:4 182:14

Lordship’s (5) 8:10 18:6 21:2 27:8 40:16

loss (1) 121:14 lost (2) 84:7 87:15

lot (19) 2:20 3:24 6:21 10:8 13:23 40:25 50:4 62:17 71:22 105:14 107:13 108:11 113:5 161:20,21 168:11 173:19 174:8 176:5

lots (6) 22:15 38:5 110:19 161:11,12 171:20

low (4) 59:21 68:1 69:1 101:15

lower (2) 68:17 79:3

Loyal (1) 168:20

LPK (1) 144:10

 

M

 

Maggs (3) 81:13 82:10

82:17

Magnum (1) 2:9 main (6) 3:14 9:14

59:8 73:7,8 95:13 mainstay (1) 33:18 major (2) 19:16 38:22 making (11) 7:19 9:7

15:20 22:12 25:4 29:22 51:2 54:13 77:22 174:1,16

Maleev (1) 170:15 maliciously (1) 55:19 Malysheva (13) 57:13

57:21,25 58:3 77:6 81:3 87:4 157:9 164:11,21 165:1 168:8 178:6

Malysheva’s (1) 87:5 man (2) 12:22 92:21 manage (1) 168:10 managed (2) 106:24

138:10 management (6) 22:1

58:10 64:20 129:13 172:8,12

manager (1) 32:3 managers (1) 129:13 managing (1) 175:24 Mann (1) 85:3 manoeuvre (1) 88:17 map (1) 99:9

March (10) 56:13 114:22 118:21 120:20 125:8 128:10 132:19 160:2,4 170:18

market (66) 60:15 61:5,10,11,17,17 62:9,10,16 63:6 65:14,24 66:6 67:5

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July 6, 2016 Day 43

 

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normally (2) 98:11

117:9

north (2) 84:9 102:14 notable (3) 9:9 83:12

100:5

notably (2) 10:12 100:7

note (19) 7:24 9:14 10:20 11:1 12:15 35:22 45:15,16 48:23 52:9 53:2 64:12 80:13 87:20 122:25 125:22 126:5,9,21

noted (3) 120:17 145:25 146:23

notes (5) 45:12 125:17 125:19,23,24

notice (1) 87:7 notices (1) 9:22 notwithstanding (2)

49:19 162:2

November (6) 43:9 122:10 143:22 160:12 177:1 179:6

Novikov (2) 35:23 126:7

nullified (1) 89:14 number (18) 13:14

32:21 42:19 45:10 46:12 50:14 60:20 60:24 63:7 76:22 77:4 86:15 98:6 150:11,11 167:2,2 172:22

numerous (3) 9:15 14:1 39:3

 

O

 

o’clock (3) 41:2 90:13 90:17

oath (1) 93:13 object (2) 25:3 46:2 objected (2) 44:12

135:19 objection (8) 11:5

22:23 24:7 45:24 47:9 116:14 128:25 137:18

objectional (1) 135:14 objective (1) 104:13 obligation (3) 145:18

151:22 163:9 obligations (6) 88:9

137:6 146:5 148:2 151:16 157:16

observation (1) 9:13 observations (1) 12:18 obstruction (1) 154:20 obtain (5) 14:1 17:25 50:12 66:6 106:24

obtained (1) 49:12 obtaining (2) 50:11

153:22

obvious (8) 7:3 12:24 14:2 72:18 113:24 143:2 159:10 160:24

obviously (29) 2:7,14 7:17 14:8 31:1 34:19 35:16 52:18 53:3,13,20 60:3,3 61:15 70:5 76:8 78:1 91:25 93:2 96:8 98:9 110:7 117:18 118:3,15,17 120:8 156:14 175:2

occasion (6) 41:5,15 41:19 50:7 52:21 154:1

occasions (5) 37:25 39:3 41:14 73:23 150:11

occur (1) 86:11 October (2) 69:15

150:7

odd (10) 37:10 74:23 99:7 119:22 130:16 130:22,23 154:13 177:23 179:23

offer (7) 1:25 119:7,10 121:25 122:1 123:9 132:24

offered (5) 119:13 131:1,2 156:10 161:12

offering (1) 141:6 office (2) 64:19

171:23 officers (1) 88:2 offices (2) 72:20

171:18

official (2) 14:22 75:23 officials (16) 9:25

14:23 15:9 48:3 54:25 55:4,24 58:24 66:20 75:12 76:3,4,14 84:4 86:16 107:6

Oh (3) 38:4 161:19 175:10

okay (5) 129:16 130:19 131:7 144:3 174:2

old (1) 140:11 Olimp (1) 171:12

OMG (44) 10:2,6,8,12 13:24 14:4 15:25 17:15,16,17 28:2 35:6 57:12 58:2 69:17,17 87:14,18 95:9 114:14 118:20 121:1,5,21,24 126:1 128:24 135:4 135:5 137:17 142:24 146:4,6 147:21,21 149:7,12 149:20 158:3,13 175:24 176:18,23 179:16

OMG’s (8) 13:21 16:4 17:11 28:3 53:14 116:14 134:22 178:21

OMGP (10) 27:11,19 27:22 28:11,18 29:25 30:13 42:21 145:19 148:2

omissions (1) 10:25 once (9) 20:23 31:23 38:17 64:10 146:6

147:22 149:11 167:10 174:22

one’s (1) 146:1 one‐month (1) 127:6 Onega (17) 35:10,11

40:17 54:1,3 63:12 63:18,24,24 65:2 68:13 72:21 94:15 97:8 111:6,11 112:15

ones (3) 61:13 132:25 181:18

onwards (1) 121:17 open (11) 5:10 23:4 24:6,10,22 25:4 47:4 48:16 85:25

144:21 180:14 opened (2) 23:13 24:2 opening (4) 69:12,22

158:23 175:16 operate (4) 96:16

99:24 108:20 109:4 operating (2) 102:19

108:9

operation (1) 108:25 opportunities (3)

18:11 39:2 114:5 opportunity (1) 11:11 oral (15) 11:15 12:10

30:18 34:15 44:12 46:10 47:5 68:3 74:13 92:11 94:1 117:10 133:19 172:16 181:21

orally (11) 4:10 8:10 8:15 9:20 35:2 37:6 49:25 50:23 117:10 119:17 173:4

order (21) 8:15 14:1 17:24 18:22 19:5 28:7 29:12 32:6 59:23 60:13 65:20 76:20 77:2 83:4 120:4,7 121:21 140:24 148:8 149:9 151:7

orders (1) 24:9 original (30) 8:3 25:7

36:13 56:19 73:7 79:14 146:3,8,12 146:18 147:6,14,19 147:25 148:1,9,20 151:2,4,5 152:16 152:21 153:23 154:3,23 156:9,17 156:23 158:5 164:8

ought (5) 26:25 91:12 92:16 108:7 154:7

outcome (2) 135:3,8 outcry (1) 65:7 outline (2) 8:17

146:19 outrageous (2) 91:18

92:16

outset (5) 34:9 73:7 147:22 174:3 177:8

outside (1) 109:4 overall (3) 9:8 93:24

108:13 overarching (1)

112:11 overcome (1) 50:4 overdraft (1) 144:11 overlap (3) 51:10,16

52:24 overlaps (1) 45:21

overnight (1) 144:14 overriding (1) 164:6 oversight (1) 58:13 overview (3) 54:13

159:3,12

overwhelming (1)

35:4

owned (8) 63:23 102:14 155:13 164:10,20,25 165:2 168:4

owner (1) 172:24 owners (1) 151:6 ownership (6) 96:13

163:25 165:8 167:9 170:5 172:8

owning (1) 97:4 owns (4) 99:9 167:22

168:6,8

 

P

 

page (21) 22:14,14 23:2,11 27:9,15,15

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L15/87/55

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L15/87/56

193

July 6, 2016 Day 43

 

68:11 71:25 77:11 90:22 92:4 94:16 94:20 95:3 96:2 97:21 98:8 100:3 100:23 105:4,12,13 106:17,18,22 107:2 107:3 108:22 109:13,15,18 110:15 111:6,6 139:19 140:6 153:4 153:7 154:12,15,18 155:10,11,20,21,23 174:17

proposals (1) 179:21 proposed (4) 128:21 128:23,25 137:19 proposition (2) 75:8

75:17

proprietor (1) 106:22 prospect (1) 3:10 prospective (1) 63:2 prospectuses (2)

169:6,14 protection (6) 109:5

109:12 138:18 141:18,21 157:18

protestation (1)

130:17 prove (3) 95:17

100:14 116:2 proved (1) 102:9 provide (5) 26:23

67:17 87:9 180:18 180:18

provided (3) 3:21 28:8 180:20

providing (1) 99:15 provisional (2) 46:6

47:17 provisioning (1) 118:1 pry (1) 92:19

PTR (2) 21:19 43:11 public (27) 7:2 22:25 24:22 25:8,15,21 25:24 26:19,20,20 66:11,15 70:14,20 71:2,12 74:1 77:1

77:23,24 86:19 163:19 169:5,8 173:6,20 181:22

publicised (1) 61:22 pudding (2) 104:4

116:13

Pugachev (1) 85:3 pull (2) 118:13 174:6 pulled (1) 113:6 purch (1) 19:12 purchase (3) 19:6

122:17 160:3

purchased (4) 68:9,10

68:12 125:2 purchaser (3) 73:8,8

102:13 purchasers (37) 62:19

63:2 72:24 78:1 96:19 97:19 99:24 146:3,9,13,18 147:6,15,20 148:1 148:1,9,20 151:3,4 151:6 152:16,21 153:24 154:3,23 156:10,18,23 157:23 158:6,6 160:7 163:1,8 164:8,9

purchasing (3) 63:12

65:11,12

purported (3) 66:11

77:24 163:19

purportedly (2) 66:12

77:25

purpose (7) 14:13,16 78:13 103:17 115:8 115:11 155:24

purposes (3) 69:16

82:21 149:23

pursuant (3) 70:1

138:19 162:23 pursued (4) 11:14

34:18 36:18 39:15 pursuing (1) 29:24 pushed (1) 118:6 put (44) 2:24 4:22

5:11,15,22,25 7:17 11:4,9 20:20 21:4 34:16 38:20 41:6 45:11 47:13,17 49:8 51:16,23 53:22 55:10 59:2 73:25 76:9 86:1 91:21,25 92:13,14 92:20 93:9,18 98:8 103:22 111:7 136:10 140:19,19 149:25 151:22 155:11 156:20 180:23

put‐up (1) 141:15 puts (3) 4:10 12:5

130:7 putting (3) 69:23

135:6 145:6

pyramid (3) 10:7

124:25 174:12

 

Q

 

qua (1) 82:7 quantification (1)

43:20 quantum (1) 42:22 query (1) 47:21 question (17) 15:10

27:22 40:22 48:16 52:7 54:17 59:20 64:21 80:13 81:19 82:2 89:5 90:9 112:23 124:13 151:13 154:10

questioning (3) 4:4

23:14 28:17 questions (4) 21:2

23:3 102:5 144:2 queueing (1) 65:5 quick (1) 144:8 quickly (1) 70:13 quid (3) 120:14

125:14 140:20 quite (47) 1:18 2:24

10:8 14:7,20 23:16 24:13,24 25:11,20 29:13 31:13 33:24 34:17 38:15 49:22 51:24 56:5,14 62:17 73:15 74:16 75:21 80:7 91:7 95:17 104:5 105:14 107:13 113:5 114:17 130:18 133:20 134:9 136:19 141:8 154:15 158:25 161:21,22 162:18 164:22 166:2 171:21 176:5 182:12,17

quo (6) 23:17 120:14 125:15 140:20,21 140:23

quotation (1) 86:3 quotations (1) 90:3

quoted (1) 21:23

 

R

 

raid (2) 150:15,17 raiding (1) 36:12 railway (2) 154:25

161:16 railways (1) 155:8 raise (3) 7:2 20:13

25:1

raised (6) 9:10 10:3 40:22 41:14 113:25 159:21

raising (1) 48:2 range (4) 60:2 101:22

102:2 110:9 rational (4) 60:9

101:23 110:14 138:23

rationale (1) 81:8 re‐reading (3) 46:8,9

153:20 reached (9) 26:21

43:7 44:2 46:5 48:6 112:25 114:14 128:16 142:13

reaching (1) 117:7 reaction (1) 32:7 read (9) 20:13 47:18

47:21 48:7 51:21 56:18 86:6 122:23 164:24

reading (2) 18:24 86:6 real (21) 9:13 10:5

19:21 22:23 26:24 35:2 44:23 49:11 60:16 66:15 95:2 95:12 96:9 100:18 101:7 108:16 110:20 145:7 159:5 177:18 181:14

realisation (1) 75:22 realise (1) 71:22 realistic (2) 48:1 51:20 reality (8) 65:14 68:6

68:7 69:5,24 110:20 121:24 160:12

really (89) 2:6 6:25 11:10 16:15 23:9 23:14 24:7,22 26:13 31:7 32:14 34:17 36:4,6 38:9 42:9,23 44:8,19 47:5,23 52:3,21 55:10 57:4,10 59:10 62:10 76:7 81:23 82:18,22 83:13 86:8 88:20 88:25,25 89:19,21 90:5,8 92:15 93:4 93:18 102:21 105:15 108:7 110:4 111:13 112:4 113:10 114:7,7,13 116:11,12 117:23 118:23 121:10 125:10 130:23 133:10 134:4 135:12,13 137:13 138:6 143:6 144:18 146:10 147:2,18,20 147:22 148:25 149:2 154:9 155:1 163:10 166:20 171:3,10,22 172:22 173:21 175:5 178:25 180:3,14

reappraisals (1)

174:16

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195

July 6, 2016 Day 43

 

pastedGraphic_57.png

 

179:1 surmount (1) 67:10 surprise (1) 6:22 surprising (22) 10:25

32:7 62:6 64:3,11 71:8 72:24 73:12 97:20 104:12 111:15 121:11 126:10 131:6 135:8 135:11 148:12 156:24 171:2,23 175:23 177:8

suspect (1) 93:17 suspicious (3) 74:23

129:5 148:12 system (4) 55:19

75:11 76:3 83:14

 

T

 

tab (3) 27:15 45:15,16 table (2) 119:1 166:21 tabloid (1) 58:20 tactic (4) 124:11,17

141:16,18 tactics (1) 141:19 tail (1) 47:19 take (23) 3:8 5:13

24:17 25:9 66:18 76:19 81:4 93:3 100:18 106:19 107:24 130:20 136:17 138:20 145:4 147:11 158:25 161:24 163:18 171:3,9 173:22 175:7

taken (15) 1:25 29:25 51:9 66:13 114:6 126:5,9 129:15 149:11,21 154:21 155:5 176:15 177:4 177:19

takes (2) 90:12 171:23 talk (2) 69:22 143:12 talked (4) 9:6 72:17

128:1 180:16 talking (1) 26:1 talks (1) 131:10 task (1) 103:9 teeth (1) 160:11 Tekno (1) 150:5 tell (8) 14:13 29:19

37:2 127:22 144:8 170:11 174:25 181:8

telling (10) 21:17 30:20 70:8 83:24 84:6 95:18 135:12 179:7,8,10

tells (4) 8:23 71:15,21

118:21 temporary (1) 179:11 ten (1) 108:4

tender (1) 1:23 tense (1) 42:23 term (3) 88:8,10

145:22

terminal (48) 10:6,18 13:5 14:5,23 15:15 15:23 16:14,22 18:1,12,14 20:16 53:17 59:15 61:14 62:20 63:12,18,25 64:13,16,18 65:2,2 68:12,17 72:21 73:1,21 80:12 94:15 95:21 97:8 102:14 108:1,4 111:6,12 138:6 154:25 155:7,14,19

162:13,17,17 180:1

Terminals (1) 112:15 terminated (1) 87:17 terminology (1) 98:4 terms (24) 8:2,10

26:16 35:15 47:24 59:18 88:21 94:8 95:11 101:3 108:6 111:21 114:9 115:8 121:12,25 126:2 128:15,25 144:10 145:18 150:13 151:17 157:6

terribly (2) 148:12

171:2

territory (5) 19:6,9 43:24 72:11 118:11

test (1) 86:9 testament (1) 76:23 tested (1) 83:3 testing (2) 78:23 79:8 tests (2) 61:16 67:16 TEUs (2) 107:21 108:2 thank (6) 2:22 54:7

144:1,16 167:18 182:1

Thanks (1) 182:23 theirs (2) 152:5,6 theme (2) 83:10 150:1 theory (5) 58:21 75:21

81:9,23,25 they’d (2) 128:11

135:18

thing (19) 19:16 40:23 66:3 67:15 91:18 92:16,20 93:14 104:1 105:8 123:7 138:23 140:17 141:5 148:24 153:13,17 174:7 181:22

things (33) 2:20 4:12 6:7 11:22 15:8 19:16 21:18 25:15 25:20 26:1 28:7 30:7,13,17 31:10 32:18 48:1,18 49:6 51:15 56:1 61:3 90:1 95:20 115:2 124:10 142:21 149:21 160:10 171:17 176:14 181:16 182:16

think (111) 1:21 2:21 3:12,17,18 4:14,15 6:22 7:25 8:3,22,24 17:22 18:2 19:18 19:20 24:3,15 25:23 26:7,8,25 31:6 35:5 37:8,23 38:3 39:7 40:4,15 42:19 47:4,7 50:6 50:19,21 52:6 53:7 55:6,25 56:20 63:1 64:3,6,8 71:9,23 72:1,13 76:19 79:16 80:11,16 86:1 93:1,10 94:3 98:25 110:18 114:8 114:23 120:1 123:10 125:18,20 125:23 126:3,10,23 129:20 130:19 133:12,22 138:11 141:7 142:19 143:1 143:19 144:13,13 149:15,22 151:13 153:18 154:1,5 157:15 158:25 160:17 161:5,19,20

162:4,15 163:2,5,7 164:11 165:19 166:10,11 169:12 172:16,18 173:16 176:3,3 181:2,18 182:9,17

thinking (7) 8:4 9:5 37:3 43:6 80:19 108:8 161:24

thinks (5) 36:5,6 47:6 63:21 92:13

third (6) 35:25 74:3 86:24 109:19 145:23 166:17 thoroughly (1) 36:25 thought (22) 9:4 13:23 15:1 19:21 25:18 28:2 45:25 91:24

103:4,8 115:2 124:12 127:25 134:8 143:12 149:1 159:22 160:12 161:11 162:10 163:4 178:9

threads (1) 144:18 threat (2) 142:17,17 threaten (1) 142:20 threatened (1) 142:1 threats (2) 142:5,14 three (17) 41:14 54:22 60:7 62:7 69:25

70:1 85:24 86:4 96:15 98:6 108:24 121:5 122:22 123:18 130:2 143:19 167:21

Thursday (1) 183:2 tickety (1) 129:1 timber (1) 178:24 time (69) 5:13 8:13,16

8:22,25 10:15 11:19 33:19 36:8 36:24 41:23 46:15 70:16 87:21,23 90:14 98:10 100:13 100:25 101:5,25 108:2,2 111:14,22 114:16,22 117:6,8 117:17 118:15,16 119:1,24 120:3 121:22 123:16 124:15,17 125:4,6 125:8,14 127:13 131:5,8,9,10,13 133:12 138:8 139:21 143:5,6,24 144:25 149:8,10 158:25 167:17 170:22 173:7,14 176:25 177:1 179:9 179:20 180:6 181:24

times (7) 13:14 14:2 65:16 97:23 98:7 108:4 167:5

timetable (1) 46:7 timid (1) 129:6 timing (1) 176:23 title (1) 152:7

today (11) 2:2 8:18,18 9:6 11:19 96:6 97:18 150:11 159:4 173:12,19

told (14) 13:24 17:19 19:20 38:8,19 74:15,15 80:17 81:16 88:21 124:20 126:21 132:7 157:25

tomorrow (4) 126:24

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196

July 6, 2016 Day 43

 

182:2,20,23

topics (4) 8:12 25:24

25:25 52:2 topped (1) 161:14

Tosno (2) 69:18 70:20 total (1) 107:21 totalled (1) 177:2 touch (1) 51:18 touching (2) 104:24

104:25

tough (2) 140:13,14 track (2) 134:9 161:16 traction (1) 75:22 trade‐related (1)

105:13

trading (2) 124:22,23 transaction (4) 112:2 121:19 131:4

138:12 transactions (1) 160:3 transcript (7) 23:4

24:4,10 26:6 48:10 48:24 54:6

transcripts (1) 153:21 transfer (8) 28:22

30:14 122:8 129:21 137:3 149:9 152:16 158:5

transferred (2) 109:12 146:3

transferring (1)

150:19

transfers (3) 10:11 75:3 157:22 traversed (1) 169:22

treasury (1) 125:3 treat (1) 32:16 tremendous (1) 37:22 trends (1) 94:17

trial (33) 1:11,13 2:15 2:20 3:3,15,25 9:10 11:1 24:4 33:7 34:6 34:13 37:9 41:15 43:3,11,12,22,25 44:10 46:7 47:2 55:10 56:1,10,24 59:9 69:10 87:25 88:1,1 163:25

trial‐related (1) 42:14 trials (1) 34:5

tricked (1) 14:24 tried (5) 2:7 19:3

28:23 32:10 43:12 tries (1) 115:22 trivial (1) 13:13 trouble (7) 19:10

75:20 138:9 139:7 140:4 154:21 176:20

TRP (5) 103:3 105:13 105:16,19 106:1 true (15) 13:25 15:24 15:24 20:5,17,22 31:11 35:20 91:9 91:15,16,17 94:7

172:7 174:7 trust (7) 33:4 74:17

152:11 157:5,12,12 171:6

trusted (7) 33:3 37:4 99:20 148:13,16 156:25 157:9 trusting (2) 148:20

162:23

truth (9) 14:14 16:8 32:20 34:8 65:10 88:21 114:11 143:5 143:11

try (4) 3:14 81:16 115:16 134:11

pastedGraphic_58.png

 

131:2 162:10,15 177:3

 

W

 

wait (5) 11:14 37:24 94:5 164:23 181:20

walk (2) 158:24 166:25

want (26) 1:12 9:7,13 14:8 22:12,20 33:9 44:4,6 51:5 94:4 109:8 117:22 118:4 123:14 125:7 130:20 131:4,14,15 132:14,23 146:8 147:11 175:7 182:15

wanted (29) 1:25 2:13 7:7 13:25 15:14 18:3 42:13 44:11 44:19 52:14 73:17 78:24 115:3 119:10 124:14,18 125:4,13 125:13 130:13 141:20 143:3,17 147:17 149:8,17 159:18 178:9 179:18

wanting (2) 158:8,24 wants (5) 53:1 79:15

132:5 169:10 173:8 war (2) 139:25 140:2 warehouse (1) 149:3 warm (1) 124:23 warn (1) 4:14

wasn’t (61) 1:25 13:15 13:24 14:24,25 15:24 20:17,22 21:24 29:7 35:12 43:11 48:20 56:12 56:13 57:24 62:21 62:22 65:10 68:18 70:5 77:23 81:1 83:13 88:10,20 92:20 114:10 115:1 115:3 116:4,4,11 116:19 117:24 119:15 127:9,11,14 127:15 129:1 133:3 137:18 140:17,20 140:24,25 145:4 150:7 151:21,24 152:1,21,24 157:18 162:17 165:16 177:5 178:10 180:23 181:6

water (3) 18:2 19:9 126:25

waters (1) 124:23 way (55) 4:2 5:2,15,21

5:25 6:23 9:11 12:4 13:3 16:6,14 22:16 22:17 24:8,15 26:8 30:16 33:7,22,24 36:12 39:14 47:18 51:17 57:7,25 59:2 61:1 66:8,20 67:5 69:18 70:7 77:1 84:20,24 98:1 105:4,5 107:19 109:21,24 121:11 128:11 130:7 138:18 140:18 146:9 151:23 152:10 163:8 166:21 169:3 174:22 181:14

ways (8) 10:13,25 19:3 47:13 108:24 114:10 141:12

pastedGraphic_59.png

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L15/87/60

pastedGraphic_60.png

 

150:19 152:19 153:10,11

worse (3) 14:18 155:8 155:22

worst (1) 59:6 worth (6) 67:24 86:5

149:10 161:4 173:17,25

worthless (1) 150:13 wouldn’t (18) 38:9 46:13 59:5 63:4 83:7 114:3,23

117:8 121:7 124:8 128:14 139:18 149:18 151:19 167:11 176:8 177:7 179:18

writ (1) 126:25 write (3) 3:8 120:18

126:22 writers (1) 54:6 writing (17) 8:14

11:18 34:16 47:22 75:13 97:18 113:13 119:17 148:11 151:25 156:4,6,7 156:11,13,16,18

written (88) 2:23,25 4:22 7:12,24 8:5,7 8:11 9:8 10:10 11:4 11:21 12:5,14,16 13:1,6,17 15:22 21:16 22:10,14,17 29:13 31:2 33:11 33:12 34:25 36:7 40:13 42:15 45:12 46:9 48:13,18 51:18 53:3,12 54:18 55:5,22 56:17,18 57:2 58:1 61:24 64:15 66:14 73:14 74:25 85:1 85:22 87:3,11 90:24 93:2 95:5 96:12 100:25 113:2 114:15 115:22 116:6 120:15 121:4 121:9,16 122:7 134:19 142:3 145:10 148:21 149:25 150:9 156:25 157:2 158:16,23 163:14 166:4 169:23 171:12 172:18 173:2,25 174:3 179:12 181:19

wrong (13) 22:9 30:13 43:17,23 60:3 63:3 70:4 101:21 103:24 122:19 144:15 152:9 163:21

wrongdoing (2) 86:15 86:18

wrongly (2) 93:4 175:17

wrongs (1) 6:14 wrote (1) 39:3

 

X

  

Y

 

Yashkina (1) 58:9

Yatvetsky (9) 62:18

73:17 96:22 98:18 99:13 147:18 157:3 163:7 165:14

Yatvetsky’s (1) 102:7 year (10) 14:7 118:1

119:24 120:3,6,12 123:14,23 130:14 141:7

years (11) 39:15 124:7 139:21 141:13,13 141:14 148:16 162:9 168:12 177:7 181:9

yellow (1) 22:15 yesterday (1) 1:23

 

Z

 

Zelyenov (2) 158:7

170:9

zone (3) 97:9 110:2 148:18

 

0

 

05/06 (1) 68:13

 

1

 

1 (6) 13:9 63:22 68:12 90:13 100:12 177:5

1.00 (1) 90:18

pastedGraphic_61.png

10 (3) 45:11 52:10 145:25

10.30 (4) 1:2 182:2,23

pastedGraphic_62.png

111:4,5,20

11.55 (1) 54:8

1119 (2) 54:1,3

112 (1) 87:12

1153 (1) 22:10

1156 (1) 22:11

1171 (1) 21:23

pastedGraphic_63.png

15th (1) 128:9

16 (3) 23:1,11 155:8

160 (8) 10:1 14:22

pastedGraphic_64.png

165 (1) 177:16

pastedGraphic_65.png

2

  

2 (10) 17:14 27:15 34:25 45:15 86:5 90:17 107:20 134:2 134:20 170:16

2.00 (1) 90:20

2006 (2) 150:3 162:9

2007 (7) 13:10 17:15 17:16 20:16 68:12 100:11,13

2007/2008 (1) 95:16 2008 (30) 10:3 13:3 33:8 56:20,21 61:1 95:1,12 111:24,25

112:3,12,17,22 113:18 115:10 122:10 129:12 135:4 139:4 144:9 150:7 161:9 176:19 176:24 177:1,2 178:21 179:6 181:6

2009 (10) 10:4 51:23 95:25 118:21,25 121:2 136:15 142:16 159:22 170:18

2010 (1) 70:14

2011 (1) 110:24

2013 (1) 69:15

2015 (2) 28:25 87:8

2016 (2) 1:1 183:2

21 (3) 27:15 46:3 71:6

21‐odd (1) 91:6

22 (2) 46:3 153:21

220 (12) 13:12,20 14:6 16:21,23,25 17:9 17:11,15,17 19:14 19:20

226 (1) 91:2

227 (1) 111:10

23 (2) 96:20 153:21

242 (1) 13:6

243 (3) 13:17 17:10,14

2462 (1) 95:15

248 (1) 19:1

25 (15) 114:19 117:5 122:6 125:18 127:7 129:2,20 130:8 135:24 136:3,4,8 179:22 180:7,8

251 (2) 15:4 18:7

2533 (1) 68:2

2607 (1) 102:7

274 (1) 20:11

275 (1) 20:12

28 (1) 122:10

29(3) (1) 115:10

 

3

 

3 (7) 17:16 27:15 41:2 47:14 134:5 148:20 180:12

3,497 (1) 3:12

3.20 (1) 144:4

3.30 (1) 144:6

30 (7) 41:20 68:19 87:12 100:22 136:16 137:23 140:25

300 (1) 14:4

309 (1) 121:17

31 (3) 125:8 140:25 144:9

312 (2) 134:18 179:14

314 (1) 179:14

316 (1) 113:3

320 (1) 133:2 320(3) (1) 116:7 3242 (1) 132:17

pastedGraphic_66.png

 

4

 

4 (8) 19:12 100:19 113:2 126:12 148:21 174:4 177:2 183:5

pastedGraphic_67.png

 

5

 

5 (1) 31:15

552 (1) 158:2

563 (1) 158:22

570 (2) 157:25 158:5

575 (1) 158:10

579 (1) 158:22

 

6

 

6 (3) 1:1 53:13 157:4

60‐day (1) 144:11

pastedGraphic_68.png

67 (3) 57:9 58:1,15

671(1) (1) 170:16 671(2)(c) (1) 170:7 674(2) (1) 74:14

pastedGraphic_69.png

 

7 (3) 87:19 158:2 183:2

70 (3) 177:24 178:1,2

700 (1) 3:12

709 (1) 101:2

71 (1) 48:9

72 (1) 48:9

74 (2) 119:6 122:24

74‐hectare (1) 108:1

774 (1) 83:17 777(2) (1) 84:13

 

8

 

8 (4) 19:7 96:20 119:6 122:24

8‐hectare (1) 107:23

80 (2) 13:22 17:12

826 (1) 31:2

830 (1) 101:2

852 (1) 158:20

857 (1) 95:4

858 (1) 95:25

859 (1) 96:4

860 (1) 96:5

861 (2) 96:12,23

865 (1) 159:11

876 (1) 77:14 878(2) (1) 79:16 879 (1) 81:16 882 (1) 163:17 891 (1) 69:7 892 (1) 69:13 895 (1) 70:11

 

9

 

9 (1) 158:20

9(5) (1) 66:13

9.4 (1) 112:13

pastedGraphic_70.png

930(2) (2) 64:15 80:16

931(3)(a) (1) 101:1

pastedGraphic_71.png

pastedGraphic_47.png

L15/87/61