Day 46

 

  July 11, 2016 Day 46

 

1

  1. (10.30 am)
  1. Closing submissions by MR STROILOV (Continued)
  1. MR STROILOV: Good morning, my Lord.
  1. MR JUSTICE HILDYARD: Good morning.
  1. MR STROILOV: My Lord, as it happens, one does remember
  1. points over the weekend, so I would like to address
  1. your Lordship ‐‐ first I would like to make some points
  1. about the Morskoy Bank criminal case, then expand
  1. a little on other criminal cases in Russia and, more
  1. broadly, on what I might perhaps unscientifically term
  1. as «political aspects» of this case in view of the
  1. submissions made on behalf of the claimants in this
  1. respect. Then I will come to the prospects of
  1. refinancing of OMG and especially Mr Bromley‐Martin’s
  1. evidence, and then I will just draw the threads together
  1. in terms of the possible motivation of the Bank’s
  1. decisions and what would have happened if not for the
  1. fraud as we invite you to find.
  1. Then I hope to pick up all outstanding points as we
  1. go along.
  1. MR JUSTICE HILDYARD: That seems fine. I mean, obviously
  1. you can address me on them at least by identifying what
  1. you wish to say before elaborating, but I won’t
  1. encourage you to expand greatly on general political

1

  1. context.
  1. MR STROILOV: I appreciate, my Lord, why you are saying
  1. that. I will simply respond to the submissions made in
  1. that respect by the claimants.
  1. MR JUSTICE HILDYARD: Very good.
  1. MR STROILOV: I don’t expect it will take long. If you see
  1. I am beginning to say something irrelevant, obviously
  1. you will feel free to stop me.
  1. My Lord, just a few points on the Morskoy Bank
  1. evidence. I think a point is made rather vigorously in
  1. the claimants’ submissions that essentially both sides
  1. are at fault, and Mr and Mrs Arkhangelsky also did not
  1. explain the full extent of a repo transaction to
  1. the Russian authorities or Russian courts. I think that
  1. is incorrect as it appears from the evidence of their
  1. own witness, Mr Sklyarevsky. If we could look at
  1. {Day24/19:4}, that is in the context of ‐‐ if we could
  1. perhaps have on the other screen {Day24/18:1} to see the
  1. context. It is in the context of the discussion of
  1. Russian civil cases, and starting at line 5, I think,
  1. I ask:
  1. «Question: Now, Mr Sklyarevsky, I think the
  1. explanation you have given is not what the judgment
  1. says…»
  1. And then ‐‐ I beg your pardon ‐‐ and page 19, yes
  1. my Lord, I beg your pardon, I was looking at page 18.
  1. At page 19, at line 4 I ask:
  1. «Question: Now, I understand that
  1. Mrs Arkhangelskaya’s lawyers did not explain the factual
  1. context in their claim. They didn’t explain all about
  1. the repo transaction and all that, did they?
  1. «Answer: Well, as a matter of fact I seem to recall
  1. that this information was provided to the judge, except
  1. that the memorandum, the repo transactions are not legal
  1. documents under Russian law, and they were not accepted
  1. by the court.
  1. «But Mr Erokhin did adduce those materials. At
  1. least he showed those materials. He turned them up, he
  1. handed them up to the judge.»
  1. My Lord, it seems in this respect the position was
  1. fully explained to the Russian court, and of course
  1. there is nothing wrong and, indeed, nothing surprising
  1. in the fact that their straightforward claim was
  1. brought, focusing on one fact of the sale being at
  1. a nominal price, and that the OMG lawyer sought to set
  1. aside the transactions on that basis. So long as the
  1. court was not misled there is nothing strange bringing a
  1. simple claim rather than a complicated claim, such as
  1. the counterclaim here.
  1. MR JUSTICE HILDYARD: Well, on the basis of this evidence it

3

  1. may not much matter, but there is a world of difference,
  1. isn’t there, between a transaction at a nominal price
  1. with an existing and enforceable counter contract
  1. enabling re‐transfer back for a nominal price on the one
  1. hand, and a bare sale at a nominal price with no right
  1. of recourse on the other. They are very different
  1. things, aren’t they?
  1. MR STROILOV: Indeed, my Lord, and I accept it would have
  1. been open to criticism, the line taken by OMG lawyers,
  1. if not for what Mr Sklyarevsky explained to you.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: Obviously on this evidence it is spotless.
  1. They explain the context to the court but the court
  1. resolved to focus on this one issue, rightly or wrongly.
  1. But any criticism would really be against the Russian
  1. court rather than OMG.
  1. MR JUSTICE HILDYARD: And, of course, I suspect you would
  1. emphasise that the Bank was there and knew these things
  1. and could always refer the court to them. It wasn’t
  1. an ex parte application or anything like that.
  1. MR STROILOV: Indeed, my Lord.
  1. MR JUSTICE HILDYARD: I’m not sure that further questions
  1. were asked as to the phrase between 9 and 12:
  1. «… except that the memorandum, the repo
  1. transactions are not legal documents under Russian law,

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  1. and they were not accepted by the court.»
  1. That wasn’t taken up, was it?
  1. MR STROILOV: It was not, my Lord, that really is the end of
  1. the line. But of course whether or not they are legal
  1. documents, you are not bound by whatever view was taken
  1. by the Russian courts on that. You have heard the
  1. Russian law evidence and it is for your Lordship to
  1. decide, with respect.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: My Lord, so there is no parallel between the
  1. way the matters were presented in these civil claims and
  1. in the Morskoy Bank loan criminal case.
  1. I think it is clear from the evidence which I have
  1. shown to relevant witnesses that the fact that the repo
  1. was fairly central to that criminal case. Just to
  1. summarise briefly, the allegation was that
  1. Mr Arkhangelsky caused Western Terminal to take a loan
  1. from Morskoy Bank without the permission of
  1. Sevzapalians, the original purchaser who was, at that
  1. time, formerly the shareholder of Western Terminal. Of
  1. course, Mr Arkhangelsky’s defence to this is that it was
  1. not a genuine shareholder; it was a security arrangement
  1. with the Bank. So he did not consider that
  1. Sevzapalians’ consent was required, especially in
  1. the light of the provisions of the memorandum whereby

5

  1. the purchasers undertook not to interfere in
  1. the day‐to‐day commercial ‐‐
  1. MR JUSTICE HILDYARD: Prior to default?
  1. MR STROILOV: Yes, my Lord. Well, it depends on whether or
  1. not there was a default, which in turn depends on the
  1. moratorium. Secondly ‐‐ and that is a side issue which
  1. clearly was not explored in the criminal case, in any
  1. event.
  1. Secondly, whether Mr Arkhangelsky had proper notice
  1. of the default, and that the Bank and the purchasers did
  1. not consider themselves bound by the memorandum anymore.
  1. Taking the Bank’s case at its highest, what they say
  1. they have done, it was formal notice of default to
  1. PetroLes, and Ms Mironova says that she phoned
  1. Mr Arkhangelsky to tell him that the extension of
  1. PetroLes loan was refused.
  1. It is not suggested that at any time Mr Arkhangelsky
  1. was told that: in the light of this default, the
  1. memorandum is no longer in force and we feel free ‐‐
  1. well, we are now the shareholders of the two companies.
  1. All these undertakings are no longer in place. He was
  1. never told that, on any view, even on the Bank’s view.
  1. MR JUSTICE HILDYARD: I do apologise, I am a bit rusty, but
  1. when the default is called on the PetroLes loan, was
  1. there a cross‐default called on the rest of
  1. the borrowing?
  1. MR STROILOV: Gradually, my Lord, well, it developed over
  1. some two months or thereabouts.
  1. MR JUSTICE HILDYARD: A sort of cascade. Yes.
  1. MR STROILOV: I could find the dates ‐‐ well, it might be in
  1. the claimants’ chronology, I imagine, in the one I think
  1. they attach to their opening.
  1. MR JUSTICE HILDYARD: But is it accepted that by the time of
  1. the Morskoy Bank loan, OMG was in default?
  1. MR STROILOV: Well, we don’t accept that because we say
  1. there was a moratorium, so there could be no default
  1. before that.
  1. MR JUSTICE HILDYARD: Subject to the six‐month moratorium.
  1. MR STROILOV: Subject to the six‐month moratorium, yes, well
  1. if you are against us on that then yes, PetroLes was in
  1. default and Vyborg Shipping was several days in default
  1. on one of its loans.
  1. MR JUSTICE HILDYARD: And if I am against you on the six
  1. months, does the fact of a default on PetroLes and
  1. Vyborg, do you accept that that knocks you out in terms
  1. of relying on the provisions which guaranteed you to be
  1. able to run the company in the meantime prior to
  1. default?
  1. MR STROILOV: Yes, in terms of contractual analysis, clearly
  1. the memorandum expressly provides that all these

7

  1. undertakings are only in force so long as the group is
  1. not in breach of its own obligations to the Bank.
  1. However, in the context of the criminal allegations
  1. in the Morskoy Bank case, the position is somewhat
  1. different, then it becomes very important what notice
  1. Mr Arkhangelsky was given, and whether he could honestly
  1. believe that moratorium ‐‐ or that memorandum was still
  1. in force. So long as there was a possibility of him
  1. taking an honest view that Sevzapalians was not
  1. a shareholder, the criminal case obviously must fail.
  1. So it was quite ‐‐ well, the whole context was
  1. enormously important, and presenting the whole
  1. transaction as a genuine sale of the shares was
  1. really ‐‐ well, was presenting the very opposite of
  1. the truth to the investigator.
  1. So on any view it is much more serious than
  1. concealing these elements in any other context.
  1. MR JUSTICE HILDYARD: But do you accept ‐‐ leaving aside the
  1. question of notice or knowledge, and all the ingredients
  1. which are relevant to the criminal process, as
  1. I apprehend, in Russia, do you accept that if I am
  1. against you on the six‐month moratorium, the nature of
  1. the default was such that the obligation not to
  1. interfere had fallen away prior to the date on which the
  1. Morskoy Bank loan was contracted?

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  1. MR STROILOV: Yes, absolutely.
  1. MR JUSTICE HILDYARD: You do.
  1. MR STROILOV: It was the default ‐‐ on that view, if you are
  1. against us on moratorium, the default was 5 March,
  1. Morskoy Bank loan was 30 March.
  1. MR JUSTICE HILDYARD: And the relevant default was
  1. sufficient, is what I am getting at ‐‐ what date was the
  1. Morskoy Bank loan?
  1. MR STROILOV: 30 March 2009.
  1. MR JUSTICE HILDYARD: 30 March. Because my understanding
  1. was it was a default only on PetroLes and Vyborg, but
  1. you accept that that worked a sufficient cascade effect
  1. that they were entitled to intervene?
  1. MR STROILOV: Yes, well I accept that on the terms of
  1. the memorandum. I accept that.
  1. MR JUSTICE HILDYARD: Thank you.
  1. MR STROILOV: Now, my Lord, turning to the evidence given to
  1. you by the Bank’s witnesses in relation to the criminal
  1. case, you will recall that Mr Savelyev said several
  1. times: I didn’t pay much attention to this, it wasn’t
  1. our case, it was Morskoy Bank’s complaint. The Bank had
  1. nothing to do with it, we were simply witnesses. And he
  1. said the same in relation to explaining his own untrue
  1. evidence, and Mrs Malysheva.
  1. Now, that explanation is, I am afraid, untrue

9

  1. because the criminal case was initiated on a complaint
  1. of Mr Maslennikov, the new director general of
  1. Western Terminal appointed by Renord. That complaint is
  1. dated 27 August 2009, and it is at {D129/2085/1}.
  1. I don’t propose to read it, but simply a reference for
  1. your Lordship’s note.
  1. Whereas Morskoy Bank only made its own complaint in
  1. relation to the loan on 31 March 2010 and that complaint
  1. is at {D137/2282/1}. So that complaint was only filed
  1. after all six witnesses gave their evidence to the
  1. investigator. At that time it was a complaint made by
  1. the Renord director general of Western Terminal acting,
  1. obviously, in the interests of the Bank.
  1. MR JUSTICE HILDYARD: So in 2009 who is the actual
  1. complainant?
  1. MR STROILOV: It is the new director general of
  1. Western Terminal just appointed by Renord in the ‐‐
  1. well, not just appointed; it has been some time between
  1. he was formally appointed ‐‐
  1. MR JUSTICE HILDYARD: That’s in August 2009.
  1. MR STROILOV: Yes, August 2009.
  1. MR JUSTICE HILDYARD: And then in March 2010, by this time
  1. Morskoy is controlled by BSP.
  1. MR STROILOV: Morskoy Bank, I don’t think it is ‐‐
  1. MR JUSTICE HILDYARD: Sorry, that element of the claim is,
  1. but they have bought the right to the claim.
  1. MR STROILOV: Yes, that is something I think I need to check
  1. when they actually bought the right to the claim.
  1. I will find the date, my Lord, in a moment.
  1. I think not. I think it was some time later. I am
  1. looking at my own, paragraph 122 of my closing
  1. submissions. It doesn’t give the date, but it says the
  1. writ of execution was issued on 3 December 2010, and
  1. I understand that it was only after the writ of
  1. execution was issued that Sevzapalians actually bought
  1. the claim. Incidentally there is an error in this
  1. paragraph which was pointed out to me earlier as well.
  1. It wasn’t Sevzapalians who filed a claim.
  1. MR JUSTICE HILDYARD: You explained, it took over the claim
  1. filed by Morskoy Bank.
  1. MR STROILOV: Yes, it was filed by Morskoy Bank, but then
  1. Sevzapalians bought the loan and therefore took over the
  1. execution proceedings.
  1. MR JUSTICE HILDYARD: That’s where I’m becoming confused,
  1. because my understanding from what you have told me is
  1. that there were two events, as it were: the one occurs
  1. in 2009 and the second in 2010. My understanding from
  1. you was that the earlier 2009 was instituted by the
  1. director general.
  1. MR STROILOV: Yes.

11

  1. MR JUSTICE HILDYARD: Director general of which company?
  1. MR STROILOV: Of Western Terminal. It’s ‐‐ Renord appointed
  1. director general of Western Terminal.
  1. MR JUSTICE HILDYARD: Complaining that Western Terminal has
  1. been, as it were, defrauded because it has been
  1. committed to a loan without the proper organ of that
  1. company authorising it.
  1. MR STROILOV: Yes, my Lord.
  1. MR JUSTICE HILDYARD: Then the other side, as it were, the
  1. Morskoy Bank side, in March 2010, at that time
  1. instituted by independent directors of Morskoy Bank, do
  1. they adopt ‐‐ theirs is a separate claim, is it?
  1. A separate proceeding?
  1. MR STROILOV: Well, it was as it appears from the documents
  1. we have disclosed, the ones we have actually received
  1. from Mr Nazarov and disclosed in 2013, that the
  1. proceedings were actually united because it was the same
  1. criminal proceeding under two complaints, but the first
  1. one ‐‐ well, it was initiated under the first complaint
  1. of the director general of Western Terminal, and then
  1. the Morskoy Bank complaint was simply merged into the
  1. existing criminal investigation.
  1. MR JUSTICE HILDYARD: So where you say in 122,
  1. between July 2009 and December 2010 Sevzapalians took
  1. over the claim filed by Morskoy Bank, which is,

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  1. I understand, how you now wish me to read it, which was
  1. the claim that was taken over by Sevzapalians: The
  1. director general’s or the Morskoy Bank claim?
  1. MR STROILOV: No, no, these are different proceedings, what
  1. I’m talking about are the criminal proceedings where the
  1. evidence of Mr Savelyev and Ms Malysheva and
  1. Ms Stalevskaya was given on which there was quite
  1. lengthy cross‐examination.
  1. Whereas the claim I discuss in 122 is the civil
  1. claim under the loan agreement, and that is material
  1. because it was used to enforce against Western Terminal
  1. assets and ‐‐
  1. MR JUSTICE HILDYARD: Well, when was the civil claim which
  1. Sevzapalians took over filed by Morskoy Bank?
  1. MR BIRT: There is a little passage in our closing which
  1. gives the facts, my Lord, I don’t want to interrupt.
  1. MR JUSTICE HILDYARD: Yes, could you give me the details?
  1. MR BIRT: It is paragraph 909 of our written closing which
  1. recites that Morskoy Bank commenced its proceedings
  1. against Western Terminal in December 2009, there was
  1. a judgment in favour of Morskoy Bank in December 2010,
  1. and then the claim was assigned by Morskoy Bank to
  1. Sevzapalians in February 2011. {AA3&4/14/480}.
  1. MR STROILOV: I am very grateful for this.
  1. MR JUSTICE HILDYARD: Right.

13

  1. I mean, it is a bit confusing on that footing, isn’t
  1. it, Mr Stroilov? What I thought you were telling me was
  1. that Mr Savelyev has misrepresented the position; has
  1. he?
  1. MR STROILOV: Indeed, of course. These are two very
  1. separate issues except that they relate to the same
  1. loan. There is a criminal complaint on the basis that
  1. Mr Arkhangelsky fraudulently caused that loan to be
  1. taken.
  1. MR JUSTICE HILDYARD: Mm.
  1. MR STROILOV: Separately there is a civil claim for the
  1. recovery of that loan, and these are two quite separate
  1. processes, if that makes sense.
  1. MR JUSTICE HILDYARD: Yes. I am sorry to make heavy weather
  1. out of it, but I just want to see exactly what you said.
  1. MR STROILOV: I actually ‐‐ in my closing I discuss this in
  1. quite different places. I talk about the Morskoy Bank
  1. criminal case evidence starting at paragraph 94.
  1. MR JUSTICE HILDYARD: And when you were saying that
  1. Mr Savelyev did not tell us the truth, in your
  1. submission, it all relates to the criminal case?
  1. MR STROILOV: It all relates to the criminal case, yes,
  1. my Lord.
  1. MR JUSTICE HILDYARD: So the confusion has been focusing on
  1. 122 rather than on 94, really?
  1. MR STROILOV: Well, it is just that it was really in answer
  1. to your Lordship’s question as to when the Morskoy Bank
  1. assigned its rights to Sevzapalians.
  1. MR JUSTICE HILDYARD: Yes, I see.
  1. MR STROILOV: As opposed to the chronology of the criminal
  1. case on which I was addressing your Lordship.
  1. MR JUSTICE HILDYARD: Okay.
  1. MR STROILOV: So the point I was making is that whereas
  1. Mr Savelyev sought to distance himself and the Bank from
  1. that criminal case, and essentially the burden of his
  1. evidence was: I did not pay much attention to this
  1. interrogation, to this interview, because the case had
  1. nothing to do with the Bank, it was a Morskoy Bank case,
  1. whereas in reality, at the time he was interviewed, the
  1. case was initiated on a complaint of the director
  1. general of Western Terminal acting in the interests of
  1. the Bank of St Petersburg, or controlled via Renord, and
  1. Morskoy Bank complaint to the criminal authorities
  1. post‐dates the evidence given by Mr Savelyev and
  1. Mrs Malysheva and others.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: Now, there is ‐‐ further, I think there is
  1. more to it, there is significantly more to it than
  1. simply failing to mention the second element of the repo
  1. transaction and explain the context. If we could have

15

  1. a look at Mr Savelyev’s evidence at {D138/2304/1} ‐‐
  1. I beg your pardon, my Lord, I think I was wrong. In
  1. fact it is dated 21 May 2010, so it post‐dates the
  1. Morskoy Bank complaint. I beg your pardon, I confused
  1. the dates.
  1. MR JUSTICE HILDYARD: Well, I am sorry, I am getting
  1. confused again.
  1. MR STROILOV: I am sorry, my Lord, yes. Perhaps let me make
  1. it clear, it is my fault entirely. I got lost in
  1. the dates.
  1. MR JUSTICE HILDYARD: So Mr Savelyev may have been accurate
  1. after all, or …?
  1. MR STROILOV: No, he was not accurate because that was the
  1. criminal case initiated by their own servant,
  1. effectively, by the Bank’s own servant nonetheless ‐‐
  1. MR JUSTICE HILDYARD: Right.
  1. MR STROILOV: ‐‐ but by that time, Morskoy Bank had also
  1. joined, so to that extent, my submission was inaccurate
  1. for which I apologise.
  1. MR JUSTICE HILDYARD: Right. So by the time of May 2010,
  1. this might be a criminal proceeding adopted by
  1. Morskoy Bank?
  1. MR STROILOV: Yes, my Lord. So there were two complaints by
  1. that time.
  1. MR JUSTICE HILDYARD: Yes.

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  1. MR STROILOV: But nevertheless, it was ‐‐ the criminal case
  1. itself was ongoing.
  1. MR JUSTICE HILDYARD: Was instigated in the first place?
  1. MR STROILOV: Yes, my Lord.
  1. MR JUSTICE HILDYARD: I see.
  1. MR STROILOV: My Lord, if we could scroll down to page 3 of
  1. this tab. So in the top paragraph, Mr Savelyev is
  1. recorded as saying that he refused to assist
  1. Mr Arkhangelsky in selling his assets {D138/2304/3} but,
  1. importantly, further on, you find in the third paragraph
  1. from the top, starting from the words:
  1. «During this meeting either beforehand …»
  1. An imperfect translation, but this is clearly
  1. a response to the allegations substantively similar to
  1. this counterclaim. Clearly he is responding to
  1. an allegation that this was in exchange for
  1. a restructuring of OMG loans.
  1. In the next paragraph he is responding to
  1. the allegations that he intimidated Mr Arkhangelsky, and
  1. then he is explaining the process of recovery, and
  1. finally he mentions in the third paragraph from the
  1. bottom, he refers to out of court settlement with SO
  1. Scandinavia, that’s the company we normally refer in
  1. these proceedings as «Scan», and he specifically
  1. mentions, also it is recorded that it was sold on
  1. could have ‐‐ let me start again.{D138/2304/2}. So that
  1. is Mr Savelyev’s evidence, and he explains in the second
  1. paragraph from the bottom, he starts from:
  1. «In November 2008 …»
  1. And he presents a coherent but false account of what
  1. happened, really directed to lead the investigation to
  1. believe that Mr Arkhangelsky genuinely intended to sell
  1. his companies and, indeed, did so.
  1. MR JUSTICE HILDYARD: Mm.
  1. MR STROILOV: If we could now look at the evidence given by
  1. Mrs Malysheva, which is at {D137/2278/1}, and that is,
  1. indeed, that appears to be March 2010. So several days
  1. before the Morskoy Bank complaint, but that is a matter
  1. of detail.
  1. Then if we scroll down to page 3 {D137/2278/3},
  1. again simply to remind your Lordship ‐‐ is that page 3?
  1. Could we have page 2 {D137/2278/2}. Again, I think the
  1. most material paragraph is the second one, starting
  1. from:
  1. «In December 2008 … «
  1. That’s where she essentially explains what allegedly
  1. happened.
  1. MR JUSTICE HILDYARD: You want me to read the last
  1. paragraph?
  1. MR STROILOV: Well, the second paragraph, really, starting:

17 19

  1. a public auction at the market price.
  1. So it appears that, among other things, he was
  1. confronted with allegations of sale at an undervalue.
  1. This cannot be a coincidence. Clearly he was commenting
  1. on the allegations substantively similar to this
  1. counterclaim, and his evidence is plainly untrue on any
  1. view and deliberately untrue, in my submission.
  1. Also, if we could quickly have a look at
  1. Mrs Malysheva’s evidence at D137 ‐‐
  1. MR JUSTICE HILDYARD: What do you say about, in the top
  1. paragraph, the phrase:
  1. «In January 2009 I found out from the employees of
  1. the bank, I cannot remember from whom, that both
  1. companies owned by Arkhangelsky were sold.»
  1. MR STROILOV: Yes, my Lord, it is plainly untrue. It was
  1. something that Mr Savelyev negotiated with
  1. Mr Arkhangelsky. That’s ‐‐ well, he admits it’s untrue,
  1. but he says in his witness statement, essentially all he
  1. says: I wasn’t paying much attention, it is inaccurate,
  1. I apologise.
  1. Clearly, again, he is misrepresenting it very
  1. substantially. It is directed ‐‐ if we could scroll
  1. down one page, simply to remind your Lordship.
  1. MR JUSTICE HILDYARD: Up or down?
  1. MR STROILOV: So the Savelyev part of it. Sorry, if we
  1. «In December 2008 …»
  1. MR JUSTICE HILDYARD: «In December 2008 …»?
  1. MR STROILOV: Yes, my Lord, to the end of that paragraph.
  1. (Pause).
  1. My Lord, that is really clearly an untrue account,
  1. but then in the next paragraph, and then in the last
  1. paragraph on that page, an important detail is that
  1. Mrs Malysheva names Mr Gavrilov, the nominal director of
  1. Sevzapalians, as the person with whom she negotiated.
  1. She avoids mentioning Mr Smirnov, she avoids mentioning
  1. Renord. She clearly ‐‐ and one may ask why she would do
  1. that, and in my submission the likeliest explanation is
  1. that she intentionally does not want to bring too many
  1. new names, too many potential witnesses, into something
  1. she knows to be a fraud, and that is for two reasons:
  1. firstly to avoid any risk ‐‐ well, any unnecessary risk
  1. of the fraud being discovered, and; secondly, to avoid
  1. the need, essentially to collude with more people in
  1. terms of giving false evidence. It is better to keep it
  1. in a relatively narrow circle, just so that you can
  1. agree what you tell the authorities if you are telling
  1. untruths.
  1. MR JUSTICE HILDYARD: Well, that’s conjecture, but your
  1. basic point is that both Mr Savelyev and Mrs Malysheva
  1. just didn’t tell the truth; or certainly what they said

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  1. then was not what they say now?
  1. MR STROILOV: My Lord, they plainly did not tell the truth
  1. on any view of things. There is no question, neither
  1. side and no one is suggesting that they told the truth
  1. in these criminal proceedings. It’s just not suggested
  1. on any side, and they have admitted it is not ‐‐ well,
  1. Mrs Malysheva obviously hasn’t admitted to anything
  1. because she has disappeared, but Mr Savelyev has
  1. admitted that obviously it isn’t true, and we agreed
  1. with that, and in Russia it was plainly in dispute long
  1. ago.
  1. So that was a deliberately false account that we say
  1. that this alone destroys their credibility, but there is
  1. more to it. Obviously if you have six witnesses giving
  1. the same false account, that means there was collusion,
  1. that means they were in this together, and then you also
  1. have to ask why would they conceal the true nature of
  1. that deal, and the answer, in my submission, at least
  1. the likeliest answer, is that because they knew it was
  1. fraudulent.
  1. Another important detail in that evidence, if we
  1. could scroll ‐‐ we don’t need to scroll down. On the
  1. other screen you have page 3, and in the second
  1. paragraph of that interview, Mrs Malysheva suggests to
  1. the investigator that prior to the sale, as she calls
  1. respect to the six people singing the same song was that
  1. your submissions that that suggested collusion and
  1. conspiracy was a leap too far, and the explanation might
  1. have been, as it were, a single hand drafted their
  1. respective statements and followed along a sort of
  1. plotted course without any real intent on behalf of any
  1. one of them to consciously mislead. I think that’s what
  1. he told me, it is at transcript {Day44/60:1} or
  1. somewhere around there.
  1. MR STROILOV: Yes, my Lord. Well that would only be
  1. possible and that conjecture would only make sense if
  1. the investigator was intentionally trying to fabricate
  1. a case.
  1. Now, clearly, step one in the analysis of that case
  1. makes it plain that whether or not there was a repo is
  1. essential, and if she was told about the repo and then
  1. failed to record it, that would be ‐‐ that can only be
  1. understood as a deliberate fabrication of charges.
  1. Now, then the question is if it was effectively on
  1. the Bank’s own complaint, unless it was in the interests
  1. of the Bank, why would she want to fabricate charges in
  1. this way.
  1. MR JUSTICE HILDYARD: Why would she what?
  1. MR STROILOV: Why would she want to fabricate charges or to
  1. trump up charges in this way, the evidence?

21 23

  1. it, of Western Terminal shareholding to Sevzapalians,
  1. there was an independent valuation of the market value
  1. of the shares, and it was valued at RUB 12,000, so that
  1. is plainly inconsistent with what you are now told by
  1. both sides.
  1. Clearly the sale for RUB 10,000 was deliberately
  1. nominal price; it was not intended to be the market
  1. price, and obviously from everything you are told about
  1. the events of late December 2008, there was clearly no
  1. question of and no time for obtaining any independent
  1. valuation; indeed no need for that.
  1. That, my Lord, in my submission, undermines any
  1. contention you have heard from the claimants suggesting
  1. that they may have honestly believed in low valuations
  1. by various Russian valuers, believing that the assets
  1. may have been sold at what turns out to be something
  1. below market value, but we had valuations of Russian
  1. valuation companies which suggested it was right, we
  1. believed in that.
  1. It is clear from this evidence that the Bank was
  1. manipulating valuations in Russian proceedings, and that
  1. really undermines any notion of honest belief in
  1. valuations which we say are incorrect, if you agree with
  1. Ms Simonova.
  1. MR JUSTICE HILDYARD: Mr Birt’s submission to me with
  1. Not to mention the fact that it is quite unlikely ‐‐
  1. well, it may be that the investigator was trying to bend
  1. the evidence in this way to select bits. Even if that
  1. is possible, well it is quite impossible that six people
  1. were so much in a hurry and irresponsible as to sign it
  1. without correcting it. It is unlikely in the extreme.
  1. I think it also deserves mentioning that both
  1. Mr Savelyev and Ms Stalevskaya told you in
  1. cross‐examination, as they were shown these records of
  1. interview one by one, they eventually resorted to
  1. telling you that: well, we did tell her about repo, we
  1. probably did, she just didn’t record it. However,
  1. that’s not what either of them says in their witness
  1. statement. Both of them address this in witness
  1. statements, essentially they say simply that: well, this
  1. was wrong, we are sorry, and that’s all, but they don’t
  1. suggest that it was misrecorded rather than they gave
  1. a very seriously false account.
  1. So in my submission that is simply quite a desperate
  1. attempt, frankly, to wriggle out.
  1. My Lord, to continue on this, I think in terms of
  1. that alleged valuation report, to which you saw the
  1. reference in Mrs Malysheva’s evidence, it also, just
  1. very briefly, if we could look at {D131/2151/1}, it
  1. appears that the same report or a similar report

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  1. featured in the defence to OMG civil claims in Russian
  1. commercial courts, known as Arbitrazh, or arbitration,
  1. courts.
  1. MR JUSTICE HILDYARD: Mm.
  1. MR STROILOV: So this is a claim of Mrs Arkhangelskaya
  1. against Sevzapalians, the appeal decision.
  1. If you look at ‐‐ if we scroll down to the second
  1. page, there is in the second paragraph from the bottom,
  1. there is a reference to Sevzapalians’ application to
  1. adduce a valuation report {D131/2151/2}, and then the
  1. court rejects that application.
  1. Then there is a further reference to that report at
  1. page 5. If we could have page 5 {D131/2151/5}. So in
  1. the third paragraph from the top you will see that the
  1. report is apparently dated 29 December 2008. So that it
  1. appears, and it is difficult to find any alternative
  1. explanation, that the report was actually backdated,
  1. because obviously there is no mention in the very
  1. detailed account which you have now had from the Bank
  1. about the events of late December 2008, there is no
  1. mention of any independent valuation and there is,
  1. frankly, no place for any independent valuation.
  1. But in these proceedings as they focused on the fact
  1. of the purely nominal price, Sevzapalians suddenly
  1. produces a report dated 29 December 2008, and valuing it
  1. MR STROILOV: It is, if we go back to {D135/2235/1}, I think
  1. the reasoning is actually at page 3 {D135/2235/3}. So
  1. I think these paragraphs in the middle:
  1. «A fictitious deal is a deal executed with failure
  1. of intention …»
  1. So I think these three paragraphs are really the
  1. reasoning of the Federal Arbitrazh Court.
  1. MR JUSTICE HILDYARD: Right. There it just says there is no
  1. sufficient evidence of undervalue?
  1. MR STROILOV: Yes, my Lord, yes.
  1. MR JUSTICE HILDYARD: But you say that must have been
  1. a misunderstanding at very best because the price had
  1. been agreed to be nominal?
  1. MR STROILOV: Yes, my Lord. Well, obviously we are not re
  1. arguing these cases; it was on a fairly technical and
  1. narrow point.
  1. MR JUSTICE HILDYARD: I am just trying to remind myself.
  1. Mrs says and wins twice: it’s at a grotesque undervalue.
  1. You add the rider, of course, that the attempt to
  1. justify it as being full value is absurd because it was
  1. always stated to be nominal because of the back repo
  1. provision.
  1. MR STROILOV: Yes, my Lord.
  1. MR JUSTICE HILDYARD: It gets to the Court of Appeal who say
  1. there is no sufficient evidence of it being at

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  1. claim to reassess the Russian judgments, you are not
  1. an appeal instance from Russian courts, you are
  1. considering the facts and forming your own judgment.
  1. But that is ‐‐ well, the only element on which I do
  1. rely is, really, the evidential element and how ‐‐ and
  1. what evidence was presented and what it demonstrates in
  1. terms of the credibility or otherwise of each side.
  1. My Lord, obviously the criminal complaint in
  1. relation to Morskoy Bank loan was only one in a series
  1. of various criminal complaints which the bank filed
  1. against Mr Arkhangelsky, and you may recall the
  1. cross‐examination of Ms Mironova, who ‐‐ that’s at
  1. Day 34, starting at page 75, and moving on.
  1. {Day34/75:1}. I think it is, just for your Lordship’s
  1. reference, I don’t propose to read it in any detail now,
  1. but essentially the picture is that Ms Mironova ‐‐ and
  1. I think two of her employees ‐‐ were working quite hard
  1. in investigating various records of transactions via the
  1. Bank in search for material to bring various complaints
  1. of fraud against Mr Arkhangelsky. Many of them totally
  1. unrelated to the Bank’s interests in any way. It would
  1. concern things like suspicion of tax evasion, and
  1. matters like that.
  1. What we say about this is that this kind of strategy
  1. is quite inconsistent with their suggestion that the

29

  1. Bank was acting commercially and trying to reach
  1. an amicable settlement with Mr Arkhangelsky that
  1. Mr Sklyarevsky was desperately trying to reach out to
  1. Mr Arkhangelsky and agree on some mutually acceptable
  1. restructuring of his business which would allow to repay
  1. the loans. It was the Bank who in fact waged a war on
  1. Mr Arkhangelsky from that stage. They now had control
  1. of the shares, they had control of the assets, they
  1. wanted him out of the way. That is ‐‐ whether or not
  1. really there is anything in these criminal complaints,
  1. whether or not there is any substance, it’s not
  1. something you would expect a commercial bank to do so
  1. enthusiastically in circumstances such as the situation
  1. in 2009.
  1. I will be brief on that, but that connects, really,
  1. with the allegations we made in terms of the Bank’s
  1. political connections and how it was able to work
  1. together with law enforcement authorities.
  1. Indeed, there is, I note, a remarkable change of
  1. tune in the claimants’ submissions on this point,
  1. because for years, really, the claimants essentially
  1. kept telling your Lordship that the allegations we make
  1. against Mrs Matvienko, against Mr Piotrovsky and Russian
  1. authorities and law enforcement agencies are totally
  1. irrelevant to the entire counterclaim; it is simply
  1. a political campaign we are running in this court and it
  1. shouldn’t be allowed. It should be, at least,
  1. discouraged, and indeed, it has been discouraged by
  1. your Lordship and I hope we have taken it on board
  1. adequately.
  1. But what they say now in their closing submissions,
  1. it is suddenly the central element of the counterclaim
  1. which we have failed to prove.
  1. Well, it isn’t the central element. It is never
  1. said it is the central element. It is simply an aspect
  1. in the general train of events which explains some of
  1. the matters which require explanation.
  1. We have focused, rightly, on the commercial sides of
  1. the counterclaim and in my submission we have proven it,
  1. and that makes it, indeed, irrelevant, whether or not
  1. Russian authorities were part of the conspiracy and, if
  1. yes, what part they played.
  1. I do, however, say that significant elements of
  1. those allegations we make against Russian public
  1. officials have been proven.
  1. You will recall that some of the evidence at the
  1. trial concerned the public official called
  1. General Piotrovsky, who was at the time the head
  1. of St Petersburg’s police. Mr Arkhangelsky’s evidence
  1. was that Mr Savelyev, actually back in 2007 he

31

  1. influenced General Piotrovsky to protect Mr Arkhangelsky
  1. from various investigations he initiated into the group.
  1. Mr Savelyev denied that. Mr Savelyev did tell you that
  1. he knew General Piotrovsky, but no more than that.
  1. However, he was the head of St Petersburg’s police
  1. at the time. Most of the complaints, at least some of
  1. the complaints from the Bank against Mr Arkhangelsky are
  1. addressed personally to him.
  1. Examples ‐‐ I don’t propose to go through all of
  1. them, but examples are {D126/1995.1/0.1}, that’s the
  1. complaint dated 15 July 2009 in relation to the alleged
  1. personal loan specifically addressed to Mr Piotrovsky.
  1. Another example is {D129/2091/1}, and that’s
  1. a complaint from the Bank in relation to Vyborg Shipping
  1. Company, which is really a follow‐up to earlier
  1. complaints on the same subject. Again, it is addressed
  1. to Mr Piotrovsky, so clearly he was in some way
  1. supervising the investigation.
  1. Further, you will recall the video which
  1. Mr Arkhangelsky has shown you of riot police taking over
  1. physically Western Terminal on 20 June 2009. Again, it
  1. was clearly done by subordinates of Mr Piotrovsky. It
  1. was 20 June 2009, so you will recall what you were told
  1. by Mr Sklyarevsky about that period when the decision of
  1. the arbitration court was forthcoming any day now. That

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  1. is when Mr Sklyarevsky expects that the repo transfer is
  1. going to be set aside by the court. In preparation for
  1. that a few days before the Bank takes the decision to
  1. authorise the transfer of Western Terminal assets to
  1. SKIF, and I think literally one or two days before the
  1. decision of the court, riot police come in to capture
  1. Western Terminal. That is unlikely to have happened
  1. without the orders of Mr Piotrovsky, and that is very
  1. unlikely to be a coincidence in terms of dates. That
  1. must have been part of the conspiracy.
  1. Then, my Lord, once Mr Piotrovsky retires from the
  1. police in 2013, he is immediately appointed the economic
  1. security adviser to the director general of
  1. Baltic Fuel Company. It’s not disputed. That in itself
  1. is a prima facie case of corruption; he has played his
  1. role in the takeover of Western Terminal, he received
  1. his reward.
  1. So that part, we say, is, insofar as any proof is
  1. required, proven on the balance of probabilities.
  1. My Lord, I think in the same context, just very
  1. briefly, as especially our pleading on that was
  1. criticised, so I am keen to show you what we meant, it
  1. is an odd reference, it may be somewhere ‐‐ it is part
  1. of the exhibit to the affidavit of Mr Balandin in
  1. support of the application for freezing order. So it

33

  1. will be in the bundle, the reference number I have is
  1. {N1,N2,N3,N4,N5&N6/3/1123}, if that makes sense at all.
  1. No, page 1123. So here you have a letter from the
  1. investigator, Levitskaya to Mrs Malysheva, dated
  1. 28 February 2011, which gives a very detailed account of
  1. the investigations ongoing against Mr Arkhangelsky one
  1. by one, what the allegations are, and what’s happening
  1. on each.
  1. MR JUSTICE HILDYARD: Who signs this?
  1. MR STROILOV: That’s the investigator, Levitskaya. So it
  1. goes on from this page, from page 1123 to page 1134, so
  1. that’s an 11‐page account. So that was the basis of our
  1. pleading that the investigator is reporting to the Bank.
  1. I don’t propose to read it in full, but if we could
  1. perhaps just slowly scroll it down just so your Lordship
  1. sees that it is a very detailed account. That is really
  1. all I am interested in.
  1. My Lord, to complete this general scene, as
  1. regards ‐‐ well, it is said that we haven’t proven the
  1. participation of Mrs Matvienko in the conspiracy, that’s
  1. the Governor of St Petersburg, well, I am prepared to
  1. accept that, we have not proven her direct role in
  1. the conspiracy as such. However, the finding which I do
  1. invite you to make is that the Bank is closely connected
  1. to Mrs Matvienko and her family in a number of ways.
  1. You will recall that there is a cross‐examination of
  1. Mr Savelyev on the shareholding in the Bank acquired by
  1. Mrs Matvienko’s son, and then passed on to her husband,
  1. about Mr Matvienko junior’s role as vice president of
  1. the Bank, about the fact that Mr Savelyev and
  1. Mrs Matvienko are old friends and business partners in
  1. the past and all those matters.
  1. My Lord, what I do invite you to find is that the
  1. Bank is perceived by public officials in St Petersburg
  1. as being sufficiently close to the Governor so that
  1. public officials would take that into account. It is
  1. what ‐‐ if your Lordship recalls the discussion we had
  1. in ‐‐ I think literally on the first day of the trial in
  1. the context of the pleadings, if I can respectfully
  1. plagiarise your metaphor, it is a bit of a Henry II
  1. situation, where the public officials, without being
  1. actually parties to the conspiracy, they are given to
  1. understand what the king, or in this case the Governor,
  1. wants to happen, where the Bank has a conflict with
  1. whatever other commercial party, the public officials in
  1. St Petersburg know that if they stand on the way of
  1. the Bank, the Governor won’t be pleased. That, in my
  1. submission, is clear enough from the evidence of the
  1. links between the Matvienko family and the claimants in
  1. this case.

35

  1. My Lord, I think without spending much time on it ‐‐
  1. I will simply make a point, as we have looked at ‐‐ and
  1. especially as all these criminal complaints and close
  1. cooperation between the Bank on one hand and the law
  1. enforcement authorities in Russia on the other hand in
  1. relation to Mr Arkhangelsky, in my submission that makes
  1. a remarkable contrast with how much the Bank would offer
  1. to this court to substantiate their allegations of fraud
  1. against Mr Arkhangelsky.
  1. You will have seen at the ‐‐ well, I think we went
  1. through this, unfortunately, rather superficially as
  1. well, but in cross‐examination of Ms Mironova, she
  1. translated to you some of the Russian complaints where
  1. very detailed investigation appears to have been made
  1. various OMG bank accounts and where the money went and
  1. in what way and what it was all meant and all that was
  1. given ready‐made to Russian law enforcement authorities.
  1. Whereas in this case you are given one suspicious fact,
  1. taken in isolation, or a few suspicious facts, well so
  1. much money was transferred to City Centre, we don’t know
  1. what City Centre is, it must be something to do with
  1. Mr Arkhangelsky. That really undermines the credibility
  1. of these allegations. They could have told you more if
  1. they were willing to.
  1. My Lord, in the same vein I now move to the issue of

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  1. a court and Vyborg Port.
  1. MR JUSTICE HILDYARD: Is that a good moment for a break?
  1. MR STROILOV: I think it is, my Lord. I am rather
  1. disappointed as to my speed of progress.
  1. MR JUSTICE HILDYARD: Will you finish by the short
  1. adjournment, by lunch?
  1. MR STROILOV: I expect to be finished by 1.00, my Lord, yes.
  1. MR JUSTICE HILDYARD: Do you have any estimate for me,
  1. Mr Birt, as to how long you are likely to be?
  1. MR BIRT: My Lord, I am, as always at this stage, slightly
  1. in my Lord’s hands. There are a number of points I can
  1. deal with by way of references if we are running short
  1. of time. I would imagine that if I am on my feet at
  1. 2.00 pm we will finish today, my Lord.
  1. MR JUSTICE HILDYARD: We have to finish today, I am afraid,
  1. because I am booked elsewhere.
  1. MR BIRT: We can cut our cloth, my Lord, I’m sure, to
  1. achieve that aim.
  1. MR JUSTICE HILDYARD: Very good. Thank you.
  1. (11.49 am)
  1. (A short break)
  1. (11.58 am)
  1. MR STROILOV: So, my Lord, very briefly, in terms of Akort
  1. and Vyborg Port, and you will recall this whole matter
  1. of Vyborg Port shareholding being transferred to ‐‐
  1. and I will give your Lordship the reference in a moment.
  1. In correspondence, as I set out on Day 18, and
  1. I think it is simply easier for your Lordship to really
  1. read it, in correspondence the Bank was not candid about
  1. it. They actually appeared to put us on the wrong track
  1. about it. I think it was Day 26 where you find
  1. Mrs Kosova ‐‐ it must be Day 25, sorry, my Lord. I am
  1. afraid the system is slightly unhelpful on that.
  1. (Pause).
  1. Yes, I beg your pardon, my Lord, it is Day 26 after
  1. all, and starting at page 108, line 23 {Day26/108:23},
  1. where I cross‐examined Mrs Kosova about it, and
  1. essentially she admitted that the information was given
  1. to the Russian police investigator, the same resident(?)
  1. Colonel Levitskaya.
  1. Now, my Lord, in these circumstances I submit two
  1. things: firstly, this shows how the claimants have been
  1. unscrupulous with this court’s process and, indeed, in
  1. trying to persecute the Arkhangelskys in any way they
  1. could.
  1. Secondly, that they are, really, if they are to make
  1. good their various allegations of fraud and dishonesty
  1. against Mr Arkhangelsky, they could and should have
  1. given you a much fuller picture that, in fact, they
  1. have.

37 39

  1. MR JUSTICE HILDYARD: Akort, A‐K‐O‐R‐T?
  1. MR STROILOV: Yes, my Lord.
  1. On Day 18 I made an unsuccessful application to
  1. exclude that evidence, and I think it is ‐‐ I will find
  1. the exact correct reference.
  1. So that will be starting at page 54 {Day18/54:1}.
  1. Now, my Lord, I wonder if, to save time, perhaps
  1. I should simply give you a reference and leave it there.
  1. It includes all the references. What is helpful about
  1. it is it includes the reference to the relevant
  1. correspondence and how the issue arose between the
  1. parties. I would simply submit in summary that clearly
  1. the transfer is something that the Arkhangelskys
  1. disclosed to the Bank themselves, having learned about
  1. it. They did so pursuant to the disclosure obligations
  1. under the freezing order. It was, therefore, subject to
  1. the claimants’ undertaking not to use that information
  1. anywhere else except for the purposes of policing the
  1. freezing order. It has subsequently transpired that the
  1. information was passed on to the Russian police and the
  1. Russian police undertook an investigation and reached
  1. the conclusion that this court’s order was breached,
  1. which is a rather odd matter to investigate for the
  1. Russian police.
  1. There was cross‐examination of Mrs Kosova on this,
  1. My Lord, in terms of ‐‐ I will spend a few more
  1. minutes on the allegations of dishonesty, coming back to
  1. your Lordship’s point on Friday about where the
  1. RUB 4 billion have gone.
  1. Now, of course, there is a danger of, as these
  1. proceedings are naturally focused on Western Terminal
  1. and next on Scan assets, including part of
  1. Onega Terminal, and then the rest of the group is only
  1. looked at marginally and in much smaller context. So
  1. there is a danger of losing the perspective.
  1. So, of course, the 4 billion was spent on the
  1. operations of the whole group. There were loans to
  1. Onega, which were spent on the development of
  1. Onega Terminal, which your Lordship has heard has been
  1. quite considerable. There were loans to
  1. Vyborg Shipping, and that’s how the first three ships
  1. were financed, and also that accounts a considerable
  1. amount of money, obviously.
  1. There were also various forestry operations and wood
  1. processing plant which OMG was constructing, and a lot
  1. of other businesses which Mr Arkhangelsky describes in
  1. outline in his 16th witness statement.
  1. So the only money which are somewhat unclear, well
  1. the loans which may have been misspent, are the last two
  1. Vyborg Shipping loans, which were intended to purchase

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  1. further ships. In fact, they were not purchased. Well,
  1. it is common ground that the money was paid to
  1. Land Breeze, as we say had been well known to the Bank
  1. from the start, and indeed Mr Arkhangelsky told you that
  1. the whole financial scheme of money going between
  1. companies was developed with the Bank’s participation.
  1. He also told you that the money was spent on paying
  1. outstanding interest towards the end of events and as
  1. the group was running into difficulties; a lot of this
  1. money was spent on paying interest to the Bank under the
  1. previous loans and that, as Mr Arkhangelsky told you,
  1. was under an agreement with the Bank.
  1. Other money went into further shipbuilding, which
  1. unfortunately collapsed and the contracts were not
  1. followed as Vyborg Shipping collapsed generally.
  1. So, generally speaking in outline, there are no
  1. black holes. Perhaps detailed analysis might provide
  1. further questions and then possibly further answers, but
  1. it is not the case that RUB 4 billion were provided and
  1. has gone nobody knows where. It is more complex than
  1. that.
  1. MR JUSTICE HILDYARD: What do I know about Land Breeze?
  1. MR STROILOV: You know that it was a Cypriot ‐‐ one of
  1. the Cypriot offshore companies ‐‐
  1. MR JUSTICE HILDYARD: Yes.
  1. is better to find one of the internal documents
  1. explaining this.
  1. MR JUSTICE HILDYARD: All right, well don’t waste your time
  1. now, but if at some point a synopsis of the various
  1. references. I felt that I don’t really know a lot about
  1. Land Breeze, beyond the fact that it is a Cypriot
  1. company where Mr and Mrs Arkhangelsky did seem to
  1. favour, and that they owned it, and that money in
  1. respect of the Vyborg loans does not appear to have gone
  1. where it was said to have gone.
  1. MR STROILOV: No, I don’t think that’s what is suggested.
  1. MR JUSTICE HILDYARD: Well, it didn’t go into the purchase
  1. of the three extra ships, or … I thought you accepted
  1. that.
  1. MR STROILOV: No, I didn’t accept ‐‐ I accepted that the
  1. three extra ships were actually never completed and
  1. never became operational.
  1. MR JUSTICE HILDYARD: Well, there is no evidence to suggest
  1. they were sort of half complete or anything else. There
  1. is just a silence, isn’t there? There is just
  1. an assertion that for one reason or another they never
  1. emerged onto the open seas, but there is nothing ‐‐ I’m
  1. given very little by way of any sort of evidence that
  1. there was sort of part payment or some disaster in
  1. building or commissioning or anything. There is nothing

41 43

  1. MR STROILOV: ‐‐ beneficially owned by Mr and
  1. Mrs Arkhangelsky.
  1. I believe the purpose of having this structure in
  1. Cyprus was, if I am not mistaken, I think
  1. Mr Arkhangelsky’s evidence was that that was the
  1. requirement of either KIT Finance project, or European
  1. Bank for Reconstruction and Development. It appears in
  1. the context of these refinancing projects. I wonder if
  1. I need to check, but it must be in the 16th witness
  1. statement. (Pause).
  1. If we go to the 16th witness statement of
  1. Mr Arkhangelsky at {C1/1/27}, I think in paragraph 106
  1. there is a reference to Land Breeze Holdings. That is
  1. immediately not very detailed and rather appears in
  1. the different context, but essentially I think he
  1. explains the Vyborg Shipping project there. I think if
  1. we go a little further to paragraph 113 {C1/1/29}, so
  1. this is where Mr Arkhangelsky sets out the
  1. Vyborg Shipping project.
  1. I think other than that, I think it was set out in
  1. the business plan and various internal documents of
  1. the Bank that the scheme was there; that it would be
  1. Land Breeze chartering vessels, and essentially it would
  1. be a coordinating company which would take care of
  1. the whole project, whereas the ‐‐ I will ‐‐ I think it
  1. of that, is there?
  1. MR STROILOV: Well, I think there is something, my Lord.
  1. MR JUSTICE HILDYARD: Oh, is there?
  1. MR STROILOV: I will show you that. I think the first thing
  1. I would like to show you is the general description of
  1. Vyborg Shipping project in the Bank’s internal
  1. documents. If we could go ‐‐ there are a lot of them
  1. essentially similar, but if we could go to {D1/2/4},
  1. that’s one of the loan reports. Well, the ‐‐ if we
  1. could go to page 1, just so that your Lordship sees what
  1. it is. It is one of these loan officer’s opinions,
  1. which we’ve turned quite a few of during the trial, and
  1. that’s the one on opening the credit line for the limit
  1. of RUB 2.1 billion for the Vyborg Shipping project.
  1. If we scroll down to page 4, {D1/2/4}, in this
  1. section, «Loan purpose», it is explained how it is meant
  1. to work, and that shows the place of Land Breeze in that
  1. structure.
  1. MR JUSTICE HILDYARD: So:
  1. «The purpose of the loan is to make advance payment
  1. under the vessel lease contract. Ten vessels are
  1. intended to be purchased monthly during the period
  1. between February and November. The average cost of …
  1. €9.5 million…»
  1. A total capital investment in the purchase of

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  1. vessels, 3.5 million; is that right?:
  1. «Total number of container ships to be purchased ‐‐
  1. 10. …
  1. «100 per cent subsidiaries …
  1. «These companies to act as vessel mortgages are
  1. 100 per cent subsidiaries.»
  1. I mean, all this is sort of intent, but what
  1. actually happened?
  1. MR STROILOV: Yes, my Lord, I simply wanted to show you that
  1. first to demonstrate the place of Land Breeze in this
  1. and the fact that money went to Land Breeze is perfectly
  1. in line with the plan which was presented to the Bank.
  1. I hope to find something on that. There wasn’t a lot on
  1. that, but I recall that this matter was discussed in
  1. the context of the initial disputes over the freezing
  1. order. I am just trying to find it. There was some
  1. letter from shipbuilders I think outlining what happened
  1. with the project.
  1. MR BIRT: I don’t want to interrupt. I think shipbuilding
  1. may be a red herring. One sees in the plan that the
  1. first stage is for purchase of second‐hand tonnage,
  1. which is what all these loans are meant to be about,
  1. my Lord.
  1. MR JUSTICE HILDYARD: I mean, a simple point is that
  1. I haven’t seen any evidence of any boat to show for it:
  1. envisaged that there would be separate companies for
  1. each ship, where there’s no evidence that any of them
  1. were set up. Are there any subsidiaries under
  1. Land Breeze?
  1. MR STROILOV: I think the companies are set up, and that’s
  1. in the assets disclosure under the freezing order.
  1. MR JUSTICE HILDYARD: Right.
  1. MR STROILOV: I think that is really the only context in
  1. which we …
  1. MR JUSTICE HILDYARD: So there were 10 companies, whatever
  1. it is, it may be 13 companies, I just don’t know, maybe
  1. someone could provide me with the references to those.
  1. MR STROILOV: I expect that will be in the first affidavit
  1. of Mr Arkhangelsky in response to the freezing order.
  1. MR JUSTICE HILDYARD: Right. Perhaps someone could just
  1. give me or send me various references.
  1. The point is Land Breeze is an area of ignorance for
  1. me, but we do know that a lot of money went there.
  1. MR STROILOV: Yes. My Lord, I will look it up, or perhaps
  1. I can e‐mail it during the short adjournment, ideally,
  1. if not later.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: My Lord, in any event, really, all these
  1. points only go to credit; they don’t directly affect the
  1. counterclaim, really. All the points made about

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  1. I haven’t been able to find where I put to Mr Belykh
  1. that the information memorandum was in disclosure, so
  1. I think I was probably wrong; I probably meant to but
  1. didn’t, so I withdraw that criticism of the claimants.
  1. Nevertheless, my Lord, I do submit that the evidence
  1. you were given about the Bank’s alleged ignorance of
  1. these refinancing negotiations is not credible at all.
  1. It is overwhelmingly inherently improbable, and indeed,
  1. there is simply no conceivable reason why
  1. Mr Arkhangelsky would have kept it secret from the Bank.
  1. On any view, it was not in his interest to conceal that
  1. from the Bank. He was trying to persuade the Bank that
  1. he had good prospects of restoring solvency. So it is
  1. inconceivable.
  1. Indeed, Mr Belykh, I think he in his second witness
  1. statement denied knowledge of that in rather strong
  1. terms, and that statement is at {B2/16/2}, starting at
  1. paragraph 7, essentially he denies. Then over the page
  1. essentially he denies any knowledge of this.
  1. I think he was not so sure when he was
  1. cross‐examined if we … that’s on {Day3/94:1} and then
  1. there I first asked him about the information
  1. memorandum, as my learned friend has correctly said on
  1. Friday, and then so page 94 and 95 is something
  1. I particularly look at, and at line 22 he says:

49

  1. «Answer: As I mentioned before, I had some very
  1. brief information that he has these negotiations, but no
  1. details were available to me.»
  1. Then there is further questioning on {Day3/96:1}
  1. about the alleged meeting they had with Mr Arkhangelsky.
  1. On the whole, in my submission, it appears that
  1. Mr Belykh was not as categorical in his denials as he
  1. was in his witness statement. In my submission it is
  1. simply implausible that this information was not given
  1. to the Bank. Well, frankly, on any view of
  1. Mr Arkhangelsky, one could rather believe that he would
  1. be exaggerating the progress of those negotiations, but
  1. not keeping it secret.
  1. My Lord, in terms of the business claim and the
  1. business valuation evidence, just to recap on the
  1. position that has been reached previously, I think the
  1. last time it was before the court was on Day 38 as part
  1. of the housekeeping, and there were written submissions
  1. made at that stage. Ours is at {I27/43/12}. I would
  1. like to take your Lordship through this as actually
  1. a number of points made there is something I would like
  1. to rely on as part of the closing submission.
  1. You can see in paragraph 1 what we were asking
  1. your Lordship to do at that stage in terms of
  1. the housekeeping problem of the difficulties in getting
  1. Mr Steadman to attend.
  1. Then further on I don’t think it is quite necessary
  1. to re‐read the whole thing, but if you scroll down to
  1. the next page, and several pages, really, we set out and
  1. quote, I think, everything that had been said on the
  1. issue in court previously {I27/43/13}.
  1. Finally, my Lord, it is ‐‐ unless your Lordship is
  1. minded to, I am not asking you to read it now,
  1. necessarily, just so that you know where it is. Then if
  1. we scroll down to page 20, we attempt some analogies of
  1. the relevance of that evidence, and in my submission it
  1. is helpful in terms of identifying the interrelations
  1. between issues and between the primary counterclaim and
  1. the alternative counterclaim in terms of quantum.
  1. And here, yes, perhaps I think I will ask
  1. your Lordship to read paragraph 18 {I27/43/20}.
  1. MR JUSTICE HILDYARD: Mm hmm.
  1. MR STROILOV: So, my Lord, in my submission that is pretty
  1. close to the starting point: there are two claims
  1. brought in the alternative, one is based on the
  1. hypothesis that if not for the Bank’s fraud, OMG would
  1. have avoided default, most likely but not necessarily
  1. through refinancing, and on that basis, that the
  1. business would have developed and reached such value as
  1. Mr Steadman indicates in his reports.

51

  1. Alternatively, if the default was inevitable on the
  1. balance of probabilities, then it is limited to
  1. the value of assets which should have been, and would
  1. have been sold at honest public auctions, the surplus
  1. would have been returned.
  1. So in that sense, I think if we scroll down one page
  1. more, we attempt some further analysis as to what
  1. affects the choice between these two alternative bases
  1. in paragraphs 22 and further {I27/43/21}. I think
  1. I will ask you to read paragraph 22 through to 24, and
  1. perhaps even further {I27/43/22}.
  1. MR JUSTICE HILDYARD: I’ve got to the end of 21.
  1. MR STROILOV: If we could scroll down, thank you. I will
  1. ask your Lordship to read through to paragraph 28. I’m
  1. sorry to …
  1. MR JUSTICE HILDYARD: That’s all right. {I27/43/23}.
  1. Yes? One more?
  1. MR STROILOV: One more, I’m grateful.
  1. My Lord, for completeness, just so that you see what
  1. was the latest you said about this, if we could go to
  1. the transcript of {Day38/70:1}. I think I haven’t shown
  1. your Lordship the claimants’ note on that, which is
  1. a bit of a discourtesy. Should I just give
  1. your Lordship the reference? I am not going to rely on
  1. anything in that, but their note will be in the same

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  1. tab, page 2. It is just before ‐‐ so it is {I27/43/2},
  1. simply for your Lordship’s note.
  1. Then the transcript of Day 38, page 70 {Day38/70:1},
  1. and {Day38/71:1} as well. I think, really, the bottom
  1. line of that discussion, and perhaps my learned friend
  1. will take you into earlier parts of it, or your Lordship
  1. will want to read more of it later, but I think the
  1. bottom line in relation to that application starts at
  1. line 22 on page 70, and continues for several pages
  1. {Day38/70:22}, but I think the next two paragraphs to
  1. page 71, line 21 is essentially what your Lordship has
  1. decided on the last occasion {Day38/71:21}. It was
  1. before the court. Later on you also warned that you may
  1. need to order some limited cross‐examination of business
  1. experts before you make your judgment, and I don’t think
  1. that at any stage you give a clear indication that you
  1. rule out a split of the trial on quantum if the dispute
  1. between business valuation experts really comes to the
  1. fore.
  1. My Lord, we submit that this issue is still very
  1. much open. We say that we have proven the alternative
  1. counterclaim, based on the value of assets, as we have
  1. shown fraud, we say, and we have shown that the correct
  1. valuations are Ms Simonova’s, but that is not the end of
  1. the matter, because there was also loss of business, and

53

  1. that would be higher. That’s especially important in
  1. relation to the business of Onega as for rather formal
  1. reasons we have been unable to claim for the second half
  1. of that terminal, the one owned by LPK Scandinavia, so
  1. we cannot claim for the value of that asset even though,
  1. on the evidence you have heard, it was clearly part of
  1. the same plan which caused that loss. So that is where
  1. the difference between the value of the only asset which
  1. we can claim for, ie the Scan land, and the value of
  1. Onega business, of the business of the entire Onega
  1. Terminal, is particularly significant.
  1. Now, my Lord, it obviously depends on two things:
  1. firstly, is it likelier than not that if not for the
  1. fraud, the default would have been avoided? Then there
  1. is a second question of the actual value of the
  1. businesses, and I accept that if you are against us on
  1. the first question, if you decide that the default was
  1. inevitable on the balance of probabilities, that’s the
  1. end of the business claim, and there is no need to
  1. resolve the issue of value, but the converse is also
  1. true.
  1. Now, in terms of the prospects of refinancing,
  1. I submit that Mr Bromley‐Martin was a very credible
  1. witness. He is entirely independent of Mr Arkhangelsky
  1. for very many years now. He had no reason to distort
  1. the reality either way.
  1. By very nature of his business and the role he
  1. plays, he is able to look at the position, both from the
  1. point of view of the borrower and the lender, otherwise
  1. he would have never succeeded in his business. It was,
  1. with respect, a top class, vigorous cross‐examination
  1. which he passed very impressively. In particular, he
  1. defended his financial model very persuasively, it is
  1. a realistic model, and his evidence on that should be
  1. accepted.
  1. Then obviously a lot of cross‐examination concerned
  1. the several serious inaccuracies in the information
  1. memorandum, and the most sensational of them, as it
  1. were, is the one which Dr Arkhangelsky explained to you
  1. by the bribes he had to pay to Mr Matvienko.
  1. Now, my Lord, even though it has been rather
  1. fiercely criticised by the claimants, I don’t resile
  1. from my submission that the process of lending does not
  1. include a cross‐examination on oath. He told you this
  1. in court, and the only reason why he had to tell you
  1. this was because he had sworn to tell the whole truth.
  1. Bribes by their very nature is something you don’t tell
  1. everyone about. Obviously it is reprehensible, the fact
  1. that someone is paying bribes, but it is not a separate
  1. point of criticism that not only did you pay bribes, you

55

  1. have also failed to tell it to your lenders. Now,
  1. that’s ridiculous: if you are bad enough to pay bribes,
  1. you don’t tell about this to everyone.
  1. So without trying to be what I think
  1. Mr Bromley‐Martin described as «purist» about bankers,
  1. realistically it wouldn’t have come out and the lenders
  1. would have never learned about it.
  1. Indeed, the burden of ‐‐ well, to save time, but in
  1. any event, for a fuller picture to be seen by
  1. your Lordship, rather than taking you to specific points
  1. in Mr Bromley‐Martin’s evidence, I would recommend
  1. re‐reading the whole cross‐examination as you deliberate
  1. on your ruling on this issue. I submit that what
  1. follows from the evidence of Mr Bromley‐Martin and
  1. invite you to accept it is that few on the potential
  1. lender’s side would actually notice the inaccuracies in
  1. the information memorandum. The significance of
  1. the acquisition price, as Mr Bromley‐Martin explained,
  1. and is clear from his evidence, its significance is
  1. simply because it is indicative of the market value;
  1. nothing other than that.
  1. So once a valuation report would have been obtained,
  1. it would be quite easy to replace the acquisition price
  1. with the value given by an independent valuer, and
  1. that’s the figure at which the lenders would have

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  1. looked. Even though much was made of these inaccuracies
  1. in cross‐examination and in submissions, in fact,
  1. Mr Bromley‐Martin is right: they could be kicked into
  1. the undergrowth, to use his phrase, with greater or
  1. lesser degree of embarrassment, but they could be kicked
  1. into the undergrowth.
  1. Indeed, my Lord, well obviously the lenders who lend
  1. to places like Russia, again, I think it is a point made
  1. by Mr Bromley‐Martin that if they walked away whenever
  1. there was a hint of bribery, there would be no lending.
  1. They don’t take this idealistic, purist view of
  1. business. Unless they are ‐‐ well, the reality is,
  1. unless they are faced with clear evidence of something
  1. as outrageous as what Mr Arkhangelsky told you about,
  1. quite frankly, they don’t walk away: they are quite
  1. happy to turn a blind eye to these things to an extent.
  1. MR JUSTICE HILDYARD: «To an extent».
  1. MR STROILOV: Indeed, my Lord, yes. But, of course, unless
  1. Dr Arkhangelsky becomes as frank with them as if he was
  1. in the witness box, it remains simply an inaccurate
  1. figure of limited relevance, no more than that.
  1. My Lord, I think Mr Bromley‐Martin told you that,
  1. really, again ‐‐ and it seems to be common knowledge in
  1. his business ‐‐ that businessmen in the emerging markets
  1. are prone to exaggeration, it is not seen as something

57

  1. extraordinary. It is important, my Lord, not to import
  1. the high standards which you rightly apply in judicial
  1. proceedings to parties which appear before you, and of
  1. course if someone tells you about things like bribery,
  1. well, you may give him some credit for candour, but you
  1. would obviously condemn this quite severely.
  1. That is not quite how lenders look at this. They
  1. do ‐‐
  1. MR JUSTICE HILDYARD: Yes. I mean, the problem, I think,
  1. with the elephant in the room to some extent, it’s very
  1. difficult for a court, isn’t it, on the one hand to say:
  1. I’m very cross about this bribery but, on the other
  1. hand, I’m going to give hundreds of millions by way of
  1. recovery on the footing that although the court has
  1. processes which enable it to be discovered, other people
  1. might not. I mean, it is a pretty unattractive kettle
  1. of fish, isn’t it? Even if I accepted, and I will
  1. re‐read as, you are quite right, I should,
  1. Mr Bromley‐Martin, but my recollection was that he
  1. thought that all lenders would perform very considerable
  1. due diligence and that due diligence, properly done,
  1. even without cross‐examination, would expose the gap,
  1. and once the gap was exposed, Mr Arkhangelsky had two or
  1. three answers: one to show that it had been spent, which
  1. would be difficult without a lie; the other was that it
  1. was a bribe, which would put everyone off, and the third
  1. that he had stolen it, in which case they would run
  1. a mile. Those are difficult points, aren’t they, for
  1. him?
  1. MR STROILOV: Well, I think what ‐‐ then it would not
  1. necessarily be a gap as such, really. It would expose
  1. an inaccuracy in the information memorandum,
  1. essentially.
  1. MR JUSTICE HILDYARD: I know. I know when an inaccuracy
  1. becomes a gap, but to my way of thinking, it is not
  1. unlikely it will come in the 100 million area.
  1. MR STROILOV: But my Lord, it’s not as ‐‐ there are gaps and
  1. gaps.
  1. MR JUSTICE HILDYARD: I agree.
  1. MR STROILOV: In this sense, well really the simplest way of
  1. kicking this into the undergrowth ‐‐ I’m slightly
  1. anxious of trying to embark on, really, inventing ways
  1. to do that.
  1. MR JUSTICE HILDYARD: Mm.
  1. MR STROILOV: But the simplest way is obvious: simply to
  1. tell the lender: sorry, it was a mistake, the real
  1. figure is different, and in any event, we now have
  1. a valuation report, so rather than go by the acquisition
  1. price, you have the market value in the report. It
  1. clearly appears from Mr Bromley‐Martin’s evidence that

59

  1. the only thing that is relevant, and to a limited extent
  1. for the lender, is really the market value, and other
  1. than that, acquisition price just does not come into
  1. play.
  1. While, obviously, the court takes a ‐‐ well, in
  1. a way, one of the big questions on which your Lordship
  1. focused and these proceedings focused, was simply how
  1. honest is Dr Arkhangelsky, whereas the lender would look
  1. at the commercial project first and foremost; they would
  1. not be passing moral judgment. The only way in which it
  1. would come into play is if he is so dishonest that we
  1. risk him running away with the money, and then we simply
  1. can’t trust him with anything.
  1. That’s a much higher standard, if you see what
  1. I mean. At the end of the day, my Lord ‐‐
  1. MR JUSTICE HILDYARD: But I asked Mr Bromley‐Martin, and
  1. I am not quoting because I haven’t got an accurate
  1. recollection of it, my recollection as it is is that
  1. I asked him whether the potential lenders identified
  1. were the sort of lenders who would have held their nose.
  1. My answer was ‐‐ my recollection of his answer was: no,
  1. they weren’t. They weren’t the sort of lender. They
  1. were main line lenders, fully conversant with the
  1. absolute rule of knowing their client, fully conversant
  1. with the need for due diligence, and not at all keen to

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  1. be involved in something which might land them in all
  1. sorts of difficulties, including sort of prosecution in
  1. America, FATCA legislation and all the rest.
  1. MR STROILOV: My Lord, I think a lot of this, a big part of
  1. the cross‐examination, really, proceeded on the premise
  1. what would happen if the fact of these briberies would
  1. come out?
  1. MR JUSTICE HILDYARD: Yes, I accept that.
  1. MR STROILOV: And really the first step is for your Lordship
  1. to assess, realistically, how likely it is that they
  1. would have come out in those circumstances ‐‐
  1. MR JUSTICE HILDYARD: I see, okay.
  1. MR STROILOV: ‐‐ rather than in this court.
  1. My Lord, it is, perhaps unfortunately, the question
  1. for you is not what should have happened in a morally
  1. ideal world; it is what would have happened in this
  1. world if not for the fraud which we say we have proven.
  1. MR JUSTICE HILDYARD: Well, there are two aspects of this,
  1. which is why I wanted some guidance on this: one is the
  1. factual question, even if a hypothetical, as to what
  1. would have happened. Would it have been revealed,
  1. either to potential lenders or to the Bank itself, and
  1. I can sort of take a view on that.
  1. You urge the answer: no, it wouldn’t have been, and
  1. kicked into the long grass in ways which are difficult

61

  1. to define exactly how, but I shouldn’t assume that it
  1. wouldn’t have been, and on that footing I should take
  1. into account business potentiality and enormous figures
  1. which that is the gateway to.
  1. At that point there is a tremendous encouragement to
  1. the court, isn’t there, to see whether there is some
  1. legal objection to it rewarding someone it knows has
  1. paid these whopping great sums for purposes it doesn’t
  1. much like the look of. At that point, the question
  1. arises as to what is the law as to illegality. One
  1. can’t really sort of get away from this fact there is
  1. a bit of a crunch here. Naturally, I think I should
  1. confess, without asserting tremendous moral superiority,
  1. that I would find it counterintuitive both to sweep the
  1. matter under the carpet and then on that footing to give
  1. someone hundreds of millions by way of reward by my
  1. order. If the law is that I should, I will do that;
  1. I will apply the law, but all that you say focuses
  1. tremendous force, doesn’t it, on the issue as to what is
  1. the law with respect to an admitted illegality.
  1. MR STROILOV: Yes, my Lord, well, obviously these are two
  1. very different issues. There is a factual issue as to
  1. what would happen ‐‐
  1. MR JUSTICE HILDYARD: They are different, but they bring
  1. together, don’t they, they come ‐‐ I mean, we are now at
  1. a late stage in trial, Day 46, I’m beginning to work out
  1. how to resolve the issue.
  1. MR STROILOV: Yes, my Lord. Simply these two issues have to
  1. be kept separate on the factual issue of whether it
  1. would have been kept quiet, it is an unattractive but,
  1. in my submission, inevitable finding that unfortunately
  1. in this imperfect world it will have been kept quiet,
  1. otherwise there would never be any lending to Russia.
  1. MR JUSTICE HILDYARD: I think all you can say, you may say
  1. that short of cross‐examination, Mr Arkhangelsky would
  1. not himself have revealed it. I don’t think you can say
  1. it was inevitable it shouldn’t discover, I think it is
  1. highly debatable at the very best. My own slightly,
  1. I dare say, jejune faith in lenders asked to cobble
  1. together hundreds of millions of dollars is that they do
  1. go carefully. That might be absurdly innocent, but it
  1. is my initial response.
  1. MR STROILOV: My Lord, I think I would here simply rely on
  1. Mr Bromley‐Martin’s comment, I think to the effect ‐‐
  1. I’m not quoting directly, but realistically, if the
  1. lenders walked away at any hint of bribery, there would
  1. be no lending on the emerging markets.
  1. MR JUSTICE HILDYARD: Mm.
  1. MR STROILOV: And he drew quite a distinction between the
  1. situation where there was evidence of bribery and merely

63

  1. a suspicion or some inconsistency which perhaps pointed
  1. towards bribery.
  1. MR JUSTICE HILDYARD: Do I take the cohort of people who
  1. might or might not discover this as being the cohort who
  1. you say there was a realistic prospect of obtaining
  1. finance from? Or do I imagine a whole series of more
  1. unscrupulous lenders, possibly, who might be less
  1. worried about their directors being locked up in America
  1. or here? Which cohort should I envisage?
  1. MR STROILOV: Well, in a way it is rather complex. I think
  1. the question for your Lordship is simply: is it more
  1. likely that the group would have defaulted or not? That
  1. is the ultimate question you have to answer. Then
  1. within that question, what comes into play is the
  1. prospects of refinancing. It’s not even limited to
  1. refinancing. Again, we can look at Mr Arkhangelsky’s
  1. witness statement.
  1. MR JUSTICE HILDYARD: No, it isn’t. I have ‐‐
  1. MR STROILOV: It is not limited to this particular project,
  1. it is not limited to Oxus, it is not limited to
  1. BNP Paribas, it is not limited to refinancing at all; it
  1. could have been restructuring, it could have been
  1. selling part of the assets and, really, was the group
  1. able to survive, is the question for you.
  1. MR JUSTICE HILDYARD: Well, there are three means of

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  1. survival, aren’t there? One is restructuring with your
  1. existing lender, right?
  1. MR STROILOV: Yes.
  1. MR JUSTICE HILDYARD: And I have to take a view as to
  1. the extent to which if I find that they were conspiring,
  1. if they had not conspired, what would have been the true
  1. situation.
  1. MR STROILOV: Yes.
  1. MR JUSTICE HILDYARD: The second is I have to look at the
  1. evidence of the potential funders if there was to be
  1. replacement finance.
  1. The third, and the question I am asking is am I
  1. entitled also to take into account the un‐evidenced
  1. prospects of some other lenders than EBRD and BNP and
  1. front‐runners of that kind holding their nose, darting
  1. in and saying: I know it looks a bit squiffy, but we
  1. will lend a lot of money. I am sorry to put it broadly,
  1. but it is just so that we know we are being quite candid
  1. about the situation.
  1. MR STROILOV: Indeed, my Lord, and I make this submission
  1. without pleasure but I think you have to take this into
  1. account.
  1. MR JUSTICE HILDYARD: The prospect of rather less particular
  1. lenders, I should, should I?
  1. MR STROILOV: I think Mr Arkhangelsky’s evidence in
  1. on searching for skeletons in the closet as, quite
  1. rightly, my learned friend focused on that day. It is
  1. just a totally different approach. It is not attractive
  1. and we may all be philosophically unhappy about it, but
  1. you have to find what the reality would be.
  1. MR JUSTICE HILDYARD: Then the crunch comes: if you feel
  1. philosophically unattracted by it, is that really the
  1. law, that you are compelled to accept the possibility of
  1. unscrupulous lending, therefore the possibility of
  1. a recovered business on the footing of something
  1. entirely unlawful, therefore lots and lots of money
  1. under the claim caught, in effect, the engine for,
  1. really a pretty awful situation.
  1. MR STROILOV: My Lord, we are back to the public policy
  1. defence.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: In my submission it is clearly ‐‐ well,
  1. obviously a lot has been made of it, but it is quite
  1. remote from any issues in this claim. It is simply some
  1. unattractive fact in the history of Mr Arkhangelsky and
  1. Western Terminal. It’s no more than that. Certain
  1. bribes have been paid, but how does that affect the ‐‐
  1. I don’t ‐‐ well, I stand to be corrected if I am wrong:
  1. I don’t believe Mr Arkhangelsky has even said that he
  1. would have to continue to pay these bribes to develop it

65 67

  1. the witness statement is that he was talking to a lot of
  1. Russian banks as well as western banks, and I think it
  1. is right to assume that both categories really include
  1. unscrupulous or less scrupulous lenders in different
  1. proportions.
  1. MR JUSTICE HILDYARD: So what evidence do I have that they
  1. might be interested beyond a general sort of ‐‐ I would
  1. then be applying a rather idiosyncratic feel,
  1. wouldn’t I, as to what more ‐‐ less mainstream lenders,
  1. possibly more unscrupulous lenders might do? It would
  1. be a guess, wouldn’t it, on my part. It would either be
  1. an exercise in sort of slightly unrealistic piety, or it
  1. would be an exercise in: my goodness, anything goes in
  1. the commercial world.
  1. MR STROILOV: I see the difficulty, my Lord.
  1. In my submission, the bottom line is the market
  1. lives by the laws of the market.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR STROILOV: If you have a phenomenally profitable project,
  1. as Mr Bromley‐Martin described it, then for the better
  1. or for the worse, there will be a financing for it. And
  1. that really resolves the issue.
  1. MR JUSTICE HILDYARD: So with Cole Porter, anything goes?
  1. MR STROILOV: My Lord, the skeletons, it is not ‐‐ the
  1. lenders focus, really, on the project: they don’t focus
  1. further. He simply explained that he did that in
  1. the past.
  1. My Lord, how would you look at it if, for instance,
  1. our defence to the Bank’s claim was based along these
  1. lines: well, the Bank only exists thanks to its corrupt
  1. relationship with Mrs Matvienko. Therefore, it wouldn’t
  1. be lending without it, and therefore it should not
  1. recover its loans.
  1. MR JUSTICE HILDYARD: I think, for clarity, the premise on
  1. which I am most stuck is the premise that though I know
  1. about this, I’m to assume that others would not have
  1. found it out, and on that footing I should grant huge
  1. damages. I think that’s the thing that I find most
  1. anxious‐making. Have I made myself sort of ‐‐ is that
  1. sort of …
  1. MR STROILOV: I think, my Lord, that is inherent in the
  1. extremity of the oath which every witness takes in
  1. the witness box. Well, you have to take into account
  1. that you are meant to know everything, but that’s not
  1. what happens in the world outside the court.
  1. MR JUSTICE HILDYARD: Mm. How are we doing on time,
  1. Mr Stroilov?
  1. MR STROILOV: Well, I think ‐‐ well, I don’t think I will
  1. need more than 10 minutes, probably after the lunch
  1. break is better because I will spend the lunch break ‐‐

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  1. MR JUSTICE HILDYARD: Would 2.00 suit you all, then Mr Birt,
  1. you must finish by 4.15 pm; is that going to be all
  1. right?
  1. MR BIRT: My Lord, if I am up on my feet before 2.15 ‐‐
  1. MR JUSTICE HILDYARD: I will give you until 4.30, I have
  1. a meeting at 4.45.
  1. MR BIRT: I will do my best, my Lord. It may be that I have
  1. to skate over some points or give your Lordship some
  1. references, but I will do what I can to accommodate
  1. your Lordship.
  1. MR JUSTICE HILDYARD: Just one question: am I going to get
  1. some assistance on the legal point as to the illegality
  1. point, as I will call it?
  1. MR STROILOV: Well, you will recall that Mr Milner very
  1. kindly volunteered to provide a note.
  1. MR JUSTICE HILDYARD: Yes, will you discuss between you the
  1. mechanics of that. They need to know when you get it
  1. and they may need to reserve their position as to
  1. an answer and you as to any further things. Will you
  1. discuss that briefly?
  1. MR BIRT: We will discuss it between us, my Lord, yes.
  1. MR JUSTICE HILDYARD: Good. Thank you. 2.00 pm.
  1. (1.10 pm)
  1. (The Luncheon Adjournment)
  1. (2.00 pm)
  1. You would expect there to be some documentary record of
  1. chasing; there is none.
  1. You were told that the Bank learned about the arrest
  1. of Tosno, and that changed its view of OMG’s situation.
  1. In the Bank’s disclosure, there is no document
  1. mentioning the arrest of Tosno prior to 5 March.
  1. In my submission, the suggestion that having learned
  1. of the tax investigation back in 2006 or 2007 which
  1. resulted in Mr Arkhangelsky being cleared, that this may
  1. have affected the Bank’s decision, that is also not
  1. credible. The Bank would have considered the commercial
  1. prospects of OMG, and refinancing would have been high
  1. on the agenda.
  1. It clearly did not and the inference I invite is
  1. that because by that time the Bank was already
  1. determined to call a default so as to be able to seize
  1. the assets.
  1. My Lord, some references on the points which came up
  1. previously. It is our pleaded case that the transfer of
  1. shares to subsequent purchasers was a breach
  1. of December 2008 agreement. That’s paragraph 129 of our
  1. re‐amended defence and counterclaim.
  1. Coming back to my previous point, I’m sorry,
  1. my Lord, the cross‐examination of Ms Mironova on that
  1. was, in my submission, rather revealing: she was clearly

69

  1. MR STROILOV: My Lord, as I said, I will be brief now, just
  1. a couple of points and a few references to give you.
  1. First, the difficult, perhaps, issues which we have
  1. discussed just before the luncheon adjournment. Clearly
  1. whatever the position on the public policy and indeed on
  1. the facts is, they do only relate to the primary claim
  1. for the value of the business; they do not affect the
  1. alternative claim for the value of the assets, in my
  1. submission. So if your Lordship is minded at all
  1. possibly to split off that issue for a separate trial or
  1. some hearing later, and to order interim payment as
  1. a result of findings on this claim, there are obvious
  1. advantages in deferring these issues to that second part
  1. as well. The most obvious of which is getting rid of me
  1. and getting proper lawyers.
  1. My Lord, just very briefly on the facts I haven’t
  1. covered. The explanations given on behalf of the Bank
  1. for the decision to call a default in March 2009, are
  1. not corroborated by documentary evidence at all. You
  1. were told that Mr Arkhangelsky was chased for
  1. documentary evidence of outstanding timber payment.
  1. I stand to be corrected; there is apparently no written
  1. record of such chasing.
  1. You were told by Mrs Volodina that he was asked to
  1. come up with a recovery plan, but never provided it.

71

  1. not credible. That’s {Day32/59:18}.
  1. There is also, I think, one point on the moratorium,
  1. which I haven’t explored sufficiently in written
  1. submissions or in oral submissions, is that apart from
  1. Mr Savelyev’s BVI statement, there have been some other
  1. statements publicly made explaining the Bank’s position,
  1. which we say are inconsistent with the Bank’s present
  1. case.
  1. Again, I cross‐examined Ms Mironova on that in some
  1. detail on Day 32 {Day32/80:9}, and going on through to
  1. {Day32/89:1}.
  1. Further, my Lord, on references, I have promised
  1. Ms Mironova’s admission that the settlement agreement
  1. with VECTOR Invest was not meant to be implemented.
  1. That’s on Day 33, and then the cross‐examination on that
  1. settlement agreement starts at page 104, line 17, and
  1. continues for some pages {Day33/104:17}.
  1. I hope I am not galloping too fast, my Lord. If
  1. I am, tell me.
  1. MR JUSTICE HILDYARD: Thank you.
  1. MR STROILOV: The minutes number 1 of the auction sale which
  1. named Globus as a second bidder, that’s at
  1. {D161/2715/1}.
  1. Now, a couple of additional points. I think what my
  1. learned friend has submitted last week in response to

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  1. your Lordship’s question on this spreadsheet exhibited
  1. by Ms Stalevskaya, naming various companies as belonging
  1. to the Bank, on our interpretation.
  1. Now, Mr Birt submitted that this column «belonging»
  1. was linked with projects. Perhaps it makes sense to
  1. have a look very quickly at the actual table at
  1. {D139/2329/21}, just so that you follow what I am
  1. talking about.
  1. So, my Lord, you look in the far right column you
  1. have «projects» and then «belonging», so it’s in
  1. the middle, it’s column 6, and I think the claimants’
  1. interpretation is that the «belonging» column being, as
  1. they say, the funder or the lender, corresponds to
  1. projects, whereas we say it corresponds to the share in
  1. charter capital and to column 5 which we say is
  1. a nominal shareholder.
  1. Now, that explanation is something Ms Stalevskaya
  1. has expressly rejected, and agreed with me that the
  1. projects column just gives you a list and does not
  1. correspond to other sub lines. That’s on {Day9/103:5}.
  1. Finally, my Lord, just a few words on Mrs Malysheva
  1. and her non appearance. It is, with respect, not
  1. correct that she was only named as a conspirator in
  1. the latest amendment to pleadings. The amendment was ‐‐
  1. well, she was named, I think the earliest time she is
  1. consistent in saying that Mrs Malysheva acted on behalf
  1. of the Bank with full authority; there was no attempt,
  1. really, to denounce her actions, no suggestion that she
  1. was acting outside her authority in any way.
  1. So whether she decided not to answer allegations of
  1. dishonesty in relation to these actions or the Bank
  1. decided that she shouldn’t answer, either way you are
  1. entitled to draw adverse inferences and, indeed, we
  1. invite your Lordship to do so.
  1. MR JUSTICE HILDYARD: Adverse inferences of what? Of
  1. conspiring?
  1. MR STROILOV: The inference is, well, really a refusal to
  1. answer these kind of allegations in these circumstances
  1. amounts to an admission, in my submission. She has
  1. nothing to say. Either she considered or the claimants
  1. considered that her cross‐examination on these issues
  1. would only make matters worse. That is the inference we
  1. invite.
  1. My Lord, unless I can assist you on any further
  1. specific points, I should, at last, give way to my
  1. learned friend.
  1. MR JUSTICE HILDYARD: Just hold on one sec. (Pause).
  1. You accept, do you, as regards Mrs Malysheva, the
  1. evidence that under Russian employment law she couldn’t
  1. have been required by contract to give evidence?

73 75

  1. named in the list of conspirators is in the version of
  1. our pleadings dated 21 January 2013. I will just give
  1. you the paragraph reference, my Lord. In the bundle
  1. that is {A2/11/42}, and then in paragraph 177 she is
  1. named expressly as one of the conspirators, and there
  1. are more detailed pleadings about the ownership or
  1. co‐ownership of Baltic Fuel company and Renord by her
  1. husband and son.
  1. The only thing that changed recently is that we
  1. expressly pleaded that the Bank was acting by ‐‐ the
  1. previous pleading was acting principally through or by
  1. Mr Savelyev, and now we have changed it into acting
  1. principally by Mr Savelyev and/or Mrs Malysheva. But
  1. she was named and very serious allegations of dishonesty
  1. were made against her.
  1. Whether it was her decision not to respond to them
  1. and to refuse to give evidence or the Bank’s decision
  1. not to call her depends on the credibility of
  1. Mr Savelyev. He told you that she was dismissed for
  1. reasons unrelated to this case, and he told you that he
  1. asked her to give evidence but she refused.
  1. We say Mr Savelyev is not credible at all, and very
  1. little weight can be given to his evidence. But
  1. ultimately it doesn’t matter very much because the
  1. claimants admit, and all claimants’ witnesses were
  1. MR STROILOV: No, my Lord. No. Well, it’s just what
  1. Mr Savelyev told you. Unless I have missed something,
  1. there was no Russian law evidence on this, and
  1. essentially it sounds rather incredible, the suggestion
  1. that in parting company and in making some payments to
  1. her, it was not possible to come to some arrangement
  1. where she would give evidence here.
  1. MR JUSTICE HILDYARD: So as regards that, you simply say
  1. that Mr Savelyev is not a lawyer and his opinion in that
  1. regard is worthless?
  1. MR STROILOV: Indeed, my Lord. If, indeed, he was
  1. truthfully giving his opinion. Well, we say his
  1. credibility is zero.
  1. MR JUSTICE HILDYARD: You stress the position of Mr Lokai in
  1. paragraphs 178 and onwards in your closing submissions;
  1. was there anything you wanted to say in that regard?
  1. MR STROILOV: Yes, my Lord, the position of Mr Lokai, well
  1. obviously the whole system of companies associated with
  1. Mr Lokai shows a number of points. It shows that there
  1. is, indeed, a system probably wider than Renord of
  1. various companies associated with Bank of St Petersburg
  1. and Mr Savelyev’s denials that BSPB stands for
  1. Bank of St Petersburg and all other similarities of name
  1. is really not credible.
  1. He is associated with Solo, he is the founder of

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  1. Solo, and that’s obviously one of the crucial companies
  1. in this case and I would submit crucial, among other
  1. things, to the understanding of what Renord is.
  1. Essentially the picture which, in my submission,
  1. seems most likely from this vast investigation of
  1. various companies associated with the Bank, is that in
  1. the reorganisation of the Bank’s investment department,
  1. to which Mr Smirnov refers in his witness statement, it
  1. simply involved separating a number of companies, and
  1. people who worked within the Bank on investment,
  1. including Mr Lokai and Mr Smirnov and various employees
  1. who are now the management team of Renord, they became
  1. separated, they became essentially, in practice, BSP
  1. Capital, the bad bank, only for the reasons which
  1. perhaps Mr Savelyev and Mr Turetsky and a number of
  1. witnesses explained to you: the connection with the Bank
  1. was kept hidden, but essentially it became the bad bank
  1. associated with BSP, and both Mr Lokai and Mr Smirnov
  1. seem to be managers of that system.
  1. MR JUSTICE HILDYARD: There was in the last substantive
  1. part, part 14 of the claimants’ closing submissions,
  1. focus on various aspects of the conduct of
  1. the litigation on behalf of the defendants with relation
  1. to disclosure, publicity given, bandstanding, I think
  1. they would call it; is there anything you wanted to say

77

  1. in that respect?
  1. MR STROILOV: Well, it is so enviably comprehensive that it
  1. takes some time to find it, my Lord.
  1. MR JUSTICE HILDYARD: Yes. It is paragraph 1186 and onwards
  1. is where the part begins.
  1. MR STROILOV: 1126.
  1. MR JUSTICE HILDYARD: 1186.
  1. MR STROILOV: I beg your pardon, my Lord.
  1. MR JUSTICE HILDYARD: It may well be you don’t wish to
  1. respond, but we haven’t looked at that and I just wanted
  1. you to …
  1. MR STROILOV: Yes, my Lord, I think obviously there has been
  1. a lot of dispute in relation to disclosure, and I’m
  1. grateful: I meant to draw your attention to the ‐‐
  1. pursuant to your Lordship’s order there was a disclosure
  1. statement with a very comprehensive appendix answering
  1. all the questions which the claimants asked in
  1. correspondence that will be in volume {P1/10/10}.
  1. Really, essentially there were two interrogatory
  1. letters, as it is, which we were directed to answer
  1. insofar as we can, and so we did at length. So in
  1. response to these criticisms, I would simply invite
  1. your Lordship to read this.
  1. MR JUSTICE HILDYARD: Yes, anything else on that section?
  1. MR STROILOV: Yes, my Lord. As regards the suggestion that
  1. V‐Bank did not withdraw from BVI proceedings because of
  1. pressure, well, you don’t have to resolve it because you
  1. did not ‐‐ a number of years ago you did not admit this
  1. part of the counterclaim, and essentially that depends
  1. on what has been ‐‐ on whatever you find generally about
  1. the parties and their credibility.
  1. On the so‐called media campaign, well, we reject the
  1. allegations of conducting a specific campaign. This was
  1. a case which attracted very considerable media attention
  1. in Russia. Both parties were briefing the media and
  1. essentially there is nothing wrong with that. That is
  1. only to be welcomed. Apart from a particular Facebook
  1. publication, which was unfortunate, for which
  1. Mr Arkhangelsky has apologised.
  1. I think the suggestion that we were distributing the
  1. cartoons of Mrs Matvienko, that’s also incorrect. That
  1. comes from some further re‐posting of our press release,
  1. and someone else added the cartoon; we were not
  1. producing any cartoons, my Lord.
  1. I think there are some criticisms of me which, with
  1. respect, I don’t think ‐‐ well, with no disrespect,
  1. I don’t think they deserve an answer.
  1. MR JUSTICE HILDYARD: Good. Thank you very much indeed.
  1. Have you agreed between you as to how you deal with
  1. the important point of progress with the issue as to

79

  1. illegality?
  1. MR BIRT: We had a discussion at the beginning and at the
  1. end of the short adjournment, my Lord. Mr Stroilov ‐‐
  1. he will speak for himself, but he suggested because he
  1. is reliant on Mr Milner really, here, and Mr Milner’s
  1. diary is not clear and is assisting pro bono, they need
  1. a little bit of time.
  1. Shortly before we started it was suggested that they
  1. might be able to produce anything in writing that they
  1. wanted to produce by two weeks today, which is 25 July.
  1. That would give us the balance of that week to produce
  1. any reply to that, if it is to be in before the long
  1. vacation. The difficulty if it doesn’t come that week
  1. is certainly I’m unavailable during the long vacation,
  1. but we will endeavour to get something in and, assuming
  1. that is what your Lordship has in mind, by Friday
  1. 29 July, and we would hope to be able to do that, if we
  1. do indeed get something in writing on 25 July, and we
  1. would say preferably 10.00 in the morning or lunchtime
  1. and then we would be able to find, Mr Eschwege and I, in
  1. the last crowded days of term that no doubt everybody
  1. experiences, we would endeavour to get something back to
  1. your Lordship then.
  1. If that suits. If your Lordship isn’t fussed until
  1. getting something much later, then more relaxed, but

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  1. assuming your Lordship wanted to get that done and
  1. dusted, that’s what we would endeavour to deal with,
  1. my Lord.
  1. MR JUSTICE HILDYARD: I’m going to be candid about this.
  1. I had hoped that I would have the rest of the term to
  1. write or begin to write judgment, but that has all, or
  1. substantially all, been taken away from me, so it is
  1. unlikely that I would immediately make progress on the
  1. judgment. My real aim is to make sure that these sort
  1. of things which are fresh to the mind now, but may pass
  1. out of it, as the summer rolls on, don’t get forgotten.
  1. What I suggest is you keep, broadly, to that
  1. timetable, but if either one of you faces some
  1. difficulty, please keep me through my clerk updated,
  1. partly as a matter of my knowing what you are doing, and
  1. partly so that we keep this matter to the fore.
  1. MR BIRT: My Lord, very well, we will do our best, and if it
  1. looks like either Mr Stroilov or Mr Milner have needed
  1. a few more days which, in effect, runs us out of time,
  1. we may have to write to your Lordship with a proposal.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: The other potential unknown which may impact on
  1. this is if the Supreme Court does indeed hand down
  1. a judgment in a new leading case we may both to have
  1. a fresh look at that, but in which case we can both

81

  1. similarly e‐mail my Lord’s clerk and come up with a
  1. fresh proposal.
  1. MR JUSTICE HILDYARD: Well broadly speaking, I am fairly
  1. glued up in July, I am away in August, and then I’m here
  1. from at least the second week of September. Then I am
  1. applications judge in the last week, or the second to
  1. last week, I can’t remember, so I will be around
  1. in September.
  1. MR BIRT: I think we have a working plan and we would hope
  1. that if it looks like we’re not going to get the note on
  1. 25 July, then we would have an idea of when so we can
  1. plan our work accordingly, my Lord.
  1. MR JUSTICE HILDYARD: Very good.
  1. Submissions in reply by MR BIRT
  1. MR BIRT: First of all, my Lord, I am obviously going to
  1. pick up points that have emerged or been made by
  1. Mr Stroilov in his submissions or emerged in discussions
  1. between my Lord and Mr Stroilov over the last few days.
  1. I don’t intend to repeat the earlier oral submissions
  1. I made or, indeed, the written document that we have put
  1. in.
  1. As I mentioned earlier, on some occasions it may be
  1. a question of just giving my Lord references,
  1. particularly given the time.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: I was just going to start off by giving a few
  1. references arising out of some exchanges this morning,
  1. while those points are fresh in our minds.
  1. First of all, Mr Bromley‐Martin and his evidence
  1. about what could have been achieved given the
  1. information memorandum discrepancy, as one might put it
  1. kindly. We have dealt with those in our closing
  1. submissions in paragraph 478 and 479. I think my Lord
  1. remembered some of his evidence earlier in answer to
  1. your own questions, and I think there was first a short
  1. passage where my Lord asked a question as part of, or in
  1. the middle of, Mr Lord’s cross‐examination. That was at
  1. {Day20/41:1}. Then coming back to it after
  1. re‐examination my Lord asked some more questions, and
  1. that was {Day21/23:1} to {Day21/26:1} on the point
  1. I have in mind which demonstrates, in our submission,
  1. that his evidence as to the difficulties of getting any
  1. of these lenders really interested was not confined to
  1. the discovery of the bribe as such, or the alighting on
  1. that as the right characterisation, but it was
  1. effectively the discrepancy. I think my Lord at one
  1. point described the discrepancy itself as a «huge
  1. clunking skeleton» that would emerge from the closet on
  1. any degree of due diligence by any of the lenders.
  1. My Lord, I think those are the passages, I won’t go

83

  1. through them now but that, in our submission, was quite
  1. valuable evidence on this point.
  1. Insofar as Mr Stroilov went on today to make
  1. a submission that: well, there might have been some
  1. other Russian lenders out there, or perhaps some lenders
  1. with fewer scruples who might have held their noses or
  1. be prepared to go ahead and lend, we say it is just not
  1. open to him now to advance that sort of case based, as
  1. it is, entirely on speculation and not evidence. There
  1. is no evidence as to any particular lenders who would
  1. have gone ahead on that sort of basis, knowing what they
  1. inevitably would have come to know through any due
  1. diligence process.
  1. Indeed, once one moves beyond were there any
  1. lenders, the next question that would inevitably arise
  1. would be: well, on what sort of terms would those sorts
  1. of lenders lend, and the sort of lender who might lend
  1. on that basis might demand much more onerous terms than
  1. a western bank in terms of rates, in terms of covenants,
  1. in terms of security, and of course, none of that was
  1. explored and none of that was put into evidence,
  1. my Lord.
  1. Generally in relation to the prospects of
  1. refinancing, we have dealt with that comprehensively in
  1. the written submissions. I wasn’t intending to make any

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  1. further points on that immediately.
  1. My Lord, just briefly on Land Breeze, my Lord made
  1. the observation this morning that there is not much that
  1. the court knows about it and, indeed, there is not much
  1. that the claimants know about it either. But what we do
  1. know in relation to the Vyborg Shipping business and
  1. Land Breeze we have set out in our closing submissions
  1. from paragraphs 222 onwards, and that describes it, we
  1. know, and the Vyborg Shipping scheme and, in particular,
  1. around paragraph 228, and then we note in footnote 666
  1. that we recently discovered that Land Breeze had been
  1. dissolved. We wrote to the Arkhangelskys about that and
  1. they said: we weren’t involved in that, but we found
  1. that slightly surprising {AA3&4/14/138}.
  1. Then there was another passage, again, just the
  1. reference, in our written opening at paragraphs 45 and
  1. onwards that dealt with the Vyborg Shipping scheme and
  1. Land Breeze and effectively there were time charters put
  1. up for vessels which didn’t exist, and it was money paid
  1. to Land Breeze under those time charters that went into
  1. what we would say was the black hole {AA3&4/14/32}.
  1. MR JUSTICE HILDYARD: Maybe I have misunderstood this, but
  1. do the Arkhangelskys not admit that they were
  1. shareholders in Land Breeze?
  1. MR BIRT: My understanding is they admit that they were

85

  1. certainly the ultimate beneficial shareholders. I’m not
  1. sure if they were the direct shareholders or whether
  1. that was through a network of Cyprus companies and a BVI
  1. trust. Some of the companies were held in different
  1. ways.
  1. MR JUSTICE HILDYARD: But ultimately they were the owners?
  1. MR BIRT: My understanding is they were ultimately owners of
  1. Land Breeze, my Lord, yes.
  1. MR JUSTICE HILDYARD: That is accepted, isn’t it,
  1. Mr Stroilov?
  1. MR STROILOV: Yes, my Lord, through the BVI trust which you
  1. will remember featured heavily in the freezing order
  1. proceedings. That’s, I think ‐‐
  1. MR JUSTICE HILDYARD: It just seems odd that they knew
  1. nothing of the dissolution if they were the ultimate …
  1. MR STROILOV: Yes, my Lord. I think it is explained in
  1. the letter which Mr Arkhangelsky sent.
  1. MR JUSTICE HILDYARD: Okay, where is the letter? 666,
  1. footnote 666.
  1. MR BIRT: It is footnote 666, so I think ‐‐ ah, we haven’t
  1. got a reference. It was a letter dated 9 June 2016.
  1. MR JUSTICE HILDYARD: Where can I find that?
  1. MR BIRT: I will ask somebody to find the reference.
  1. I expect that came in at around the same date as the
  1. submission went in, my Lord, so it will be towards the
  1. back end of bundle I.
  1. MR JUSTICE HILDYARD: Thank you.
  1. MR BIRT: Then, my Lord, some other references arising out
  1. of this morning. There were some submissions about the
  1. Morskoy Bank loan, and just to remind my Lord a little
  1. bit about that, we dealt with that story in various
  1. places, but in paragraph 808 of the written closing
  1. {AA3&4/14/432} we gave some explanation about some of
  1. the evidence about it.
  1. My Lord knows a number of the allegations about who
  1. the shareholder was and whether or not that was the
  1. right way of approaching it, but the story ‐‐ there was
  1. a part that wasn’t really gone through this morning, and
  1. going through to 808(4), and this ought not to be
  1. forgotten in the Morskoy Bank loan story, it was a loan
  1. taken out by Western Terminal, so Western Terminal
  1. assumed the obligation of repayment to Morskoy Bank, but
  1. the money was paid straight on by Western Terminal out
  1. to another OMG company, LPK Scan, which of course was
  1. outside the repo. That was contrary to the purpose for
  1. which the loan was advanced by Morskoy Bank, which was
  1. supposed to be for the purposes of Western Terminal’s
  1. working capital.
  1. So the loan itself was of no benefit to
  1. Western Terminal at all and Mr Arkhangelsky’s

87

  1. explanation was: ah, it was of benefit for the group,
  1. but, of course, that was rather contrary to the idea
  1. that Western Terminal itself would not, whilst subject
  1. to the repo arrangements, be the subject of action or
  1. conduct or manoeuvring which would be to its own
  1. financial disadvantage. Indeed, that was one of
  1. the terms of the memorandum that Mr Arkhangelsky relies
  1. on under clause 3, he was not, whilst still involved in
  1. Western Terminal, to act to its financial disadvantage
  1. in that way, to its detriment.
  1. So that is part of the story that will come up again
  1. later, because one of the claims against LPK Scan was
  1. then trying to get that money back that Mr Arkhangelsky
  1. had procured Western Terminal to transfer out.
  1. But at the moment, the loan itself was a breach of
  1. the memorandum. Obviously my Lord knows that we say the
  1. memorandum isn’t binding, but Mr Arkhangelsky does, he
  1. relies on it. We say even if it was binding then the
  1. action in relation to Morskoy Bank was a breach, whether
  1. or not there was a moratorium, because it was a taking
  1. out a loan which was obviously to the financial
  1. detriment of Western Terminal and for the advantage of
  1. a different OMG company.
  1. We return, just for completeness, it comes back in
  1. paragraph 962 of our written closing. I will come back

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  1. to that later, but that’s then how it fits in with the
  1. claim against LPK Scan. {AA3&4/14/508}.
  1. My Lord, coming back to some points that were made
  1. last week, in going back to the conspiracy allegations,
  1. and in particular there were some submissions made by
  1. Mr Stroilov about the bailiffs or the other auction
  1. organisers, and we would say there was a fair amount of
  1. equivocation from him about what he says, those who were
  1. involved in those auctions in that sort of capacity
  1. knew, what their level of involvement was, and what
  1. their case is about it.
  1. His pleaded case, which we cite at paragraph 8821 of
  1. our closing, was that the defendants contend that the
  1. court bailiffs acted under the claimants’ direction
  1. and/or their co‐conspirators, and the direction of their
  1. co‐conspirators and/or were themselves co‐conspirators.
  1. He seemed to backtrack from that in his oral
  1. submissions, because he said it didn’t matter that much,
  1. perhaps the auctioneer was misled is what he says, but
  1. he never said what he thought the auctioneer might have
  1. been misled about or who had misled the auctioneer and
  1. it was certainly not suggested to any of the Bank’s
  1. witnesses that they had done any such thing.
  1. {AA3&4/14/468}.
  1. So in any event there is actually nothing to suggest
  1. they would have wanted to do their duty and ensure
  1. a fair auction to get the best price.
  1. Indeed, the evidence from the witnesses who talked
  1. about it was that so far as they knew, the rules were
  1. followed. It’s also important to note how the starting
  1. price at the auction is set, and we have dealt with that
  1. at paragraph 876 of the closing: it is either the amount
  1. set out in the mortgage contract itself, in other words,
  1. a previously agreed price between the pledgor and the
  1. pledgee, or by the court after an independent valuation
  1. report {AA3&4/14/466}, and in that situation the pledgee
  1. has no role in setting the price. That was
  1. Professor Maggs’ evidence, we have cited that
  1. at paragraph 876.
  1. So it’s not as if the Bank can rig how the auction
  1. starts: it has either been agreed in the mortgage
  1. contract or it is independently determined, and the
  1. evidence of the experts was that is the starting price
  1. and the only way to increase it is by people bidding.
  1. So we don’t understand how it is said, if it is
  1. said, that those conducting the auctions were either
  1. conspirators or were misled, or what the Bank is said to
  1. have done in that regard, and in fact, the evidence is
  1. that they were not.
  1. MR JUSTICE HILDYARD: I mean, that may well be a fair point,

89 91

  1. that the bailiffs or the auction organisers were
  1. co‐conspirators or were, in fact, misled. The evidence
  1. that we have set out on Russian law at 873(3) is that
  1. the auction organisers had a duty to comply strictly
  1. with all the requirements of the law governing the
  1. auctions and there is nothing to suggest that they would
  1. not have done their duty and invalidated the auction if
  1. they had apprehended a breach of the rules.
  1. It was certainly not suggested to anybody that they
  1. had procured any of the organisers or the bailiffs to
  1. breach their duty or, indeed, that they had misled them
  1. in any way. {AA3&4/14/464}.
  1. And we also have noted in the written closing
  1. submissions that the organisers of the auctions had
  1. their own incentive to get the best price: they got
  1. a percentage of the sale price, and that was the
  1. evidence of Ms Mironova, which we have cited at
  1. paragraph 865, and indeed, Ms Kosova as well at 931(2)
  1. {AA3&4/14/460} and Mr Turetsky, our banking practice
  1. expert, said that the range of fees payable was between
  1. 1 and 5 per cent of the selling price to the auction
  1. organiser. He said that in his report at paragraph
  1. 8.33, which can be found on the {E2/8/28}, so that is
  1. potentially quite an incentive on the organiser to get
  1. the best price, leading to the inherent probability that
  1. I will have to review it, but any sort of auction
  1. bidding or auction barring from interested people, or
  1. any curiosities in the valuations, will be unlikely to
  1. be known, still less within the remit of the bailiffs,
  1. who are really in a ministerial capacity just to see to
  1. it that the rules, which are fairly basic, are not
  1. themselves confounded.
  1. But your case is that so long as the sale takes
  1. place at an auction, it is protected from enquiry except
  1. by action against the bailiffs; is that really right?
  1. MR BIRT: My Lord, that is right. Absent proof of
  1. effectively dishonesty on behalf of another party, that
  1. was the gist of both Dr Gladyshev and Professor Maggs’
  1. evidence, that there was a set of rules and the bailiffs
  1. are responsible for adhering to them.
  1. My Lord is right that the bailiffs are the
  1. court‐appointed officials and, as one sees from the
  1. documents, quite often the actual auction process is
  1. sent to an auction organiser. The Russian Auction House
  1. was an independent one for the Onega properties, and
  1. that wasn’t through the court process, but the other
  1. ones were through different auction organisers on
  1. different occasions. There was one called Aurora,
  1. I think there is one called Tymen, and there are
  1. different companies that fulfil that function, and all

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  1. those people have their own incentive in seeing that
  1. there is a fair auction, getting the best price from the
  1. market.
  1. The bailiffs have the responsibility of seeing that
  1. the rules are followed. Unless there has been a
  1. starting price agreed, or even if there has, they can go
  1. and get an independent appraisal. That’s what the
  1. bailiffs do, and then that’s the starting price, subject
  1. to the court’s approval, and in some cases there is
  1. a 80 per cent level to reflect the fact that it is
  1. starting in an auction, my Lord.
  1. So there’s not ‐‐ you would have to have all those
  1. people, or at least, a substantial number of those
  1. people, in on it, because if you ‐‐ first of all you
  1. have to get the starting price a long way down where you
  1. want it, so you have to somehow skew the independent
  1. appraisal, you have to get that ‐‐
  1. MR JUSTICE HILDYARD: Subject to it being in the mortgage,
  1. there is no actual ‐‐ all it has to be is an independent
  1. valuation of which the bailiffs have no control.
  1. MR BIRT: Well, we will have to check the evidence. I think
  1. the bailiffs or the auction organisers ‐‐
  1. MR JUSTICE HILDYARD: I know, but they wouldn’t be able
  1. to… what I’m getting at is that there must be all
  1. sorts of reasons why an auction which looks like

93

  1. an auction isn’t really an auction, but your case is
  1. that as long as it is something which takes place in
  1. accordance with the rules of an auction, so nominalistic
  1. rules, really, it is an auction.
  1. MR BIRT: My Lord, I don’t quite accept that. If it takes
  1. place within the rules of the auction, which are more
  1. than nominalistic rules, they are an auction, because
  1. the rules are set down there in long ‐‐ we took
  1. Dr Gladyshev to some of the parts of the law on
  1. mortgages and things and there is quite a lot of rules
  1. about it, and that is the process through which Russian
  1. law has dictated that a security holder is entitled to
  1. enforce his security, and that’s what he’s entitled to
  1. do.
  1. Just because a bank who is having difficulty with
  1. its borrower who is not repaying and having difficulty
  1. in selling the property in a difficult market chooses to
  1. exercise legal rights and says: I can’t get anywhere,
  1. I’m just going to have to press the button of putting
  1. this into the court auction process now and seeing what
  1. goes on. That’s where we are, my Lord. The rules are
  1. followed, the relevant people who are involved from the
  1. bailiffs and the auction organisers do their job, and
  1. the price is produced according to the normal rules.
  1. MR JUSTICE HILDYARD: It may be that there is no evidence on
  1. this and therefore you can’t answer, but what would be
  1. the recourse if there were an auction ring, for example?
  1. I mean, the bailiffs wouldn’t be able to tell that?
  1. MR BIRT: Well, if there’s an auction ring, my Lord,
  1. meaning …?
  1. MR JUSTICE HILDYARD: Meaning that there is a pre‐compact
  1. between bidders either not to bid or to stop at
  1. a certain amount or to yield to another at a certain
  1. level, or any of the other well known tricks of
  1. the auction trade.
  1. MR BIRT: My Lord, if dishonesty can be proved, then there
  1. is a claim, the expert said, under the relevant
  1. provisions of Russian law against those who are involved
  1. in it.
  1. But absent the proof of dishonesty, none of that
  1. goes anywhere.
  1. MR JUSTICE HILDYARD: Supposing the auction is a sham
  1. because there are two people with different names who
  1. happened to be controlled by the same person?
  1. MR BIRT: My Lord, there are different ways of approaching
  1. that and, first of all, we would say that wasn’t a sham,
  1. that’s an auction that’s been set up in accordance with
  1. the rules.
  1. MR JUSTICE HILDYARD: Really?
  1. MR BIRT: But there is a further point, which is that, just

95

  1. take a step back and look at the situation here. One
  1. says ‐‐ one looks at the situation and says: it has all
  1. been put up for auction and two companies come along to
  1. bid at the auction, and as we know, they are both
  1. associated with Renord. Well, what are people to do
  1. about it? Was the Bank to say at that stage: stop the
  1. auction, you can’t have this? Well, it is not in their
  1. gift to say that. They are not entitled to. Are they
  1. to say ‐‐
  1. MR JUSTICE HILDYARD: Who was saying that to the Bank?
  1. MR BIRT: Well, nobody was saying that to the Bank.
  1. MR JUSTICE HILDYARD: No, but if it had.
  1. MR BIRT: What was the Bank to do if no other bidders came
  1. forward? They put these assets up for auction in
  1. the hands of the court and its processes, and it has to
  1. be followed through. They are not then entitled to say:
  1. oh, there are not enough bidders come forward I want to
  1. call it all off. They are not entitled to say: oh,
  1. I don’t like starting price, it has to go higher. That
  1. was the evidence of the experts; they have to live with
  1. it.
  1. What happens if they say: Renord, you can’t do this,
  1. only one of you can come forward. Maybe they have
  1. a conversation with them, or maybe the bailiffs say:
  1. we’re not happy with this, invalid. Then what happens?

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  1. Then what happens is that the price reduces and you go
  1. off for another auction some 7 or 14 or 21 days later,
  1. and it starts at a lower price, and you see whether
  1. anybody else comes forward.
  1. Now, nobody is going to come forward to bid higher
  1. than the first auction. You are inevitably going to get
  1. a lower price. So one asks where does all that go if
  1. there aren’t any bidders out there?
  1. Again, as my Lord knows, if it still fails, it goes
  1. down again, and ultimately, if nobody comes in to bid,
  1. the Bank can take the property at the last starting
  1. price and just write it off against the debit.
  1. Standing back, if the Bank had actually wanted to
  1. take these properties for the lowest possible price for
  1. itself, which is ultimately the defendants’ case, there
  1. was a much better and cleaner way for them to do it,
  1. which was to put it up for auction and have nobody
  1. attend, or have one Renord bidder attend and have it
  1. declared invalid and run it again at a lower price.
  1. MR JUSTICE HILDYARD: Prices were so low I shouldn’t think
  1. it was worth their while, even if you thought about
  1. that. The thing is, it is very, very odd that in none
  1. of the auctions did anyone other than a Renord Company
  1. or a Savelyev company ever attend, and in none of them
  1. does the price go more than one step up above the
  1. the spiral of going downward.
  1. MR JUSTICE HILDYARD: Do you have a list for me of
  1. references to marketing efforts?
  1. MR BIRT: My Lord, I have a list of references for you,
  1. which I am …
  1. MR JUSTICE HILDYARD: Well come to them in due course,
  1. Mr Birt.
  1. MR BIRT: Yes, my Lord, they are behind one of the sheets of
  1. paper.
  1. MR JUSTICE HILDYARD: That’s fine.
  1. MR BIRT: We noted Mr Stroilov’s position on Friday that he
  1. said it wasn’t essential to the alleged conspiracy that
  1. no independent bidder ever came forward. He said that
  1. {Day45/71:1}. In other words, he seemed to be wanting
  1. to accommodate in the conspiracy the risk of an
  1. independent bidder coming forward, no doubt because
  1. putting the properties up for auction did include that
  1. risk, if you want to put it that way, or that
  1. possibility. That seemed to be on his basis that
  1. because the theory that the money goes around in
  1. a circle, the Bank wasn’t actually fussed about what
  1. price they got it, as long as they got it below a price
  1. that was sufficient to discharge the loans.
  1. That seems to us actually to undermine the idea of
  1. the conspiracy because how then is the conspiracy going

97 99

  1. auction reserve, and one has never seen that. I have to
  1. say, I’ve never seen anything like it.
  1. MR BIRT: My Lord, first of all, none of these are Savelyev
  1. companies, we take issue with that: they are Renord
  1. companies.
  1. MR JUSTICE HILDYARD: I mean, that’s a debate, isn’t it?
  1. MR BIRT: Well, I just wanted to make that clear. My Lord,
  1. it may be the case my Lord has never seen it. It may be
  1. the case that one has never seen a market such as that
  1. which prevailed in St Petersburg over this period after
  1. many people will say in the financial market: we have
  1. never seen a financial crisis like 2008. We have
  1. Mr Millard’s evidence that nobody was buying property.
  1. Now, there is absolutely no reason to doubt that
  1. evidence: he is an expert, he has come to this court to
  1. give his honest professional view, and he gave evidence
  1. that they could not sell property over that period. It
  1. is not surprising that when it goes up for auction
  1. nobody really wants it. That was the reality of
  1. the market at the time. No other bidders came forward.
  1. So we do say that attaching some sort of label to
  1. this such as the bid‐rigging label that Mr Stroilov
  1. attaches, doesn’t really get you anywhere unless you can
  1. show that there is somebody else out there who would
  1. have paid a higher price. Otherwise you just end up in
  1. to work? If an independent bidder does come forward as
  1. was obviously possible, the price could go all the way
  1. up on Mr Stroilov’s case, to sort of Simonova levels, or
  1. at least substantially higher than the money
  1. outstanding. Then there would be no way ‐‐
  1. MR JUSTICE HILDYARD: No, because he says as long as it was
  1. lower than that, then there wasn’t very great risk on
  1. all that you say of that, the Bank, if he is right about
  1. the ownership of the companies, would be removing money
  1. from one pocket to stuff in another.
  1. MR BIRT: Yes, but that’s where I pause to say ‐‐ the
  1. trouble is once you allow the possibility of
  1. an independent bidder in, how is the Bank to say: that
  1. is okay, as long as we cap it at the levels of
  1. the outstanding debt. The Bank doesn’t have any control
  1. over it at that stage.
  1. MR JUSTICE HILDYARD: The question of risk analysis on your
  1. scenario the market was so feeble that there wasn’t even
  1. the prospect of anyone attending. Mr Stroilov then
  1. says: supposing it wasn’t quite that feeble, the Bank
  1. could have taken the risk of it not being so feeble so
  1. long as there was no realistic prospect of the money
  1. being paid in such an amount as would come close to
  1. discharging the loan. You say that is a real risk, do
  1. you? I thought your whole case was miles under water.

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  1. MR BIRT: No, no, my Lord, I don’t say it was a real risk,
  1. but what I say is on Mr Stroilov’s case, if one takes
  1. the defendants’ case where these properties are worth
  1. stratospherically greater amounts than they were
  1. auctioned for, then these conspirators are acting at
  1. risk to their own conspiracy by putting these on the
  1. market, because if Mr Stroilov is right that these
  1. properties really were worth even in the range of
  1. Ms Simonova, then somebody would have come out of the
  1. woodwork and bid for them and destroyed the whole house
  1. of cards, my Lord.
  1. MR JUSTICE HILDYARD: I think he says at that point that
  1. while there might have been any risk they took steps to
  1. ensure that unless you are in control on both sides of
  1. the equation, you put something in like the Gunard
  1. lease, which cooled the thing so much that no one in
  1. their right mind would buy it.
  1. MR BIRT: My Lord, we have handled the Gunard lease in our
  1. written closing, and I won’t repeat all the points
  1. there, but the key point for present purposes is that it
  1. is nowhere to be seen when the property is put up for
  1. auction. It is long lost in time. It is not in any of
  1. the sales particulars, it’s not in the documents put
  1. into the auction house, we have put the reference there.
  1. So there is no suggestion that anybody had been
  1. low prices. They were sold for the best prices
  1. achievable in the market at that time.
  1. One has to remember, for example, I know I made this
  1. point already, but Mr Arkhangelsky acquired the
  1. Western Terminal for around a billion roubles at a point
  1. where the market had increased, or was increasing, to
  1. its unsustainable levels. There was then a crash, and
  1. whether you say it is a 30 per cent loss or as
  1. Ms Saltykova said a 50 per cent loss in the property
  1. market, you get quite close to the price that it
  1. achieved at auction.
  1. MR JUSTICE HILDYARD: Assuming nothing was spent on it to
  1. improve it?
  1. MR BIRT: My Lord, yes, of which there is no evidence apart
  1. from Mr Arkhangelsky’s say‐so that he spent a few
  1. million putting some concreting down.
  1. MR JUSTICE HILDYARD: There were some buildings, weren’t
  1. there? I’m not indicating whether I thought it was
  1. a lot of improvement or a little improvement, but it
  1. wasn’t quite just the asphalt, was it? It was a new
  1. building, we saw that picture of him in an office, sort
  1. of low rise office.
  1. MR BIRT: I’m not sure that was at Western Terminal,
  1. my Lord.
  1. MR JUSTICE HILDYARD: Wasn’t it? Where was that? Onega?

101 103

  1. frightened off by the Gunard lease, it is just not part
  1. of the piece at that stage, my Lord, so I come back to
  1. the point that if this was a conspiracy it was a risky
  1. one to put them up for auction, and going back to
  1. my Lord’s points about the sale price was low and so on,
  1. and we have given the references in paragraphs 857 to
  1. 858 of the closing, and that was Mr Millard’s evidence,
  1. and my Lord will remember I think I referred to this as
  1. well last week, about the crash in real estate prices in
  1. Russia and that bank lending for commercial development
  1. dried up. We have Ms Simonova saying that the prices
  1. increased during 2007 and the early part of 2008 to a
  1. sort of unsustainable level and then crashed again, and
  1. we have Mr Arkhangelsky’s chief accountant,
  1. Ms Saltykova, giving her statement in the French
  1. proceedings on Mr Arkhangelsky’s behalf saying as
  1. a result of the 2008 crisis prices for real estate
  1. dropped by almost half, and Mr Millard explaining there
  1. was a complete lack of buyers in the property market …
  1. MR JUSTICE HILDYARD: You have given me the references.
  1. MR BIRT: Yes, my Lord, I have given you the references
  1. already.
  1. So, my Lord, that is the context through which one
  1. has to see the prices that were obtained and we simply
  1. don’t accept the premise that these were sold for very
  1. MR BIRT: I think that may have been the main OMG offices,
  1. which were neither at Scan or at Western Terminal, but
  1. was an office closer in St Petersburg. The problem with
  1. that video, one of the problems was, it wasn’t clear
  1. where each of the extracts was taken.
  1. Certainly the buildings where the outside was shown,
  1. they looked rather like sort of portacabin type
  1. structure, rather than anything perhaps more permanent
  1. or solid, my Lord.
  1. Just going back, again, a last point on the auctions
  1. and how various points that have to be remembered, is
  1. that the sales of some assets were undertaken not at the
  1. behest of the Bank in enforcement of its pledge rights
  1. or even enforcement of a judgment, but by the bankruptcy
  1. receiver of Scan for the benefit of creditors generally.
  1. And so there again ‐‐ the Bank is even one step further
  1. removed there and there has been no even allegation,
  1. I think, that the bankruptcy administrator has been
  1. party to a conspiracy and there would be no basis for
  1. that. There were other real creditors of Scan who had
  1. an interest. My Lord may remember that the Pravdy
  1. Street offices which were owned by Scan were sold by the
  1. bankruptcy administrator in August 2012. We have given
  1. the reference at paragraph 953 of our written closing.
  1. MR JUSTICE HILDYARD: Are the bankruptcy receiver sales

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  1. there mentioned as well?
  1. MR BIRT: They are, my Lord.
  1. MR JUSTICE HILDYARD: At 953?
  1. MR BIRT: Paragraph 953, there is a footnote there I think
  1. to 2723, to the reference to his receiver’s report,
  1. dating from October 2012, which is at {D162/2728/0.1},
  1. and with those offices they were sold for
  1. RUB 19.15 million which was distributed to Scan’s
  1. creditors, and we have given the references there in
  1. the closing.
  1. MR JUSTICE HILDYARD: What was that? D162 ‐‐
  1. MR BIRT: The reference is at footnote 2723 of our closing
  1. and it is at {D162/2728/0.1}. I was just going to
  1. finish the point that of the 19.15 million which was
  1. realised from the sale of those offices, and it was all
  1. distributed to Scan’s creditors, the Bank received about
  1. 3.745 million.
  1. MR JUSTICE HILDYARD: Which should I take, just for my note,
  1. as the conversion to dollars?
  1. MR BIRT: It changed over the course. In bundle AA we set
  1. out a table, I will have to get the reference, at the
  1. beginning of the trial we put it in there and over the
  1. period it is ‐‐ it has come up on screen {AA2/12/1},
  1. my Lord.
  1. MR JUSTICE HILDYARD: Thank you.
  1. LPK Scan is not a party and nor is it shareholder who,
  1. if there was even a claim for reflective loss, she might
  1. have it, but she is not a party, and the shareholder is
  1. Mr Arkhangelsky’s mother‐in‐law, Ms Tarasova. But there
  1. has never been any suggestion that she was going to
  1. bring a claim or could bring a claim and no claim has
  1. been brought for the LPK Scan land.
  1. The second general point about the land at Onega,
  1. the Scan land and the LPK Scan land, is it had no access
  1. to the sea. My Lord will remember, it had no berths of
  1. its own; it was entirely dependent upon its neighbour to
  1. grant those rights of access.
  1. My Lord, I think I mentioned last week, and we have
  1. given the references in our closing as well, that we
  1. think it is instructive to see the prices at which the
  1. land at Onega was acquired, which is around in total
  1. RUB 136 million, and that was late 2005 or 2006. We
  1. have given the references and the figures in our closing
  1. at paragraph 22(1)(a) and footnote 38 and also in
  1. paragraph 945(4) {AA3&4/14/20} and I think again,
  1. paragraph 1109 with footnote 3206, and those are prices
  1. which, as Ms Yatvetsky said in her evidence, we have
  1. cited that in that last paragraph, were really not
  1. a million miles away from the prices they ultimately
  1. realised at auction, and again, remembering the

105

  1. MR BIRT: So, standing back, we say that the auctions were
  1. all organised, actually, by different people: some of
  1. them were the Bank enforcing its pledge, of which some
  1. of them were done through the courts and some of them
  1. through an independent auction house. Some were in
  1. execution of their judgments, some were by the
  1. bankruptcy receiver. All of those people, we say, would
  1. have been seeking to discharge their duties faithfully
  1. and indeed, many of them had an incentive to do so in
  1. terms of their percentage take on the sale proceeds.
  1. My Lord, briefly in relation to Onega Terminal and
  1. the land there, my Lord knows that there are two
  1. separate plots of land at the Onega Terminal, one
  1. belonging to Scan Insurance and one to LPK Scan. In
  1. relation to the Scan land, first of all in terms of
  1. valuation, Mr Milner said a little bit, but not very
  1. much, about this on Friday, and we have dealt with it
  1. quite fully in our written closing, so I am not going to
  1. take up too much time on the detail. It is
  1. paragraph 1101 and following. For present purposes,
  1. I just want to note two points about it {AA3&4/14/580}.
  1. One is that it is not to be forgotten that it is only
  1. the Scan land at Onega that is in issue in terms of any
  1. claim in these proceedings. There is no claim for the
  1. LPK Scan land. My Lord may recall why that is, because

107

  1. intervening financial crash {AA3&4/14/583}.
  1. Mr Stroilov tries to get away from some of this and
  1. the difficulty he recognises he has with the acquisition
  1. prices by saying that Mr Arkhangelsky acquired these
  1. assets at an undervalue due to his connections in
  1. the criminal underworld, to which we say there is
  1. absolutely no evidence, apart from his own say‐so, that
  1. he acquired them at an undervalue, and one can’t trust
  1. that sort of thing from Mr Arkhangelsky.
  1. My Lord, one of the other aspects that comes out of
  1. the land at Onega Terminal is the LPK Scan land and
  1. my Lord mentioned at some earlier point in
  1. the submissions that you would just be helped by being
  1. reminded how the sale of that came about. Just to give
  1. the references and a brief summary, it is in our written
  1. closing starting at paragraph 960 and goes on for
  1. a number of pages there {AA3&4/14/507} and I should also
  1. give this reference, which is related to it, which is
  1. one of my Lord’s questions to Mr Stroilov, was whether
  1. there was any evidence when ROK Prichaly had become
  1. interested in acquiring the land at Onega.
  1. MR JUSTICE HILDYARD: Oh yes.
  1. MR BIRT: And I think Mr Stroilov wasn’t sure, but we have
  1. given a reference in paragraph 961(2) {AA3&4/14/508} to
  1. Mrs Yatvetsky’s evidence, and she remembered it as early

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  1. 2011. That was her evidence at {Day39/55:21}.
  1. Coming back to the LPK Scan land, it’s also to be
  1. remembered that LPK Scan was not controlled by the Bank
  1. or the original purchasers. It wasn’t part of, or party
  1. to, the repo arrangements in terms of the shares in
  1. Western Terminal or Scandinavia Insurance; it was
  1. a company that Mr Arkhangelsky appears to have
  1. controlled through his mother‐in‐law, and its land at
  1. Onega had been pledged to the Bank in support of two
  1. different loans to the Bank: there was a second Onega
  1. loan and the 2007 LPK Scan loan.
  1. How the original enforcement against LPK Scan land
  1. came about goes back to a point I made earlier, my Lord,
  1. which was that the monies that Western Terminal had
  1. borrowed from Morskoy Bank had been sent straight on by
  1. Western Terminal at Mr Arkhangelsky’s behest to
  1. LPK Scan. That was RUB 56.5 million. We say that was
  1. all part of his scheme to get money out of
  1. Western Terminal, even though it was under the repo
  1. arrangements, but whilst he still had the chance.
  1. Obviously Western Terminal as a company had
  1. an interest in getting that back. So it sued LPK Scan
  1. for repayment, not surprisingly the Russian court agreed
  1. and ordered that it be repaid. So there was enforcement
  1. against LPK Scan by Western Terminal against its assets,
  1. way of ROK Prichaly, and we have given the explanation
  1. in 967 of the closing and following, 968 sets out the
  1. mechanics. 969 looks at the value for which it was
  1. transferred which was very close to the value at which
  1. the LPK Scan land had been included in the OMG accounts.
  1. It was transferred for 27 million and actually OMG
  1. accounts had recorded it as worth RUB 29 million. So
  1. that is definitely a valuable comparison.
  1. Then, importantly, the Bank wrote off the balance ‐‐
  1. MR JUSTICE HILDYARD: I don’t know whether it is or not.
  1. I have no idea the basis on which the OMG accounts were
  1. drawn up.
  1. MR BIRT: No, there isn’t much evidence about that figure,
  1. but it is one of those things to take into account if
  1. one ‐‐ the trouble is, in this case, if one starts with
  1. looking at things like Ms Simonova’s valuations and then
  1. you look at 27 million, you might think: oh, that’s
  1. a bit low, but then if you look at all the figures in
  1. context, you find that actually there’s quite a lot of
  1. figures, wherever they come from, which are similar to
  1. the price at which it was sold and this figure happens
  1. to come from OMG’s own accounts.
  1. MR JUSTICE HILDYARD: But in classical accounting you would
  1. normally include in the accounts the acquisition cost,
  1. and so it wouldn’t take you any further than the

109 111

  1. namely the land.
  1. So that land in support of that judgment,
  1. remembering that judgment only came about because of
  1. Mr Arkhangelsky’s channelling the Morskoy Bank loan to
  1. LPK Scan, through that judgment there was an enforcement
  1. against the land, it was put up for auction, and it was
  1. that auction at which Mercury bought the land, but
  1. obviously always subject to the pledges to the Bank
  1. because those pledges hadn’t been released. That first
  1. auction was nothing to do with the Bank’s pledges; it
  1. was to make good the debt. So a separate legal process.
  1. It is to be remembered that at this time we have
  1. given the reference in footnote 2756, the outstanding
  1. debts to the Bank secured by this land was some
  1. RUB 865 million.
  1. So naturally the price at which Mercury were able to
  1. acquire those assets at auction was low because the
  1. assets were always subject to that RUB 865 million debt.
  1. This is one of those auctions that was reported in
  1. the press shortly after the event, we have given the
  1. reference at paragraph 965 of the closing.
  1. Then what happens in the story of this land, there
  1. was the transfer of the loans and the pledge over the
  1. LPK land to Mercury. By this time, this is when it
  1. became apparent that there might be a final purchaser by
  1. acquisition price.
  1. MR BIRT: Well, I don’t know if we have the evidence to go
  1. into where it came from. But, my Lord, even if that is
  1. the case, then it is still a relevant factor to bear in
  1. mind and it goes back to the point I made just now about
  1. the acquisition cost, my Lord.
  1. An important feature of this, of course, is that the
  1. Bank entirely wrote off the balance of the debt, and
  1. Mercury, as Mr Sklyarevsky, I think it was, gave
  1. evidence, brought no claim. So the upshot was that the
  1. Oslo Marine Group, under these two loans, the second
  1. Onega loan and the LPK Scan 2007 loan, were forgiven the
  1. entirety of the 855 million debt.
  1. So it doesn’t actually matter whether the land had
  1. been sold for 3 per cent of that outstanding debt or
  1. 30 per cent of that outstanding debt or 90 per cent of
  1. that outstanding debt, because the balance was forgiven.
  1. The ultimate result is the same.
  1. In fact, the evidence is that it was sold for what
  1. was thought to be an appropriate value for the land at
  1. the time, but the credit ‐‐ or, rather, the relevant OMG
  1. companies get, makes the precise percentage write‐off
  1. slightly irrelevant because the entirety of the debt was
  1. written off, and they actually got quite a large benefit
  1. from that.

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  1. Again, if this really was the sort of conspiracy
  1. theory that it is said to be when they are bankers
  1. intent on persecution and running people out of town and
  1. bankrupting them, it is not very consistent with a big
  1. write‐off of the debt in that amount.
  1. Another point was made in relation to another set of
  1. auctions, but this time in relation to
  1. the Western Terminal assets, and Mr Stroilov made
  1. something of the fact that the assets were separated
  1. into pledged on the one hand and unpledged on the other,
  1. before being sold, and that’s relied upon as something
  1. that artificially reduces the price, as I understand it.
  1. But one needs to unpack it a bit and put it in
  1. the context and ask how did they get there, because this
  1. wasn’t the Bank starting with a blank sheet of paper and
  1. making it up. It was a fact that some of the assets
  1. were pledged and some were unpledged.
  1. Now, the assets that were owned by Western Terminal,
  1. subject to the Bank’s pledges in respect of some of
  1. them, they came into the hands of Nefte‐Oil, but that
  1. is, again, a bit like the first sale of LPK Scan land;
  1. that was because of a different enforcement action.
  1. That wasn’t a process by which the Bank was seeking to
  1. realise a pledge. That was an attempt to pay off the
  1. Morskoy Bank debt.
  1. assets into some auction process that was being held
  1. pursuant to the rules of enforcing one’s pledge.
  1. They would have been now criticised if they hadn’t
  1. followed the rules on auctions and instead tried to do
  1. some sale outside the whole scope of it, and that would
  1. have led to another round of complaints.
  1. So that, really, is a bit of a red herring, we say.
  1. The Bank had to go through that process of auctioning
  1. the pledged assets because ‐‐ it is a circular thing to
  1. say, but those were the assets that were pledged and the
  1. others weren’t.
  1. We have put in our written closing that actually the
  1. unpledged assets themselves were worth little and they
  1. don’t really generate their own claim for loss because
  1. of the fact that Western Terminal had been encumbered by
  1. this debt by Mr Arkhangelsky to Morskoy Bank that had to
  1. be paid off in any event, so that was what the assets
  1. went to; to pay off that debt that Mr Arkhangelsky had
  1. lumbered Western Terminal with at the death.
  1. Just going back, briefly, to valuation. We were
  1. glad to hear the confirmation that it wasn’t said that
  1. Mr Millard had performed anything other than an honest
  1. and professional calculation. Obviously the other side
  1. say that there were certain flaws in his calculations,
  1. but we do say that that being the case, that it was

113 115

  1. Now, by the time the finalisation of the enforcement
  1. that debt had ‐‐ we looked at the chronology this
  1. morning ‐‐ been assigned to Sevzapalians, but
  1. Sevzapalians of course themselves had paid off the debt
  1. to Morskoy Bank to stop Morskoy Bank driving the
  1. process.
  1. So that first auction was simply an attempt to get
  1. some value out of the unpledged portion of the assets to
  1. repay Sevzapalians, who had in turn repaid the debt to
  1. Morskoy Bank. So there’s nothing very surprising or
  1. suspicious about that.
  1. But then the assets are held, as it turns out, by
  1. Nefte‐Oil, subject in part to a pledge to the Bank. So,
  1. again, some assets are pledged, some are not.
  1. What is the Bank to do? It only has security rights
  1. over the pledged assets. Nefte‐Oil now owns all of
  1. the assets, subject to that pledge, and those assets
  1. which weren’t pledged, it owns, having acquired them
  1. validly, at an auction that wasn’t to do with
  1. enforcement of the Bank’s rights. So it is difficult to
  1. see how the Bank could have done anything other than
  1. enforce its pledge over the assets which were pledged to
  1. it. It certainly couldn’t have enforced its pledge over
  1. the unpledged assets, that’s obvious, nor could it have
  1. compelled the auctioneer to somehow bring unpledged
  1. an honest and professional valuation, it is quite
  1. difficult for them to say that an auction price which
  1. comes within the range of or the region of his valuation
  1. can be redolent of fraud.
  1. Now, we dealt with Mr Millard’s valuations in oral
  1. submissions last week and in our written closing. The
  1. references, just for completeness, Western Terminal, it
  1. is paragraph 1041 onwards and the land at Onega 1106
  1. onwards, we’ve also dealt with other assets in part 11,
  1. and I don’t intend to go through the details now.
  1. A couple of points arising out of things that were
  1. said earlier in the submissions by Mr Stroilov, or
  1. probably Mr Milner. It was acknowledged, and
  1. acknowledged by Ms Simonova, that she didn’t perform any
  1. sensitivity analysis on her DCF calculations. We say
  1. that is an important point. Such an analysis may well
  1. indicate the range of numbers that would be generated by
  1. the calculation once one tests some of the assumptions.
  1. We say that would have been quite important in assessing
  1. what the relevant range of values might be.
  1. It would show how much slight difference in
  1. the input might make to the final calculation, and when
  1. you are asking to infer fraud from a valuation, it is
  1. quite important to know where the range is. Knowing
  1. where the centre point is is only, really, half the

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  1. information that you need, because if slight changes in
  1. assumption actually lead to a hugely wide range, then it
  1. may well be that the price came within that range,
  1. albeit maybe towards the lower end, but that, again, we
  1. say, is not a safe basis on which to infer fraud from
  1. price.
  1. We noted that the Sestroretsk assets were something
  1. of an example here. I mean, Mr Milner noted that
  1. Mr Millard had performed an alternative cash flow
  1. analysis for the Sestroretsk houses. Without going into
  1. the detail, that is the plot where we disagree on
  1. whether it really was high value housing or as
  1. Mr Millard said, the plot next to the rusty ditch.
  1. Anyway, the two experts took different views on
  1. a number of assumptions, and Mr Milner fairly said there
  1. wasn’t any hard evidence to support the assumptions
  1. either way but it was just a matter of judgment, and of
  1. course he said he would prefer Simonova.
  1. We say that just shows that if you change the
  1. assumptions within the range of reasonable, professional
  1. valuation might happen, it shows the sale price was
  1. within the range; in other words, whether you are a bit
  1. lower or a bit higher just depends on professional
  1. judgment, and that’s certainly not in the realm of
  1. inferring fraud.
  1. of land that had exchanged hands, and trying to build up
  1. from there what a sensible figure would be.
  1. It wasn’t a bizarre or irrational way of doing it.
  1. MR JUSTICE HILDYARD: It was, slightly, in one sense, in
  1. that having accepted there wasn’t really a market so
  1. that you have to sort of homebake some add‐ons to some
  1. different market, one wondered why he had approached it
  1. in that way at all. I mean, if there is no
  1. market, market analysis is simply an exercise in
  1. comparing different and not comparable things. I think
  1. I should ‘fess up: I did find it rather odd.
  1. MR BIRT: Well, he recognise that direct comparables were
  1. hard to come by.
  1. MR JUSTICE HILDYARD: They weren’t hard to come by, they
  1. weren’t there: there was no market.
  1. MR BIRT: There was no direct comparable, and what he was
  1. trying to do was find the closest comparables and use
  1. a rational and sensible methodology to get to what this
  1. property might have been worth based on the closest that
  1. he could find, and we do say that at least it was
  1. grounded in actual figures for which property had
  1. changed hands, and as he recognised, it might not be
  1. ideal, but it had the virtue of being grounded in actual
  1. prices and, as he pointed out, was consistent with
  1. certain other valuations and prices, my Lord.

117

  1. My Lord, I won’t go back through all Ms Simonova’s
  1. points and the points I made the other day. I just did
  1. want to make it clear, because Mr Milner said it seemed
  1. we only really challenged her assumptions at
  1. Western Terminal in respect of the annual TEU figure,
  1. and that’s absolutely not the case: we challenge quite
  1. a few of her assumptions. We have set them out in
  1. closing at paragraph 1054, but the TEU was the one
  1. I picked out at oral submissions, both because of
  1. the constraints of time and because it is one that she
  1. was obviously wrong about, but we challenge the others
  1. that we set out there as well {AA3&4/14/552}.
  1. My Lord, I was going to come on to say something
  1. about Russian law, but I wondered if that was
  1. an appropriate moment for a short break.
  1. MR JUSTICE HILDYARD: I mean, on valuation the real
  1. criticism that was made was that there was simply no
  1. basis for assuming there to be a market.
  1. MR BIRT: My Lord, yes, it was as I said the other day,
  1. really, which is that Mr Millard was doing his best, and
  1. he had looked, as he said in his evidence, at doing
  1. a DCF calculation. He had said in respect of
  1. Western Terminal, for example, it was just too uncertain
  1. and the assumptions would be too wild and difficult to
  1. predict. So he did his best, based on looking at plots
  1. MR JUSTICE HILDYARD: Good. Right, well I shall look
  1. forward to Russian law.
  1. (3.21 pm)
  1. (A short break)
  1. (3.31 pm)
  1. MR BIRT: My Lord, one reference from earlier, I said
  1. I would get the reference to the Arkhangelskys’
  1. communication where they said they were nothing to do
  1. with the dissolution of Land Breeze.
  1. MR JUSTICE HILDYARD: Oh yes.
  1. MR BIRT: That’s an e‐mail that can be found at I28 ‐‐
  1. MR JUSTICE HILDYARD: Hold on, I am just going to … yes,
  1. thank you.
  1. MR BIRT: Yes, {I28/45/19}. They say they really don’t know
  1. anything about it.
  1. MR JUSTICE HILDYARD: I can’t remember where we had got to,
  1. and it is my sort of failings, but did we get to
  1. an agreed chronology as regards the Morskoy Bank loan
  1. sequence?
  1. MR BIRT: I think my Lord asked me this last Wednesday or
  1. Thursday.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: And I did address it. Perhaps the quickest thing
  1. for me is to find the bit of transcript where
  1. I addressed it rather than going back over things now,

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  1. given the time.
  1. MR JUSTICE HILDYARD: Thank you. Russian law.
  1. MR BIRT: My Lord, really the main issue that I am just
  1. going to say one or two things about is reflective loss.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: And we have covered this in our written closing
  1. submissions starting at paragraph 985 and then going on
  1. from there {AA3&4/14/522} and Dr Gladyshev’s position
  1. appeared to be that it ought to be recoverable in any
  1. situation, but there was no case actually saying that
  1. and the boundaries were not known, particularly in
  1. the citation we gave at paragraph 995 of the closing.
  1. As we understand the position that Mr Milner was
  1. setting out on Friday, he did not go as far as to say
  1. that a claimant could always recover what might be
  1. characterised as reflective loss. In fact, he accepted
  1. that normally a claimant could not, and he said that at
  1. {Day45/29:12‐16}, he said that ordinarily claims for
  1. reflective loss would not be allowed in a Russian court.
  1. And that was also one of the ways he was able to
  1. accommodate the Fiona Trust decision in this
  1. jurisdiction, and that was {Day45/52:1}, but he said it
  1. could be recovered in particular circumstances, and he
  1. said in particular where a company has been disabled
  1. from bringing a claim by the wrongdoing in question.

121

  1. No, there is no Russian court guidance on that and
  1. we don’t accept it, but we also say that in any event it
  1. doesn’t actually help the defendants in situations where
  1. the point arises in this case. I will come on to
  1. explain that.
  1. The other piece of the jigsaw worth bearing in mind
  1. in terms of what the Russian law experts said is the
  1. evidence that that sort of claim could not be used to
  1. circumvent the insolvency process; we have given some
  1. references at paragraph 991 and 1016 of our written
  1. closing {AA3&4/14/525} but without being too technical
  1. about how one might look at Russian law, one has to
  1. remember how this point arises in relation to some of
  1. the claims.
  1. So first of all, the claim for Onega’s business
  1. loss, well that is Onega’s claim, we would say, and
  1. Onega, it is to be remembered, was not part of the repo,
  1. its shares weren’t transferred. The Bank has not
  1. prevented Onega from bringing any claim by some method
  1. of control. Onega went into consultancy about five
  1. years after the alleged wrongdoing, and we have set that
  1. out in paragraphs 1015 to 1016 of the closing
  1. {AA3&4/14/532}, so any claim that Onega might have
  1. belongs to its bankruptcy administrator, not to its
  1. shareholders.
  1. One also has to look at the claim for Scan’s loss,
  1. Scan Insurance, and that is a claim which, certainly in
  1. the first instance, would be for Scan to bring, and it
  1. is to be remembered that Scan also went into bankruptcy.
  1. So even if there was a principle, contrary to our
  1. submissions, allowing a shareholder in Scan Insurance to
  1. recover the loss in value of its shareholding in Scan,
  1. one must remember that that shareholder would be the
  1. company Group Oslo Marine, referred to generally in
  1. the parties’ submissions as GOM. GOM, of course, does
  1. not bring a claim in these proceedings.
  1. We have dealt with this a little bit further in
  1. paragraphs 991(3), 997, and footnote 2862
  1. {AA3&4/14/525}, and GOM, it is to be remembered, is also
  1. in bankruptcy, and that is not a bankruptcy at the suit
  1. of the Bank and not owing the Bank money {AA3&4/14/527},
  1. there are other creditors and the submissions set out
  1. some of the evidence about that ‐‐ yes, that is the
  1. footnote 2862, and we explain that:
  1. «No case has been advanced by the defendants as to
  1. how any loss to Scan would have been reflected in
  1. the loss value in the shares of its parent company, GOM,
  1. in particular where GOM was put into liquidation by
  1. a third party creditor…»
  1. Who is named by Mr Arkhangelsky as Mr Yuri

123

  1. Chichoyan, nothing to do with the Bank, and so there is
  1. no attempt to prove how, if at all the value of their
  1. shares in GOM would have been affected by anything done
  1. by the Bank as opposed to the enforcement by third
  1. parties of their debts against GOM.
  1. So that is not only a double reflective loss
  1. problem, but there is also a double bankruptcy problem
  1. and there would also be a causation problem.
  1. So, my Lord, really one doesn’t have to get into too
  1. much of a tangle on this, because in those sorts of
  1. situations you are outside even Mr Milner’s narrow
  1. principle, and in relation to Western Terminal, it
  1. depends in our submission, really, on what is the
  1. wrongdoing in question and what is claimed?
  1. Now, as we have accepted, if the wrongdoing is
  1. taking the shares and the loss is the loss of
  1. the shares, that is not reflective loss in the hands of
  1. OMGP; it would be a loss, namely the loss of their
  1. shares, although, of course, it wouldn’t be a loss
  1. claimable by Mr Arkhangelsky; it would be reflective in
  1. his hands.
  1. However, if the wrongdoing is said to be something
  1. else or ultimately turns out to be something else later
  1. in the chronology, like wrongfully selling the assets at
  1. an undervalue, then the loss is framed by reference to

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  1. that. The loss is then felt by Western Terminal itself.
  1. That is not a loss of the shares but a loss to
  1. Western Terminal reflected in the value of its shares.
  1. So, in a sense, that comes back to what can the
  1. defendants prove about the wrongdoing, and if the repo
  1. itself is the wrongdoing, or at least if that is the
  1. point at which one says that was wrong, and there was
  1. a loss there, and the wrong was ‐‐ and the loss was the
  1. loss of the shares, that’s the first situation.
  1. If, however, the repo itself, there’s nothing
  1. actionable about it ‐‐ and I will make some more
  1. submissions about the repo shortly, but remembering it
  1. was something, we say, consensually entered into, and
  1. one is really looking at there was a wrongful sale of
  1. the shares which hit the company that owned ‐‐ sorry,
  1. a wrongful sale of the assets which hit the company that
  1. had owned the assets, and that’s a loss to
  1. Western Terminal and, therefore, if it reflects at all
  1. on Mr Arkhangelsky, it is, indeed, a reflective loss, or
  1. reflects at all on OMGP, it is reflective, my Lord.
  1. There was a discussion between my Lord and Mr Milner
  1. as well about the English law of reflective loss, and of
  1. course that doesn’t impact directly, but just because
  1. I know my Lord is interested in the point, there is what
  1. we would suggest is an useful discussion of the recent
  1. why it could not bring the claim, there was a deadlock
  1. situation imposed.
  1. That, in the judgment of Mr Justice Birss, based on
  1. the Kazakh case, was that that didn’t amount to
  1. an impossibility. That is his conclusion at
  1. paragraph 58.
  1. If any guidance is to be obtained from English law,
  1. that is where we say a useful recent summary and
  1. discussion of the authorities on that exception, which
  1. even in English law is extremely narrow and, indeed,
  1. Lord Millett, obviously sitting in the Hong Kong Court
  1. of Final Appeal is not binding in this jurisdiction, but
  1. he said it wasn’t really an exception at all.
  1. My Lord, I was just going to very quickly cover the
  1. limitation arguments which we heard briefly from
  1. Mr Milner on. Really by way of references to start
  1. with, we have covered those at paragraphs 998 to 1008
  1. and 1014 of the closing {AA3&4/14/528}, setting this out
  1. as well in paragraphs 505 to 511 and 705 in our opening.
  1. I will just very briefly summarise the points that
  1. arise. {AA3&4/14/531}, {AA3&4/14/286}.
  1. There are three points where this arises, and we
  1. have dealt with those one by one starting at 998
  1. {AA3&4/14/528}. I am going to deal with them in
  1. a slightly different order for reasons that will become

125 127

  1. authorities in a case called Peak v Tarek which is in
  1. the authorities bundle at {AUTH5/21/1}, and we’ve
  1. referred to that in our footnote 2860. Just to give
  1. your Lordship the references, this is a judgment of
  1. Mr Justice Birss dating from September last year, his
  1. discussion of the law starts at paragraph 29 and he goes
  1. on to discuss the so‐called exception of
  1. the Giles v Rhind case, which is something that
  1. Mr Milner relied upon which is where a company itself is
  1. disabled from bringing the claim.
  1. He goes on to explain how that has been rejected as
  1. an exception by Lord Millett sitting in the Hong Kong
  1. Final Court of Appeal in a case called Waddington, and
  1. then there has been subsequent confirmation that
  1. Giles v Rhind remains good law in England, subject to
  1. the Supreme Court saying otherwise.
  1. But he also refers to the judgment of the Court of
  1. Appeal in the Kazakh case, and this is paragraph 41 of
  1. Peak v Tarek, which characterises Giles v Rhine as a
  1. very narrow doctrine, very limited. It only applies
  1. where it would be impossible for the company to bring
  1. a claim, and as a result, the exception did not apply in
  1. that case, in the Peak v Tarek case, even though the
  1. company in question there was controlled by the
  1. conspirators themselves, which was no doubt the reason
  1. apparent. Starting with Article 179, which is a claim,
  1. obviously it is a contractual‐type claim but for
  1. invalidation of the alleged 2008 agreement. It is
  1. common ground between the experts that the limitation
  1. period under Russian law was one year and we pleaded
  1. that by way of defence at paragraph 42(h) of our
  1. re‐re‐amended reply, and the defendants never pleaded
  1. back to that, so they never actually pleaded or relied
  1. upon the Foreign Limitation Periods Act in relation to
  1. that defence.
  1. But in any event, we say that would not assist the
  1. defendants because whilst the court did apply that act
  1. and permitted the Article 1064 claim at an earlier
  1. stage, it is not as simple as saying: therefore it must
  1. also be applied now for a different and new claim under
  1. a different provision because much of the reasoning of
  1. this court and of the Court of Appeal when considering
  1. this issue in its previous judgments, in other words,
  1. considering whether the application of the Russian law
  1. limitation period was unduly harsh was centred around
  1. the circumstances in which this matter had come before
  1. these courts and, in particular, in light of the fact
  1. that claims had been pursued in the BVI and then there
  1. had been agreement to come here.
  1. The relevant factors were summarised by the Court of

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  1. Appeal in paragraph 17 of its judgment at {K1/15/8}, and
  1. for my Lord’s note, also your judgment
  1. from November 2013 at paragraph 110, which is {K1/6/22}.
  1. As I say, the relevant factors largely related to
  1. the fact that claims had been brought in the BVI which
  1. the parties had then agreed would be brought here, and
  1. the defendants had encountered difficulty in serving
  1. their claim here in time.
  1. But in relation to the new Article 179 claim, the
  1. same factors aren’t present. Most importantly, that
  1. wasn’t a claim that was ever brought in the BVI or that
  1. the defendants sought to bring when they issued
  1. proceedings here in the Commercial Court, and it is no
  1. answer to say: ah, well, no representation, they don’t
  1. know what they are doing, because of course in the BVI
  1. they did have representation. I think they had leading
  1. counsel.
  1. So it just wasn’t in play, and there’s been no
  1. explanation why it wasn’t in play or why it wasn’t
  1. brought earlier. So when one is looking at: is there
  1. undue hardship here, one would expect at least to see
  1. an explanation why it is only now that it is brought.
  1. And there is no relation back for this claim, that
  1. was carved out my Lord’s order at {J1/16/2}, so the
  1. claim was only commenced in July 2015, so it would be

129

  1. time‐barred even if there was a 6‐year English law
  1. limitation period because this is a claim under 179,
  1. effectively, to invalidate the December 2008 agreement
  1. because of alleged threats. So that was a wrong that
  1. occurred and a claim that would have accrued, indeed,
  1. in December 2008.
  1. The second claim in relation to which it arises is
  1. the new claim for the loss of the Onega business. We
  1. deal with this at 1009 and following, and whether this
  1. is advanced under Article 179 or 1064 it is a new claim,
  1. it is not a mere head of loss, and we have dealt with
  1. this further at 1014. {AA3&4/14/530} {AA3&4/14/531}.
  1. It is not enough to say: new head of loss. That may
  1. be an answer if what you are talking about is simply
  1. further particulars of an existing claimed loss, but
  1. this is something entirely new; it is, effectively,
  1. a new ingredient and therefore, that turns it into
  1. a distinct cause of action.
  1. If, as they say, it is a conspiracy formed
  1. in December 2008, loss started to be felt once the
  1. shares in Scan were put into the repo transaction. So,
  1. my Lord, we say that it goes back all that way and is
  1. time‐barred on either basis.
  1. The other point we have considered in our
  1. submissions starting at paragraph 999 is the new
  1. conspiracy claim, in other words, the alternative
  1. conspiracy claim, only starting later {AA3&4/14/528}.
  1. We have put what we say in writing, I won’t develop it
  1. further because it is not really a case that has been
  1. advanced in oral submissions.
  1. I was just going to touch next, my Lord, on one or
  1. two points in relation to the repo. I’m not intending
  1. to go back over points made last week or repeat them, we
  1. have obviously made quite a lot of submissions as well
  1. in our written document, but we do say it is relevant
  1. and must not be forgotten that Mr Arkhangelsky and the
  1. OMG companies agreed to enter into those arrangements.
  1. He had time to consider them with his lawyers, and he
  1. decided to do it. It wasn’t something that the Bank
  1. unilaterally imposed upon him.
  1. Now, albeit he says he thought he was getting
  1. a six‐month moratorium when, in fact, he wasn’t, and we
  1. have made our submissions on the moratorium, we say it
  1. wasn’t understood to be part of the deal, but even if
  1. Mr Arkhangelsky thought it was, we say on the evidence
  1. it is clear, there was no prospect of his raising the
  1. finance or paying back the loans within that six‐month
  1. period but, nevertheless, he was willing to enter into
  1. the repo on that basis, or taking that risk. He knew he
  1. was risking his shares if he could not get the money in

131

  1. that sort of time period, even on his case. That was
  1. the deal he struck, and so the risk he was prepared to
  1. run. There was nothing wrong with the repo arrangements
  1. themselves, namely the agreement to transfer the shares
  1. with the quid pro quo of the agreement to transfer them
  1. back. Indeed, there has not actually been an attempt to
  1. invalidate those repo contracts themselves in this case
  1. at all.
  1. We made submissions earlier about the various points
  1. concerning what the parties might have thought about the
  1. legal mechanics or how it was going to work. Again, not
  1. to repeat those. But at the end of the day we say none
  1. of that really matters: the Bank had security rights
  1. over the various assets, and that’s not disputed. OMG
  1. defaulted, having not paid back its loans, and that is
  1. not, or really ought not to be, disputed, and the Bank
  1. had an entitlement to enforce those security rights. It
  1. did so in accordance with the law and the pledges were
  1. realised for whatever value they could be realised for,
  1. and all that is what the Bank would have been entitled
  1. to do regardless of the repo.
  1. We say questions about what might have happened to
  1. any surplus value are perhaps interesting but academic.
  1. There was no surplus value in the property that was
  1. auctioned, so at the end of the day it doesn’t really

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  1. matter. Those, as I explained earlier, those parts of
  1. the Western Terminal property that were not pledged had
  1. to be sold in any event to clear the Morskoy Bank debt
  1. that Mr Arkhangelsky had saddled the Western Terminal
  1. with, so that can’t really be a matter of complaint.
  1. My Lord, I don’t intend to go back over the
  1. submissions on the finances and financial position of
  1. OMG and its various companies, but we do say that our
  1. submissions do not depend either on the Lair valuations
  1. being incorrect, or Mr Arkhangelsky embezzling the
  1. assets. Mr Stroilov suggested that it being a financial
  1. pyramid was dependent upon both those being right. We
  1. say, of course, that both of those are right, but even
  1. if they were not, for some reason, accepted by the
  1. court, that does not mean that the various businesses
  1. were real ones sustained by their operating profit and
  1. so on. For the various reasons set out in our closing
  1. submissions, that just was not how they were operated or
  1. what happened.
  1. Just to make one or two points about the
  1. 25 December 2008 meeting. It is important to remember,
  1. we say, that it is not the defendants’ case that
  1. a legally binding agreement was formed at the meeting.
  1. It is their case that an agreement was entered into on
  1. or around 30 December 2008, and that’s their pleading at

133

  1. paragraph 117(a), which is {I25/39/147}, and also at
  1. paragraph 180(a) at {I25/39/184}.
  1. The second of those references, one sees it clearly:
  1. they plead an agreement that was partly oral and partly
  1. in writing. The reason they say that is because they
  1. want to rely upon the written terms of the memorandum,
  1. and they tack on to that what they say is an oral part,
  1. namely the moratorium.
  1. But that does rather give rise to the question: when
  1. is it said that this agreement really was made? It
  1. appears that it must be, that it is when the memorandum
  1. is signed, and is that, we ask rhetorically, when the
  1. defendants say it became binding? Because otherwise it
  1. is difficult to see how the agreement could have been
  1. partly in writing. And if that is the case, then it
  1. coincides with our case, which is that the parties were
  1. happy to leave the meeting on 25 December without
  1. an agreement at the meeting.
  1. On the defendants’ case, it sounds like they say
  1. there may have been an oral agreement on a moratorium at
  1. the meeting, perhaps they say this, which only became
  1. binding once the memorandum was signed up to.
  1. We say that sounds very odd, because if that was the
  1. case, why was that not reflected in the memorandum,
  1. particularly given that the memorandum was listing the
  1. loans which they say a moratorium was being granted in
  1. respect of.
  1. Or, we wonder, do they say that there was a binding
  1. oral agreement for the moratorium at the meeting but
  1. without any agreement on the repo; in other words, the
  1. Bank just unilaterally agreed to grant them a moratorium
  1. at the meeting without a quid pro quo. We say that
  1. obviously wouldn’t make sense from the Bank’s point of
  1. view and there is no reason to think that the Bank would
  1. make or intend to make a legally binding agreement on
  1. those terms, a six‐month moratorium, all interest in
  1. capital, without getting anything in return.
  1. We also note that this six‐month moratorium is
  1. supposed to have been made in respect of loans to
  1. a number of different OMG companies. Those companies
  1. weren’t at the meeting: Mr Arkhangelsky was at the
  1. meeting and, actually, he wasn’t even director general
  1. of some of the companies. For example, he wasn’t
  1. director general or direct shareholder in PetroLes or,
  1. by this time, Vyborg Shipping. He couldn’t have bound
  1. them. So it is unlikely that people at the meeting were
  1. considering they were entering into that sort of binding
  1. agreement in relation to the loans to those companies.
  1. Mr Arkhangelsky’s position is that he didn’t make
  1. any agreement on his own behalf anyway. His evidence

135

  1. was that he only made an agreement on behalf of OMGP and
  1. GOM. That’s what he said. We have given the reference
  1. in our closing at paragraph 709 {AA3&4/14/384}. Again,
  1. we say that makes it less likely that he would be or the
  1. Bank would think he was entering into a binding
  1. agreement at a meeting on an oral basis.
  1. Now, as I say, OMGP and GOM were not even
  1. shareholders in PetroLes or in LPK Scandinavia or, by
  1. this point in time, Vyborg Shipping. By this point in
  1. time, Vyborg Shipping shares had been transferred, or at
  1. least 99 per cent of them had been transferred, to
  1. a Cyprus company called Alwildama, that was
  1. in October 2008, and we have given some references at
  1. footnote 213 of our opening, but those documents are at
  1. {D89/1156/1} and {D89/1157/1}. So as of December 2008
  1. OMGP and GOM were not shareholders in Vyborg Shipping
  1. and Mr Arkhangelsky was not general director of
  1. Vyborg Shipping. That was Ms Krygina.
  1. We have already LPK Scan of course was owned by
  1. Ms Tarasova and she was the general director so again,
  1. query whether it can really have been thought or
  1. intended that extensions to all of those companies’
  1. loans were really thought to have been granted in
  1. legally binding way when those companies were not, in
  1. a formal sense, at the meeting. We just say it is not

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  1. likely and one just cannot infer that sort of intention,
  1. especially when one adds that a few days later they do
  1. write down the basic arrangement in an aide‐memoire of
  1. the memorandum, of course, without the moratorium.
  1. My Lord asked during the course of ‐‐ it was either
  1. my submissions or Mr Stroilov’s submissions, for some of
  1. the references in relation to the debate that was had on
  1. disclosure in September 2015. We have added, in case it
  1. is useful, to the bundle the skeletons exchanged for
  1. that hearing. The claimants’ skeleton is at
  1. {G4/103.1/1}, the defendants’ skeleton at {G4/103.2/1}
  1. and the passages dealing with disclosure from the
  1. original and subsequent purchasers in the claimants’
  1. skeleton start at 112 onwards, the section dealing with
  1. the disclosure application coming this way, having
  1. started at paragraph 90; and the defendants’ skeleton
  1. starts their argument on disclosure from ‐‐ I think they
  1. called it «Renord et al as custodians» that started at
  1. paragraph 38. My Lord may or may not remember now,
  1. because the passage of time, one has other things to
  1. remember, but there were heavy disclosure applications
  1. in both directions, and there were a number of points
  1. that had come both from the claimants, complaining about
  1. the defendants’ disclosure, and the defendants
  1. complaining about the claimants’ disclosure.
  1. be found at {K1/11/1} and the order that was
  1. subsequently made is the one at {J1/20/1}, paragraph 16,
  1. which was an order for letters to be sent to a listed
  1. number of individuals and companies and the letters
  1. themselves were settled by my Lord, set out at schedule
  1. D of that order.
  1. What informed that order was the need to keep in
  1. mind the distinction between Renord and its companies in
  1. a general sense and the original purchasers and
  1. subsequent purchasers specifically because the
  1. foundation of my Lord’s judgment was that it was the
  1. original purchasers and the subsequent purchasers that
  1. should be written to, not the whole of the Renord Group.
  1. Now, the Bank is entirely entitled to test the scope
  1. of its disclosure obligations in court, and once the
  1. court has ruled, it is entitled to fulfil those
  1. obligations but it doesn’t have to voluntarily go
  1. outside them at all. And among other things, and
  1. especially in this case, there is a proportionality
  1. issue, suggesting that all companies within the Renord
  1. Group ought to be searching through all their documents
  1. for anything to do with this case, we say would be, and
  1. always would have been, entirely disproportionate, and
  1. that was, indeed, one of the bases on which we resisted
  1. the order. Not just Renord; it was sought to be made

137 139

  1. One, but one of quite a large number of points, was
  1. whether the Renord Companies themselves were
  1. sufficiently within the control of the claimants, or at
  1. least whether their documents were sufficiently within
  1. the control of the claimants so as to give rise to
  1. a disclosure obligation upon the claimants for those
  1. documents.
  1. One will see from the skeleton argument of
  1. the claimants starting at 112 onwards, the principal
  1. objection was that the request was just far too wide and
  1. onerous and lacked any real definition. There had been
  1. no attempt to define which documents held by those
  1. companies were alleged to be within the Bank’s control
  1. and which were not {G4/103.1/32}. We say, for example,
  1. we said you can’t just ask for all documents held by the
  1. Renord Group, because even on your case about original
  1. purchases, for example, there are all sorts of companies
  1. in the Renord Group, nothing to do with this or the
  1. Bank.
  1. Now, the Bank did seek to be constructive in that
  1. skeleton and at paragraph 114 it offered to consider
  1. more focused requests for documents. None were
  1. forthcoming. There was, as my Lord knows, a hearing
  1. about it, it was argued out and my Lord delivered
  1. a judgment on it. Again, for the note, the judgment can
  1. anything held by Mr Sklyarevsky and Mr Zelyenov as well,
  1. I think.
  1. There were all sorts of other issues and these were
  1. all ventilated at the time: potential confidentiality
  1. points, difficulties in Renord tracking them down, costs
  1. for Renord or Mr Sklyarevsky, and obviously they
  1. wouldn’t just let the Bank go in and root around
  1. themselves.
  1. My Lord also considered the issue about working
  1. papers and invasion of rights, and that informed the
  1. particular formulation of the order and the draft
  1. letter.
  1. But at the end of the day, my Lord, we say that the
  1. court process was gone through and my Lord gave
  1. a judgment on it and formulated the approach that had to
  1. be followed, and that was followed. And I don’t think
  1. there has ever been any complaint, at least no
  1. articulated complaint or anything on a proper basis,
  1. that the Bank did not comply with its obligations under
  1. paragraph 16 and schedule D of that order.
  1. Once the boundaries of a particular disclosure
  1. obligation have been set in that way, it is not right to
  1. draw inferences against a party from choosing not to go
  1. beyond those obligations. It has, by definition,
  1. fulfilled its obligations. If Mr Stroilov wanted to

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L15/90/36

July 11, 2016 Day 46

 

  1. invite my Lord to draw inferences from a failure to go
  1. beyond a disclosure obligation, then a further order
  1. should have been applied for and there could have been
  1. an argument about it and the Bank then would have known
  1. whether it ought or ought not to do anything else.
  1. But what you can’t do, we say, is make a disclosure
  1. application, lose it in part, and then say that because
  1. the other party did not go beyond what they had to do
  1. under the order that was made ‐‐ in other words didn’t
  1. carry out the stuff that they succeeded on and you
  1. lost ‐‐ what you can’t then say is an inference should
  1. be drawn about that.
  1. My Lord, in relation to disclosure, you probably
  1. have the references, but Mr McGregor dealt with what the
  1. Bank did in a series of witness statements, and in
  1. particular in relation to the September order and the
  1. searches that followed it, Mr McGregor’s fifth statement
  1. is at {H2/32/1}, Mr McGregor’s sixth statement is at
  1. {H2/33/1}, he sets out there all the details of the
  1. searches that were undertaken, the search terms that
  1. were included, the reasons for those. There was also,
  1. my Lord may remember, a further debate about those
  1. search terms and in the end my Lord decided that others
  1. did not have to be added.
  1. In the end, my Lord may remember that the Bank also

141

  1. added the search term «Renord», having completed all the
  1. other searches, Mr Stroilov of course saying that really
  1. should be a term, and that ended up producing no further
  1. disclosable documents. That was a letter at
  1. {I19/19/51}. So we do say the Bank had reached the end
  1. of any sensible disclosure process.
  1. There’s also Mr McGregor’s seventh statement, for
  1. completeness, which is {H2/35/1}, which sets out the
  1. fruits of the letters written under my Lord’s order, the
  1. schedule D letters.
  1. I have summarised the points, really, already, but
  1. there was an obvious proportionality point here, as
  1. explained by Mr McGregor, and the efforts that had
  1. already been made; and, as with any litigation on this
  1. scale, it was a question of getting the balance right
  1. and bearing in mind the fruits of the various searches
  1. and the cost of them, and that was the boundary my Lord
  1. drew and that the Bank stuck to.
  1. My Lord, on the forgery case, I think there is very
  1. little I want to say, save that on Friday Mr Stroilov
  1. propounded what seemed to be slightly new theories about
  1. it that hadn’t really been advanced or put before.
  1. We say there is no basis for them, and we still don’t
  1. understand what is really alleged to have happened or
  1. who is alleged to have forged what or when. It has
  1. never been suggested who it was that has actually
  1. committed the huge number of forgeries or who is even,
  1. in terms of the individuals, said to have known about
  1. them.
  1. The theories seem to be: well, nothing happened
  1. until December 2008 but, amongst other things ‐‐ and we
  1. rely on everything we have put in our written closing ‐‐
  1. that is entirely inconsistent with Mrs Arkhangelskaya
  1. having signed the first Onega loan spousal consent,
  1. which is dated from back in the middle of 2006, and on
  1. which the experts are agreed there is very strong
  1. evidence it was her signature. In a sense, that brings
  1. the whole house of cards crashing down.
  1. But it is not just that: there’s also the OMG
  1. internal debt schedules which refer to the guarantees,
  1. and they predate that period. We have dealt with those
  1. in our written closing at paragraphs 81 and following.
  1. One also has to remember that there are direct debit
  1. agreements with the other banks for the Scan guarantees,
  1. and they are completely inconsistent with the idea that
  1. the Scan guarantees were only drawn up and either
  1. backdated, or forged, or both, in December 2008.
  1. We have dealt with these in our written closing at
  1. paragraphs 99 and following {AA3&4/14/68}, and the
  1. various documents are referred to as we discuss each

143

  1. loan, starting at paragraph 89 {AA3&4/14/56}. But they
  1. were, my Lord, remember, contracts which referred to
  1. the Scan guarantees and were signed not only by the
  1. Bank of St Petersburg and Mr Arkhangelsky, but also by
  1. various third party banks at which Scan Insurance held
  1. accounts, and there is simply no explanation for those
  1. save that they were in support of valid Scan guarantees
  1. that had been entered into at the time they were made,
  1. inconsistent with this all just happening
  1. in December 2008.
  1. As a last point on this, there was a point that is
  1. sought to be made on the basis of Ms Volodina’s evidence
  1. in his witness statement. Mr Stroilov relied on her
  1. paragraph 63 {B1/5/13}.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: We say that is not fair and doesn’t work. It is
  1. not an obvious reading of her witness statement,
  1. particularly when one considers earlier paragraphs where
  1. she gave evidence of the need for guarantees. I think
  1. I pointed out paragraphs 7, 10 and 15, but if this was
  1. ever a point that was going to be run, and this reading
  1. put on paragraph 63 of Ms Volodina’s witness statement,
  1. it obviously had to be put to her and it was not. So,
  1. my Lord, that is, we say, an end of that.
  1. A few brief points, I think I am making just about

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L15/90/37

July 11, 2016 Day 46

 

  1. sufficient progress, my Lord, on Mr Stroilov’s
  1. submissions about connections with Renord. An emphasis
  1. is placed on Mr Maleev and his role in what is said to
  1. be a nominee for Mr Savelyev. I think quite a lot of
  1. emphasis was placed on Mr Maleev and what was said to be
  1. a sort of habitual role as a nominee, but actually
  1. he wasn’t a nominee for Mr Savelyev; he was a director
  1. general of a number of companies, about which
  1. Mr Savelyev was asked questions, and we have listed some
  1. of those in our submissions at paragraph 671(2)
  1. {AA3&4/14/368}.
  1. But that is different: he was not, in fact,
  1. a nominee for Mr Savelyev. It was only put to
  1. Mr Savelyev, as far as we are aware, that Mr Maleev was
  1. his nominee, meaning holding shares on his behalf, in
  1. relation to a company called Teknopark, said to be
  1. a minor shareholding, that was {Day27/102:1}, and
  1. Mr Savelyev denied that he was holding it as his
  1. nominee, and he went on to point out the difference
  1. between a director general who is working in
  1. an administrative capacity and somebody who was
  1. a nominee. He said Mr Maleev did fulfil the role of
  1. director general because he was good at keeping the
  1. documents in order, paying the tax and so on and so
  1. forth, that was {Day27/107:1} but he was not a nominee.
  1. We have summarised the points at paragraph 877 of
  1. our closing {AA3&4/14/466} and, as I think Mr Stroilov
  1. accepted the other day, I noted down {Day44/91/16} and
  1. {Day44/92/7}. They don’t actually challenge that they
  1. were advertised according to the rules, but we have
  1. given references in our written closing to the adverts
  1. for the Western Terminal auction at footnote 2654
  1. {AA3&4/14/493} and for the auction for the Pravdy Street
  1. assets at footnotes 2724 and 2725 {AA3&4/14/504}
  1. We also rely on Ms Mironova’s evidence which we have
  1. cited at footnote 2511 {AA3&4/14/466} where she said the
  1. bailiffs had to publish the information in the media and
  1. advertise, et cetera, and also her evidence at
  1. {Day33/120:1} to {Day33/121:1} where she explained that
  1. the Bank took all possible steps and measure to
  1. advertise the auction of Western Terminal as widely as
  1. possible.
  1. She also said in relation to the Scan Onega land ‐‐
  1. MR JUSTICE HILDYARD: She gives no examples there.
  1. MR BIRT: My Lord, there is not a document reference I can
  1. give you for that.
  1. She also said at {Day34/29:1} and we have cited this
  1. in our closing at paragraph 944 {AA3&4/14/500} in
  1. relation to the Scan Onega land auction, that that was
  1. published in various media outlets and promotional

145 147

  1. My Lord also asked a question, and I owe
  1. a reference, for whether Ms Mironova’s shareholding
  1. arrangements are reflected in various of the Bank’s
  1. public documents.
  1. MR JUSTICE HILDYARD: Oh yes.
  1. MR BIRT: And the reference, I don’t suggest we look it up
  1. now, but in the 2014 annual report there are some
  1. references at {D210/3064/74} and {D210/3064/86}.
  1. My Lord, also ‐‐
  1. MR JUSTICE HILDYARD: Which was the first? D210?
  1. MR BIRT: I’m sorry {D210/3064/74} and {D210/3064/86}
  1. My Lord also asked me to revert on things like
  1. advertisements for the auctions and efforts that have
  1. been made to sell the properties. I’ve already
  1. referred, I think, to the various bits of the witness
  1. evidence saying that the auction rules were complied
  1. with and, indeed, nobody was challenged on the basis
  1. that they had been complied with, including that the
  1. appropriate adverts had been placed, and it repeats my
  1. earlier submission to say that there is no reason to
  1. believe that the bailiffs wouldn’t have ensured that
  1. they had been advertised properly, or they would have
  1. let the auctions go ahead without the proper adverts.
  1. So one has to assume the rules, including those as to
  1. advertising, were followed.
  1. publications. As before, my Lord, I do not have
  1. a document reference for that day.
  1. Various references in our written closing to
  1. the efforts to sell the properties, and they include
  1. evidence given by Mrs Yatvetsky, which we refer to at
  1. paragraphs 161, 916, and 917 {AA3&4/14/103}
  1. {AA3&4/14/485} and Ms Mironova at paragraph 924.
  1. I have already made, I think, submissions along the
  1. lines that one has to bear in mind that these were
  1. properties that the Bank was entitled to sell at auction
  1. in satisfaction of the pledges which were there as
  1. security for debts which had not been repaid.
  1. An auction in those circumstances does have the
  1. character of a forced sale. It is likely to raise less
  1. than a sale where there is a seller who does not have to
  1. sell unless he likes the price. One has to keep that in
  1. mind.
  1. There is no obligation under the rules for the Bank
  1. to conduct a lengthy marketing exercise. Yes, efforts
  1. were made to find buyers. That is the witness evidence
  1. that I have referred to: they were not successful. So
  1. the assets had to be realised through the enforcement
  1. process in what was, ultimately, the only way that the
  1. Bank was going to see any money out of their security,
  1. and I made submissions earlier as to what else were they

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L15/90/38

July 11, 2016 Day 46

 

  1. supposed to do.
  1. My Lord, I think you also asked for what the rules
  1. were. I was going to give one example that the experts
  1. referred to, I don’t suggest we go to it now, but it is
  1. Article 57.3 of the law on mortgages, which is at
  1. {E2&E3/12/329}, and it has to be advertised under those
  1. rules in a periodical which is an official source of
  1. information and on the internet under a government
  1. procedure. We have seen examples ‐‐ some of
  1. the examples that I gave earlier, I think the Pravdy
  1. Street properties were advertised for sale in
  1. Kommersant, which is one of the publications that
  1. my Lord has been taken to. There were a number of
  1. articles and I think it is a publication with quite wide
  1. circulation.
  1. Mr Eschwege reminds me, it is the auction organisers
  1. who are responsible for making sure that the right
  1. adverts are placed in the right place at the right time.
  1. My Lord also asked for a reference as to where we
  1. deal in our written closing with Mr Savelyev’s BVI
  1. witness statement. We have dealt with that.
  1. MR JUSTICE HILDYARD: Have you given me within that ‐‐ I’m
  1. sorry, you are going quite a pace, I don’t criticise you
  1. for that ‐‐ have you given me within that whether there
  1. is any evidence of any ‐‐ any documentary evidence of

149

  1. any approaches to ROK Prichaly or its holding company
  1. with respect to sales at Onega?
  1. MR BIRT: My Lord, as far as I know, there is not in
  1. the trial bundle such documentary material. I have
  1. given you the references to what the witnesses say,
  1. albeit I’m not saying that if you look there you will
  1. find them referring to documents giving the references
  1. to the witness evidence.
  1. MR JUSTICE HILDYARD: I think my interest was that there was
  1. an obvious purchaser, possibly the only potential
  1. purchaser, so I was interested to know what feelers had
  1. been put out by the Bank, but perhaps that is
  1. undocumented.
  1. MR BIRT: My Lord, it is undocumented, yes.
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: And I don’t think that specific question was asked
  1. of the witnesses either in cross‐examination or
  1. re‐examination, my Lord.
  1. I was going to give my Lord the reference, we had
  1. dealt with Mr Savelyev’s BVI evidence. You asked me for
  1. that reference at some point, we dealt with it briefly
  1. at paragraph 304(6) of our closing {AA3&4/14/181} where
  1. we also give the references to where he dealt with it in
  1. his witness statement, which is paragraphs 48 and 49,
  1. and in the transcript of {Day29/41:1} to {Day29/42:1}
  1. The gist of it was that the trial statement was put
  1. together with the benefit of a more detailed review of
  1. the documents and with the opportunity of the statement
  1. to make clear what Mr Savelyev’s recollection was as
  1. opposed to something being done in a rush in response to
  1. the freezing order, which is the circumstances in which
  1. the BVI statement was put in. My Lord, I think that
  1. is ‐‐ the explanation is in Mr Savelyev’s evidence in
  1. those two references.
  1. I think this may be the last point, subject to
  1. anything else being handed up to me. Mr Stroilov, at
  1. the end of his submissions, made a point about the
  1. defendants’ disclosure, and they said that everything
  1. was answered in the annex to the disclosure statement
  1. that he referred to at {P1/10/1}, which was
  1. in October 2015.
  1. In fact, we say that does not answer everything, in
  1. fact, it raises more questions than it answered. We
  1. wrote a letter about that on 19 November that can be
  1. found at {I19/19/9} and that was explaining why that
  1. annex was not satisfactory and trying to follow up on
  1. some of the points without going into the detail.
  1. My Lord may remember, there were issues about what he
  1. had done with his laptop that he said had been ‐‐ there
  1. were inconsistent statements, let’s just leave it at

151

  1. that for now, about what had happened to it. There were
  1. memory sticks he said he had brought from Russia,
  1. containing documents, there were all sorts of things.
  1. So that was our letter then. We never got
  1. a response to that. There was a short summary of some
  1. of the ‐‐
  1. MR JUSTICE HILDYARD: That’s at I19/9, is it?
  1. MR BIRT: {I19/19/9}, it is one of those slightly difficult
  1. to read references if you haven’t got your teeth in.
  1. There is a short summary of some of the key points
  1. in our opening at paragraphs 755 to 756, and again
  1. a short summary in our closing at 1186 to 1188
  1. {AA3&4/14/623} where we also refer to Mr Nazarov’s
  1. documents, which my Lord will well remember, and there
  1. was always going to be a proposal for Mr Stroilov as to
  1. how those were to be reviewed, and my Lord gave a fair
  1. amount of licence to him about when he did that, and the
  1. position remains that we never had that proposal and as
  1. far as we know, they have never been reviewed, my Lord.
  1. Can I just check whether there is anything else that
  1. I ought to say to my Lord? (Pause).
  1. My Lord, I am sorry that has been a slight gallop
  1. through, I have done my best to stick to the allotted
  1. time, but obviously I’m still here if my Lord wants to
  1. pick up on any of those points or go back into them.

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L15/90/39

July 11, 2016 Day 46

 

  1. Ah yes, sorry, there was one more point, I knew
  1. there would be one. My Lord asked where I dealt with
  1. the Morskoy Bank and the change of directors chronology.
  1. That was discussed on {Day44/53:1} to {Day44/55:1}.
  1. That’s when I set out my position on that.
  1. Unless there is anything else I can now help you
  1. with, my Lord, those are what we say.
  1. MR JUSTICE HILDYARD: At various points in your closing
  1. submissions you have made, or at least you have stated,
  1. that there were points now relied on not put to
  1. the witnesses. I shall have to comb through those, but
  1. do you say that the same rigour applies notwithstanding
  1. the somewhat different array of forces on each side of
  1. the court?
  1. MR BIRT: My Lord, I wasn’t trying to make, if you like,
  1. a technical not‐put point in a general sense, but ‐‐ and
  1. it may be that it carries a different character on the
  1. different occasions when I made it.
  1. I think the thrust of my points when I was saying
  1. that was really if there was a coherent case here it
  1. would have been suggested to this witness or that
  1. witness or the other witness.
  1. The point I came to at the end, I think, is
  1. potentially in a slightly different category, where
  1. Mr Stroilov is saying: read paragraph 63 of

153

  1. Ms Volodina’s witness statement, it means X, when there
  1. would at least be a debate about that. In my
  1. submission, one should really pause before accepting or
  1. going much further with that submission, because it is
  1. difficult to see why it would be fair to accept that
  1. submission without having heard the witness on it,
  1. my Lord.
  1. To complete that, I’m sorry to interrupt my Lord,
  1. that is, we say, something that arises in relation to
  1. the forgery case where, really, we say one can almost
  1. disregard it because the evidence is so one way,
  1. my Lord.
  1. MR JUSTICE HILDYARD: At some point my feeble recollection
  1. is that though Mr Lord cavilled against it I rather
  1. indicated that given the disparity in force of
  1. representation that if there were points on which the
  1. not‐put argument was going to be made, I would rather
  1. like them identified.
  1. MR BIRT: My Lord, which is why ‐‐ I’m not disagreeing that
  1. my Lord made that known. My recollection is that you
  1. asked Mr Lord to keep an eye on questions that might
  1. have been rolled up or ambiguous to avoid us having to
  1. pore over the transcript. My Lord may be right. As
  1. I say, I’m not trying to make a technical not‐put point.
  1. MR JUSTICE HILDYARD: No.
  1. MR BIRT: And, indeed, I don’t think any of the points
  1. I have made have really been: he can’t advance that
  1. because it is not put, rather than: this doesn’t really
  1. appear to have been the case that has been suggested.
  1. There is the forensic point, really, which is the
  1. meandering case theory, in a sense. You can’t assume
  1. a witness wouldn’t ‐‐ in a sense it comes to weighing
  1. the evidence as well. It is difficult for Mr Stroilov
  1. to say: ah, so‐and‐so didn’t say anything about it if he
  1. wasn’t asked about it. I’m not saying those sorts of
  1. points cannot be pursued to some extent but one has to
  1. sometimes weigh the witnesses’ evidence in the context
  1. of what they were asked.
  1. Then the Ms Volodina point may be slightly
  1. different, because it is quite difficult for us to stand
  1. up and say when she is giving evidence: you haven’t put
  1. that, when it is not actually part of their case. It
  1. only became part of Mr Stroilov’s case when he stood up
  1. to make the point last week. So I’m not sure we can
  1. really be expected to police a case that is not being
  1. met, my Lord.
  1. As I say, in the main we are not taking a technical
  1. rigour: you haven’t put it, you can’t advance it, but
  1. that’s not to say there is no point at all when one is
  1. trying to work out what the witnesses’ evidence was, and

155

  1. whether the case theory actually works or is coherent
  1. because of course, the case is being put on the
  1. instructions of Mr Arkhangelsky and certainly on matters
  1. where one would expect him to have some input, one would
  1. expect that to relate to his evidence at least to some
  1. extent, my Lord.
  1. MR STROILOV: In case it assists, actually my recollection
  1. is as my learned friend’s is, that your discussion with
  1. Mr Lord concerned rolled‐up questions rather than
  1. not‐put points.
  1. MR JUSTICE HILDYARD: That is very fair of you. I must have
  1. a misrecollection. Thank you.
  1. You seek declaratory relief. Is there anything you
  1. wish to add to that, or may I take it that I simply have
  1. to read with care the closing submissions again?
  1. It is unusual. I can understand that a bank or many
  1. claimants wish to have such vindication, but the
  1. ordinary rule is you either win or you lose, sort of
  1. thing?
  1. MR BIRT: My Lord, yes, I don’t think there is anything in
  1. detail I want to add to what’s in part 13 of our written
  1. closing. My Lord knows the gist of what is sought is,
  1. a declaration that the claimants haven’t committed the
  1. wrongs that Mr Arkhangelsky has been alleging for many
  1. years.

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L15/90/40

July 11, 2016 Day 46

 

  1. We summarise there, we have given the citation to
  1. the case, the FSA v Rourke case, which can be found
  1. behind {AUTH1/2/8}, and what Mr Justice Neuberger, as he
  1. then was, said which is the court has an unfettered
  1. discretion and the question is whether it is an
  1. appropriate situation to make an order for
  1. a declaration, taking into account justice for the
  1. claimant and the defendants, whether it would serve
  1. a useful purpose, or whether there is another special
  1. reason.
  1. We have sort of summarised the reasons there, but
  1. effectively one can step back and say: these allegations
  1. have been made against the Bank and against Mr Savelyev
  1. over a long period of time in different jurisdictions.
  1. As we would characterise it, the war has been waged by
  1. Mr Arkhangelsky in various courts, and one hesitates to
  1. say: but is there anything to suggest that he does
  1. intend to stop here? It has been waged not only in
  1. the courts, but also in the press and on the internet.
  1. Again, that is a campaign that he has not said he is
  1. going to stop. We say it has been an all out attempt to
  1. stigmatise the name of the Bank and, indeed, personally,
  1. the name of Mr Savelyev. Indeed we would say it has
  1. become something of a vendetta. The allegations are
  1. serious ones and as we would say there is no evidential
  1. earlier. If there is a reference to give my Lord, could
  1. I send that in ‐‐
  1. MR JUSTICE HILDYARD: Yes.
  1. MR BIRT: ‐‐ because I don’t have it to hand?
  1. Housekeeping
  1. MR JUSTICE HILDYARD: I have photographs to bring back the
  1. witnesses to me, as I wrestle with the case. I’m not
  1. sure I have a photograph of Mr Turetsky. Perhaps you
  1. could provide me one.
  1. MR BIRT: My Lord, I’m sorry about that. We will seek to
  1. remedy that.
  1. MR JUSTICE HILDYARD: That’s all right. And so far as the
  1. defendants are concerned, I think I remember Mr and
  1. Mrs Arkhangelsky, and I do remember Mr Bromley‐Martin.
  1. MR STROILOV: Is it unnecessary, my Lord? I am afraid
  1. I forgot to take care of that.
  1. MR JUSTICE HILDYARD: I think I can remember. There were
  1. fewer.
  1. MR STROILOV: I’m grateful.
  1. MR JUSTICE HILDYARD: Good. Well, thank you both very much
  1. indeed. As I said, I have reserved the right to get
  1. back to you and, if necessary, reconvene. Obviously
  1. I will do everything I can to avoid that.
  1. I should say that it is always a rather sort of
  1. weird moment when you hand over the case to the judge,

157 159

  1. basis for them, the Bank has been forced to defend
  1. itself both inside and out of court against the
  1. allegations at great cost and as my Lord knows, has even
  1. paid effectively for both sides of this trial in some
  1. respects.
  1. My Lord has in mind as well the various press
  1. releases and media interviews in which the allegations
  1. have been propagated outside the courts. We have
  1. selected some for inclusion at paragraph 1184
  1. {AA3&4/14/621} and in fact, Mr Arkhangelsky has not
  1. shied away from publicity, he has rather courted
  1. publicity during the course of the trial. We say there
  1. can’t really be a complaint that the court sets clear in
  1. the record what the position is, and in terms of
  1. injustice to Mr Arkhangelsky, well, there obviously
  1. wouldn’t be, we say, if the declarations were sought but
  1. justice to the claimants given the history and the
  1. extent to which the allegations have been broadcast,
  1. my Lord. I think that is a rough summary of what is in
  1. the written document and our submissions on the point.
  1. MR JUSTICE HILDYARD: Did you want to say anything about the
  1. suggestion that you had improperly used information
  1. derived from the freezing order in these proceedings?
  1. MR BIRT: My Lord, my recollection is that we had this
  1. debate in court and I couldn’t find the reference
  1. and on this particular context it feels even more
  1. daunting than usual. There is a great volume of
  1. material, some considerable part of which has actually
  1. been referred to, which is not invariable, and it will
  1. take me, inevitably, some considerable time to get back
  1. to you, quite apart from the intervention of holidays,
  1. which I don’t intend entirely to ignore.
  1. As I will say, I’m extremely indebted to everyone,
  1. to you, Mr Birt, for taking over from Mr Lord whilst he
  1. is elsewhere in the building, but also to your entire
  1. team, Mr Eschwege and all the solicitors. I know the
  1. ferocious amount of work which is involved in any case,
  1. but in a case like this it must have been really quite
  1. staggering.
  1. MR BIRT: Thank you, my Lord.
  1. MR JUSTICE HILDYARD: And to Mr Stroilov, who has had to
  1. take on a very, very considerable burden, and whose
  1. conduct I think has been notable and much appreciated,
  1. and I hope that Mr and Mrs Arkhangelsky will see what
  1. I have said in this regard and have also been kept
  1. abreast of the proceedings over the last four days,
  1. which have been very useful to me. So thank you very
  1. much.
  1. The other thing is I do think that the transcription
  1. service and the whole Magnum product has been quite

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A

  

A‐K‐O‐R‐T (1) 38:1 A2/11/42 (1) 74:4

AA (1) 105:20

AA2/12/1 (1) 105:23

AA3&4/14/103 (1)

148:6

AA3&4/14/138 (1)

85:14

AA3&4/14/181 (1)

150:22

AA3&4/14/20 (1)

107:20

AA3&4/14/286 (1)

127:21

AA3&4/14/32 (1)

85:21

AA3&4/14/368 (1)

145:11

AA3&4/14/384 (1)

136:3

AA3&4/14/432 (1)

87:8

AA3&4/14/460 (1)

90:19

AA3&4/14/464 (1)

90:12

AA3&4/14/466 (3)

91:11 147:2,11

AA3&4/14/468 (1)

89:24

AA3&4/14/480 (1)

13:23

AA3&4/14/485 (1)

148:7

AA3&4/14/493 (1)

147:8

AA3&4/14/500 (1)

147:23

AA3&4/14/504 (1)

147:9

AA3&4/14/507 (1)

108:17

AA3&4/14/508 (2)

89:2 108:24

AA3&4/14/522 (1)

121:8

AA3&4/14/525 (2)

122:11 123:14

AA3&4/14/527 (1)

123:16

AA3&4/14/528 (3)

127:18,24 131:2

AA3&4/14/530 (1)

130:12

AA3&4/14/531 (2)

127:21 130:12

AA3&4/14/532 (1)

122:23

AA3&4/14/552 (1)

118:12

AA3&4/14/56 (1)

144:1

AA3&4/14/580 (1)

106:21

AA3&4/14/583 (1)

108:1

AA3&4/14/621 (1)

158:10

AA3&4/14/623 (1)

152:13

AA3&4/14/68 (1)

143:24

able (15) 7:22 30:17 49:1 55:3 64:24 71:16 80:9,17,20 93:23 95:3 110:16 121:20 162:2,17

abreast (1) 160:21 absent (2) 92:11 95:15

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162:23 average (1) 44:23 avoid (4) 20:16,17

154:22 159:23 avoided (2) 51:22

54:14

avoids (2) 20:10,10 aware (1) 145:14 awful (1) 67:13

 

B

 

B1/5/13 (1) 144:14 B2/16/2 (1) 49:17 back (45) 4:4 27:1,21 31:25 40:2 67:14 71:8,23 80:22

83:13 87:1 88:13 88:24,25 89:3,4 96:1 97:13 102:2,4 104:10 106:1 109:2 109:13,22 112:5 115:20 118:1 120:25 125:4 128:8 129:23 130:22 131:8,22 132:6,15 133:6 143:10 152:25 157:12 159:6,22 160:5 161:11

backdated (2) 25:17 143:22

background (1) 46:13 backtrack (1) 89:17 bad (3) 56:2 77:14,17 bailiffs (17) 89:6,14

90:1,10 92:4,10,14 92:16 93:4,8,20,22 94:23 95:3 96:24 146:21 147:12

balance (8) 33:19 52:2 54:18 80:11 111:9 112:8,17 142:15

Balandin (1) 33:24 Baltic (2) 33:14 74:7 bandstanding (1)

77:24

bank (172) 1:9 2:9 4:18 5:12,18,23 6:10 7:9 8:2,4,25 9:5,8,21 10:7,13,24 11:15,16 12:10,11 12:21,25 13:3,14 13:19,21,22 14:17 15:2,9,13,13,17,18 16:4,17,22 18:13 19:13 22:20 23:21 25:19 29:9,10,19 30:1,6,12 32:7,14 33:3 34:13,24 35:2 35:5,9,19,22 36:4,7 36:15 38:14 39:4 41:3,10,12 42:7,22 45:12 46:11 49:10 49:12,12 50:10 61:22 68:5 70:17 71:3,11,15 73:3 74:10 75:2,6 76:21 76:23 77:6,10,14 77:16,17 84:19 87:5,15,17,21 88:19 91:15,22 94:15 96:6,10,11 96:13 97:11,13 99:21 100:8,13,15 100:20 102:10 104:13,16 105:16 106:3 109:3,9,10 109:15 110:4,8,14 111:9 112:8 113:15 113:23,25 114:5,5

pastedGraphic_43.png

 

54:10,10,19 55:2,5 57:12,24 62:3 67:10 70:7 85:6 122:15 130:8

businesses (3) 40:21

54:16 133:15

businessmen (1)

57:24 button (1) 94:19 buy (1) 101:17 buyers (2) 102:19

148:20 buying (1) 98:13

BVI (11) 72:5 79:1 86:3,11 128:23 129:5,11,15 149:20 150:20 151:7

 

C

 

C1/1/27 (1) 42:12 C1/1/29 (1) 42:17 calculation (4) 115:23

116:18,22 118:22

calculations (2)

115:24 116:15 call (6) 69:13 70:18

71:16 74:18 77:25 96:18

called (10) 6:24,25 31:22 92:23,24 126:1,13 136:12 137:18 145:16

calls (1) 21:25 campaign (4) 31:1

79:7,8 157:20 cancelled (1) 46:16 candid (3) 39:4 65:18

81:4 candour (1) 58:5 cap (1) 100:14

capacity (3) 89:9 92:5 145:21

capital (5) 44:25 73:15 77:14 87:23 135:12

capture (1) 33:6 cards (2) 101:11

143:13

care (3) 42:24 156:15 159:16

carefully (1) 63:16 carpet (1) 62:15 carries (1) 153:17 carry (1) 141:10 cartoon (1) 79:18 cartoons (2) 79:16,19 carved (1) 129:24 cascade (2) 7:4 9:12 case (93) 1:9,12 5:12

5:15 6:7,12 8:4,10 9:19,21 10:1 14:18 14:21,22 15:6,10 15:12,13,15 16:14 17:1 23:13,14 28:16 33:15 35:18 35:25 36:18 41:19 59:2 71:19 72:8 74:20 77:2 79:9 81:24,25 84:8 89:11,12 92:8 94:1 97:15 98:8,9 100:3 100:25 101:2,3 111:15 112:4 115:25 118:6 121:10 122:4 123:20 126:1,8,13 126:18,23,23 127:4 131:4 132:1,7 133:22,24 134:15 134:16,19,24 137:8 138:16 139:19,22

142:19 153:20 154:10 155:4,6,17 155:18,20 156:1,2 156:7 157:2,2 159:7,25 160:12,13

cases (4) 1:10 2:20 27:15 93:9

cash (1) 117:9 categorical (1) 50:7 categories (1) 66:3 category (1) 153:24 caught (1) 67:12 causation (1) 124:8 cause (1) 130:18 caused (4) 5:17 14:8

28:19 54:7 cavilled (1) 154:14 cent (10) 45:4,6 90:21

93:10 103:8,9 112:15,16,16 136:11

central (5) 5:15 31:7,9

31:10 162:13

centre (4) 36:20,21

48:1 116:25 centred (1) 128:20 certain (5) 67:21 95:8

95:8 115:24 119:25 certainly (10) 20:25

80:14 86:1 89:22 90:9 104:6 114:23 117:24 123:2 156:3

cetera (1) 147:13 challenge (3) 118:6,11

147:4 challenged (2) 118:4

146:17 chance (1) 109:20 change (3) 30:19

117:19 153:3 changed (5) 71:4 74:9

74:12 105:20 119:22

changes (1) 117:1 channelling (1) 110:4 character (2) 148:14

153:17

characterisation (1)

83:20 characterise (1)

157:15 characterised (1)

121:16 characterises (1)

126:19

charges (4) 23:18,21 23:24,25

charter (1) 73:15 chartering (1) 42:23 charters (2) 85:18,20 chased (1) 70:20 chasing (2) 70:23 71:2 check (4) 11:2 42:9

93:21 152:20

Chichoyan (1) 124:1 chief (1) 102:14 choice (1) 52:8 chooses (1) 94:17 choosing (1) 140:23 chronology (6) 7:6

15:5 114:2 120:18 124:24 153:3

circle (2) 20:20 99:21 circular (1) 115:9 circulation (2) 149:15

161:20

circumstances (9)

30:13 39:16 61:11 75:13 121:23 128:21 148:13

151:6 162:16 circumvent (1) 122:9 citation (2) 121:12

157:1

cite (1) 89:12

cited (5) 90:17 91:13 107:23 147:11,22 City (3) 36:20,21 48:1 civil (6) 2:20 5:11 13:9

13:13 14:11 25:1 claim (72) 3:5,18,23 3:23 10:25 11:1,3 11:11,13,14 12:12 12:25 13:2,3,9,10

13:13,22 14:11 25:5 29:1 48:4,22 50:14 54:3,5,9,19 67:12,19 68:4 70:6 70:8,12 89:2 95:12 106:24,24 107:2,6 107:6,6 112:10 115:14 121:25 122:8,15,16,19,23 123:1,2,11 126:10 126:22 127:1 128:1 128:2,13,15 129:8 129:9,11,23,25 130:2,5,7,8,10 131:1,2

claimable (1) 124:20 claimant (3) 121:15 121:17 157:8 claimants (20) 1:13 2:4 22:13 30:21

35:24 39:17 49:4 55:17 74:25 75:15 78:17 85:5 137:23 138:3,5,6,9 156:17 156:23 158:17

claimants’ (12) 2:11 7:6 30:20 38:17 52:22 73:11 74:25 77:21 89:14 137:10 137:13,25

claimed (2) 124:14 130:15

claims (8) 5:11 25:1 51:19 88:12 121:18 122:14 128:23 129:5

clarity (1) 68:9 class (1) 55:6 classical (1) 111:23 clause (1) 88:8 cleaner (1) 97:16 clear (15) 5:13 16:9

22:20 35:23 53:16 56:19 57:13 80:6 98:7 104:4 118:3 131:21 133:3 151:4 158:13

cleared (2) 71:9 162:19

clearly (22) 6:7 7:24 17:13,15 18:4,21 20:5,11 22:6,9 23:14 26:1 32:17 32:22 38:12 54:6 59:25 67:17 70:4 71:14,25 134:3

clerk (2) 81:14 82:1 client (1) 60:24 close (6) 35:10 36:3

51:19 100:23 103:10 111:4 closely (1) 34:24 closer (1) 104:3

closest (2) 119:17,19 closet (2) 67:1 83:23 closing (52) 1:3 11:6

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dollars (2) 63:15 105:19

double (2) 124:6,7 doubt (4) 80:21 98:14

99:16 126:25 downward (1) 99:1

Dr (7) 48:18 55:14 57:19 60:8 92:13 94:9 121:8

draft (1) 140:11 drafted (1) 23:4 draw (5) 1:16 75:8

78:14 140:23 141:1 drawn (3) 111:12

141:12 143:21 drew (2) 63:24 142:18 dried (1) 102:11 driving (1) 114:5 dropped (1) 102:18 due (9) 26:12 46:21

58:21,21 60:25 83:24 84:12 99:6 108:5

dusted (1) 81:2 duties (1) 106:8 duty (4) 90:4,7,11

91:1

 

E

 

e‐mail (3) 47:20 82:1 120:11

E2&E3/12/329 (1)

149:6

E2/8/28 (1) 90:23 earlier (21) 11:12,23

32:15 53:6 82:19 82:22 83:9 108:12 109:13 116:12 120:6 128:13 129:20 132:9 133:1 144:18 146:20 148:25 149:10 159:1 162:14

earliest (1) 73:25 early (2) 102:12

108:25 easier (1) 39:3 easily (1) 162:3 easy (1) 56:23 EBRD (1) 65:14 echo (1) 161:5

economic (1) 33:12 effect (5) 9:12 46:15 63:19 67:12 81:19 effectively (9) 16:15 23:19 83:21 85:18

92:12 130:3,16 157:12 158:4

efforts (5) 99:3 142:13 146:13 148:4,19

either (22) 17:12 24:13 42:6 55:1 61:22 66:11 75:7 75:15 81:13,18 85:5 91:7,16,21 95:7 117:17 130:23 133:9 137:5 143:21 150:17 156:18

elaborating (1) 1:24 element (7) 10:25

15:24 29:4,5 31:7,9 31:10

elements (2) 8:17 31:18

elephant (1) 58:10 embark (1) 59:17 embarrassment (1)

57:5

embezzling (1) 133:10 emerge (1) 83:23

 

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fuller (2) 39:24 56:9 fully (4) 3:16 60:23,24

106:18 function (1) 92:25 funder (1) 73:13 funders (1) 65:10 funny (1) 28:13 further (34) 4:22

15:22 17:10 25:12 26:10,16 32:19 41:1,13,18,18 42:17 50:4 51:2 52:7,9,11 68:1 69:19 72:12 75:19 79:17 85:1 95:25 104:16 111:25 123:12 130:12,15 131:4 141:2,22 142:3 154:4

fussed (2) 80:24 99:21

 

G

 

G4/103.1/1 (1) 137:11

G4/103.1/32 (1)

138:14

G4/103.2/1 (1) 137:11 gallop (1) 152:22 galloping (1) 72:18 gap (4) 58:22,23 59:6

59:10

gaps (2) 59:12,13

Gatchina (1) 46:4 gateway (1) 62:4 Gavrilov (1) 20:8 general (27) 1:25 10:2

10:12,16 11:24 12:1,3,20 15:16 31:11,23 32:1,4 33:13 34:18 44:5 66:7 107:8 135:17 135:19 136:17,20 139:9 145:8,20,23 153:16

general’s (1) 13:3 generally (6) 41:15,16

79:5 84:23 104:15 123:9

generate (1) 115:14 generated (1) 116:17 genuine (2) 5:22 8:13 genuinely (1) 19:7 getting (13) 9:7 16:6

50:25 70:14,15 80:25 83:17 93:2 93:24 109:22 131:16 135:12 142:15

gift (1) 96:8

Giles (3) 126:8,15,19 gist (3) 92:13 151:1

156:22

give (32) 11:7 13:17 26:22 38:8 39:1 47:16 52:23 53:16 58:5,13 62:15 69:5 69:8 70:2 74:2,17 74:21 75:20,25 76:7 80:11 98:16 108:14,18 126:3 134:9 138:5 147:21 149:3 150:19,23 159:1

given (44) 2:23 8:6 9:17 13:7 15:19 19:10 35:17 36:17 36:18 39:13,24 43:23 49:6 50:9 56:24 70:17 74:23 77:24 82:24 83:5 102:6,20,21 104:23

 

105:9 107:14,18 108:24 110:13,20 111:1 121:1 122:9 134:25 136:2,13 147:6 148:5 149:22 149:24 150:5 154:15 157:1 158:17

gives (5) 13:16 34:5 46:13 73:19 147:19

giving (9) 20:19 21:14 28:17 76:12 82:23 83:1 102:15 150:7 155:16

glad (1) 115:21 Gladyshev (2) 92:13

94:9

Gladyshev’s (1) 121:8 glaring (1) 28:11 Globus (1) 72:22 glued (1) 82:4

go (38) 1:21 27:1 32:9 42:11,17 43:12 44:7,8,10 46:9 47:24 52:20 59:23 63:16 83:25 84:7 93:6 96:19 97:1,7 97:25 100:2 112:2 115:8 116:10 118:1 121:14 131:8 133:6 139:17 140:7,23 141:1,8 146:23 149:4 152:25 161:21

goes (14) 34:11 66:13 66:23 94:21 95:16 97:9 98:18 99:20 108:16 109:13 112:5 126:6,11 130:22

going (44) 33:2 41:5 52:24 58:13 69:2 69:11 72:10 81:4 82:10,15 83:1 87:14 89:4 94:19 97:5,6 99:1,25 102:4 104:10 105:13 106:18 107:5 115:20 117:10 118:13 120:12,25 121:4,7 127:14,24 131:6 132:11 144:21 148:24 149:3,23 150:19 151:22 152:15 154:4,17 157:21

GOM (10) 123:10,10 123:14,22,23 124:3 124:5 136:2,7,16

good (15) 1:4,5 2:5 37:2,19 39:22 49:13 69:22 79:23 82:13 110:11 120:1 126:15 145:23 159:20

goodness (1) 66:13 governing (1) 90:5 government (1) 149:8 Governor (4) 34:21

35:10,18,22

Gradually (1) 7:2 grant (3) 68:12 107:12

135:6 granted (2) 135:1

136:23 grass (1) 61:25

grateful (7) 13:24 52:18 78:14 159:19 161:4 162:12 163:1

great (4) 62:8 100:7 158:3 160:2

greater (2) 57:4 101:4 greatly (1) 1:25 grotesque (1) 27:18 ground (2) 41:2 128:4 grounded (2) 119:21

119:23

group (14) 8:1 32:2 40:8,12 41:9 64:12 64:23 88:1 112:11 123:9 138:16,18 139:13,21

guaranteed (1) 7:21 guarantees (6) 143:15 143:19,21 144:3,7

144:19 guess (1) 66:11

guidance (3) 61:19 122:1 127:7

Gunard (3) 101:15,18

102:1

 

H

 

H2/32/1 (1) 141:18 H2/33/1 (1) 141:19 H2/35/1 (1) 142:8 habitual (1) 145:6 half (5) 43:19 54:3 102:18 116:25

161:3

hand (10) 4:5 23:4 36:4,5 58:11,13 81:23 113:10 159:4 159:25

handed (2) 3:14 151:11

handled (1) 101:18 hands (7) 37:11 96:15

113:20 119:1,22 124:17,21

happen (4) 35:19 61:6

62:23 117:21 happened (15) 1:18

19:6,22 33:7 45:8 45:17 61:15,16,21 95:19 132:22 133:19 142:24 143:5 152:1

happening (2) 34:7 144:9

happens (8) 1:6 26:3 68:20 96:22,25 97:1 110:22 111:21

happy (3) 57:16 96:25 134:17

hard (4) 29:17 117:16 119:13,14

hardship (1) 129:21 harsh (1) 128:20 head (4) 31:23 32:5

130:11,13 hear (1) 115:21 heard (8) 5:6 22:13

28:16,18 40:14 54:6 127:15 154:6

hearing (3) 70:11 137:10 138:23 hearsay (1) 28:17 heavily (1) 86:12

heavy (2) 14:14 137:21

held (9) 60:20 84:6 86:4 114:12 115:1 138:12,15 140:1 144:5

help (2) 122:3 153:6 helped (1) 108:13 helpful (2) 38:9 51:12 helps (1) 26:23

Henry (1) 35:15 herring (2) 45:20

115:7

hesitates (1) 157:16 hidden (1) 77:17 high (3) 58:2 71:12

117:12

higher (7) 54:1 60:14 96:19 97:5 98:25 100:4 117:23

highest (1) 6:12 highlighted (1) 162:5 highly (1) 63:13 HILDYARD (211) 1:5

1:22 2:5 3:25 4:11 4:17,22 5:9 6:3,23 7:4,8,13,18 8:18 9:2,6,10,16 10:14 10:20,22,25 11:14 11:19 12:1,4,9,23 13:13,17,25 14:10 14:14,19,24 15:4,7 15:21 16:6,11,16 16:20,25 17:3,5 18:10,24 19:9,23 20:2,23 22:25 23:23 25:4 26:3,6 26:14,19,24 27:8 27:11,17,24 28:8 28:11,15,20 34:9 37:2,5,8,15,19 38:1 41:22,25 43:3,12 43:18 44:3,19 45:24 46:3,14,18 46:21,24 47:7,10 47:15,22 51:17 52:12,16 57:17 58:9 59:9,14,19 60:16 61:8,12,18 62:24 63:9,23 64:3 64:18,25 65:4,9,23 66:6,18,23 67:6,16 68:9,21 69:1,5,11 69:16,22 72:20 75:10,22 76:8,14 77:20 78:4,7,9,24 79:23 81:4,21 82:3 82:13,25 85:22 86:6,9,14,18,22 87:2 91:25 93:18 93:23 94:25 95:6 95:17,24 96:10,12 97:20 98:6 99:2,6 99:10 100:6,17 101:12 102:20 103:12,17,25 104:25 105:3,11,18 105:25 108:22 111:10,23 118:16 119:4,14 120:1,10 120:12,16,22 121:2 121:5 144:15 146:5 146:10 147:19 149:22 150:9,15 152:7 153:8 154:13 154:25 156:11 158:21 159:3,6,12 159:17,20 160:16 161:14 162:7,10,21 162:25

hint (2) 57:10 63:21 history (2) 67:20

158:17

hit (2) 125:15,16 hmm (1) 51:17

hold (3) 75:22 120:12 162:20

holder (1) 94:12 holding (4) 65:15

145:15,18 150:1

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Holdings (1) 42:13 hole (1) 85:21 holes (1) 41:17 holidays (1) 160:6 homebake (1) 119:6 honest (7) 8:9 22:22

52:4 60:8 98:16 115:22 116:1

honestly (2) 8:6 22:14 Hong (2) 126:12

127:11

hope (7) 1:20 31:4 45:13 72:18 80:17 82:9 160:19

hoped (1) 81:5 hour (1) 161:3 house (5) 92:19

101:10,24 106:5 143:13

housekeeping (4)

50:18,25 159:5 164:5

houses (1) 117:10 housing (1) 117:12 huge (3) 68:12 83:22

143:2 hugely (1) 117:2

hundreds (3) 58:13 62:16 63:15

hurry (1) 24:5 husband (2) 35:3 74:8 hypothesis (1) 51:21 hypothetical (1) 61:20

 

I

 

I19/19/51 (1) 142:5 I19/19/9 (2) 151:20

152:8

I19/9 (1) 152:7 I25/39/147 (1) 134:1 I25/39/184 (1) 134:2 I27/43/12 (1) 50:19 I27/43/13 (1) 51:6 I27/43/2 (1) 53:1 I27/43/20 (1) 51:16 I27/43/21 (1) 52:9 I27/43/22 (1) 52:11 I27/43/23 (1) 52:16 I28 (1) 120:11 I28/45/19 (1) 120:14 idea (5) 82:11 88:2

99:24 111:11 143:20

ideal (2) 61:16 119:23 idealistic (1) 57:11 ideally (1) 47:20 identified (2) 60:19

154:18 identifying (2) 1:23

51:12 idiosyncratic (1) 66:8 ignorance (2) 47:17

49:6

ignore (1) 160:7 II (1) 35:15

illegality (4) 62:10,20 69:12 80:1

imagine (3) 7:6 37:13 64:6

immediately (4) 33:12 42:14 81:8 85:1

impact (2) 81:22 125:23

imperfect (2) 17:13 63:7

implausible (1) 50:9 implemented (1)

72:14 import (1) 58:1

important (14) 8:5,12

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171

July 11, 2016 Day 46

 

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80:16,23,24 81:1 81:20 126:4

Lordship’s (7) 10:6 15:2 29:14 40:3 53:2 73:1 78:15

lose (2) 141:7 156:18 losing (1) 40:10

loss (36) 53:25 54:7 103:8,9 107:2 115:14 121:4,16,19 122:16 123:1,7,21 123:22 124:6,16,16 124:17,18,18,19,25 125:1,2,2,8,8,9,17 125:19,22 130:8,11 130:13,15,20

lost (4) 16:9 26:21 101:22 141:11 lot (17) 40:20 41:9 43:5 44:7 45:13

47:18 55:11 61:4 65:17 66:1 67:18 78:13 94:10 103:19 111:19 131:9 145:4

lots (2) 67:11,11 low (8) 22:14 28:2

97:20 102:5 103:1 103:22 110:17 111:18

lower (6) 97:3,7,19 100:7 117:4,23

lowest (1) 97:14

LPK (24) 54:4 87:19 88:12 89:2 106:14 106:25 107:1,7,9 108:11 109:2,3,11 109:12,17,22,25 110:5,24 111:5 112:12 113:21 136:8,19

lumbered (1) 115:19 lunch (3) 37:6 68:24

68:25 luncheon (2) 69:24

70:4

lunchtime (1) 80:19

 

M

 

Maggs’ (2) 91:13 92:13

Magnum (2) 160:25 161:7

main (4) 60:23 104:1 121:3 155:22 mainstream (1) 66:9 making (5) 15:8 76:5 113:16 144:25

149:17

Maleev (4) 145:3,5,14 145:22

Malysheva (13) 9:24 13:6 15:20 19:11 20:8,24 21:7,24 34:4 73:21 74:13 75:1,23

Malysheva’s (2) 18:9 24:23

management (1)

77:12 managers (1) 77:19 manipulating (1)

22:21 manipulation (1) 26:1 manoeuvring (1) 88:5

March (10) 9:4,5,9,10 10:8,22 12:10 19:12 70:18 71:6

marginally (1) 40:9 Marine (2) 112:11

123:9

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L15/90/49

172

July 11, 2016 Day 46

 

obligations (7) 8:2 38:15 139:15,17 140:19,24,25

observation (1) 85:3 observed (1) 162:1 obtained (3) 56:22 102:24 127:7 obtaining (2) 22:10

64:5

obvious (7) 59:20 70:12,14 114:24 142:12 144:17 150:10

obviously (44) 1:22 2:7 4:12 8:10 10:13 21:7,9,14 22:8 25:18 27:14 29:8 40:18 46:2 48:2 54:12 55:11,23 57:7 58:6 60:5 62:21 67:18 76:18 77:1 78:12 82:15 88:16,21 100:2 109:21 110:8 115:23 118:11 127:11 128:2 131:9 135:8 140:6 144:23 152:24 158:15 159:22 161:6

occasion (1) 53:12 occasions (3) 82:22 92:23 153:18 occurred (1) 130:5

occurs (1) 11:21 October (3) 105:6

136:13 151:16 odd (7) 28:1 33:23

38:23 86:14 97:22 119:11 134:23

offer (1) 36:7 offered (1) 138:21 office (3) 103:21,22

104:3 officer’s (1) 44:11

offices (4) 104:1,22 105:7,15

official (2) 31:22 149:7 officials (6) 31:20 35:9 35:11,16,20 92:17

offshore (1) 41:24 oh (7) 44:3 96:17,18 108:22 111:17 120:10 146:5

okay (4) 15:7 61:12 86:18 100:14

old (1) 35:6

OMG (23) 1:15 3:20 4:9,16 7:9 17:17 25:1 36:15 40:20 51:21 71:12 87:19 88:23 104:1 111:5 111:6,11 112:21 131:12 132:14 133:8 135:15 143:14

OMG’s (2) 71:4 111:22

OMGP (5) 124:18 125:20 136:1,7,16

once (10) 33:11 56:22 58:23 84:14 100:12 116:18 130:20 134:22 139:15 140:21

one’s (1) 115:2

Onega (28) 40:8,13,14 54:2,10,10 92:20 103:25 106:11,13 106:23 107:8,16 108:11,21 109:9,10 112:12 116:8

122:17,19,20,23 130:8 143:9 147:18 147:24 150:2

Onega’s (2) 122:15,16 onerous (2) 84:18

138:11

ones (4) 12:15 92:22 133:16 157:25 ongoing (2) 17:2 34:6

onwards (8) 76:15 78:4 85:8,17 116:8 116:9 137:14 138:9

open (4) 4:9 43:22 53:21 84:8

opening (6) 7:7 44:13 85:16 127:19 136:14 152:11

operated (1) 133:18 operating (1) 133:16 operational (1) 43:17 operations (2) 40:12

40:19

opinion (2) 76:9,12 opinions (1) 44:11 opportunity (1) 151:3 opposed (3) 15:5

124:4 151:5 opposite (1) 8:14 oral (11) 72:4 82:19

89:17 116:5 118:9 131:5 134:4,7,20 135:4 136:6

order (29) 33:25 38:16 38:19,22 45:16 47:6,14 53:14 62:17 70:11 78:15 86:12 127:25 129:24 139:1,3,6,7 139:25 140:11,20 141:2,9,16 142:9 145:24 151:6 157:6 158:23

ordered (1) 109:24 orders (1) 33:8 ordinarily (2) 121:18

161:17

ordinary (2) 156:18

161:25 organ (1) 12:6

organise (1) 161:7 organised (1) 106:2 organiser (3) 90:22,24

92:19 organisers (9) 89:7

90:1,4,10,14 92:22 93:22 94:23 149:16

original (8) 5:19 46:3 109:4,12 137:13 138:16 139:9,12 Oslo (2) 112:11 123:9 ought (9) 87:14 121:9 132:16 139:21 141:5,5 152:21

161:17,24 outlets (1) 147:25 outline (2) 40:22

41:16 outlining (1) 45:17

outrageous (1) 57:14 outside (8) 68:20 75:4 87:20 104:6 115:5 124:11 139:18

158:8 outstanding (10) 1:20

41:8 70:21 100:5 100:15 110:13 112:15,16,17 161:14

overruled (1) 26:11 overwhelmingly (1)

49:8

owe (1) 146:1 owing (1) 123:16 owned (9) 18:14 42:1

43:8 54:4 104:22 113:18 125:15,17 136:19

owners (2) 86:6,7 ownership (2) 74:6

100:9

owns (2) 114:16,18

Oxus (1) 64:20

 

P

 

P1/10/1 (1) 151:15 P1/10/10 (1) 78:18 pace (1) 149:23 page (34) 2:25 3:1,2

17:6 18:23 19:15 19:16,17 20:7 21:23 25:8,13,13 27:2 29:13 34:3,11 34:11,11 38:6 39:11 44:10,15 49:18,24 51:4,10 52:6 53:1,3,9,11 72:16 164:2

pages (4) 51:4 53:9 72:17 108:17 paid (11) 41:2 62:8

67:22 85:19 87:18 98:25 100:23 114:4 115:17 132:15 158:4

paper (2) 99:9 113:15 papers (1) 140:10 paragraph (79) 11:6

11:12 13:18 14:18 17:7,10,18,21 18:11 19:3,18,24 19:25 20:3,6,7 21:24 25:8,14 42:12,17 49:18 50:23 51:16 52:10 52:14 71:21 74:3,4 78:4 83:8 85:10 87:7 88:25 89:12 90:18,22 91:7,14 104:24 105:4 106:20 107:19,20 107:21,23 108:16 108:24 110:21 116:8 118:8 121:7 121:12 122:10 126:6,18 127:6 128:6 129:1,3 130:25 134:1,2 136:3 137:16,19 138:21 139:2 140:20 144:1,14,22 145:10 147:1,23 148:7 150:22 153:25 158:9

paragraphs (19) 27:3 27:6 52:9 53:10 76:15 85:8,16 102:6 122:22 123:13 127:17,19 143:17,24 144:18 144:20 148:6 150:24 152:11

parallel (1) 5:10 pardon (6) 2:25 3:1

16:2,4 39:10 78:8 parent (1) 123:22 Paribas (1) 64:21 part (36) 18:25 31:16

31:17 33:10,18,23 40:7 43:24 50:17 50:22 54:6 61:4

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L15/90/50

173

July 11, 2016 Day 46

 

111:1 150:1 prima (1) 33:15 primary (2) 51:13 70:6 principal (1) 138:9 principally (2) 74:11

74:13 principle (2) 123:5

124:12

prior (5) 6:3 7:22 8:24 21:25 71:6

pro (3) 80:6 132:5 135:7

probabilities (4) 33:19 48:14 52:2 54:18 probability (1) 90:25

probably (7) 24:12 49:3,3 68:24 76:20 116:13 141:13

problem (6) 50:25 58:9 104:3 124:7,7 124:8

problems (1) 104:4 procedure (1) 149:9 proceeded (1) 61:5 proceeding (3) 12:13

12:18 16:21

proceedings (20)

11:18 12:17 13:4,5 13:19 17:24 21:5 22:21 25:23 40:6 58:3 60:7 79:1 86:13 102:16 106:24 123:11 129:13 158:23 160:21

proceeds (1) 106:10 process (18) 8:20

17:20 39:18 55:18 84:13 92:18,21 94:11,20 110:11 113:23 114:6 115:1 115:8 122:9 140:14 142:6 148:23

processes (3) 14:13 58:15 96:15 processing (1) 40:20 procured (2) 88:14

90:10

produce (3) 80:9,10 80:11

produced (1) 94:24 produces (1) 25:25 producing (2) 79:19

142:3

product (1) 160:25 professional (5) 98:16

115:23 116:1 117:20,23

Professor (2) 91:13

92:13

profit (1) 133:16 profitable (1) 66:19 progress (5) 37:4

50:12 79:25 81:8 145:1

project (11) 42:6,16 42:19,25 44:6,14 45:18 60:9 64:19 66:19,25

projects (5) 42:8 73:5 73:10,14,19

promised (1) 72:12 promotional (1)

147:25 prone (1) 57:25

proof (3) 33:18 92:11 95:15

propagated (1) 158:8 proper (5) 6:9 12:6 70:15 140:18

146:23

properly (2) 58:21 146:22

properties (9) 92:20

97:14 99:17 101:3 101:8 146:14 148:4 148:10 149:11

property (11) 94:17

97:11 98:13,17 101:21 102:19 103:9 119:19,21 132:24 133:2

proportionality (2)

139:19 142:12 proportions (1) 66:5 proposal (4) 81:20 82:2 152:15,18

propose (4) 10:5 29:15 32:9 34:14

propounded (1)

142:21 prosecution (1) 61:2 prospect (5) 64:5

65:23 100:19,22 131:21

prospects (8) 1:14 48:23 49:13 54:22 64:15 65:14 71:12 84:23

protect (1) 32:1 protected (1) 92:9 prove (3) 31:8 124:2

125:5 proved (1) 95:11

proven (7) 31:14,20 33:19 34:19,22 53:21 61:17

provide (4) 41:17 47:12 69:15 159:9

provided (3) 3:8 41:19 70:25

provides (1) 7:25 provision (2) 27:22

128:16

provisions (3) 5:25 7:21 95:13

public (17) 18:1 31:19 31:22 35:9,11,16 35:20 52:4 67:14 70:5 146:4 161:15 161:18,24,25 162:6 162:14

publication (3) 79:13 149:14 162:19

publications (2) 148:1

149:12

publicity (3) 77:24 158:11,12

publicly (1) 72:6 publish (1) 147:12 published (1) 147:25 purchase (4) 40:25

43:12 44:25 45:21 purchased (3) 41:1

44:22 45:2 purchaser (4) 5:19

110:25 150:10,11 purchasers (9) 6:1,10 71:20 109:4 137:13

139:9,10,12,12 purchases (1) 138:17 purely (1) 25:24 purist (2) 56:5 57:11 purpose (6) 28:25

42:3 44:16,20 87:20 157:9 purposes (5) 38:18

62:8 87:22 101:20 106:20

pursuant (3) 38:15

78:15 115:2 pursued (2) 128:23

155:11

put (37) 39:5 49:1 59:1 65:17 82:20 83:6 84:21 85:18 96:3,14 97:17 99:18 101:15,21,23 101:24 102:4 105:22 110:6 113:13 115:12 123:23 130:21 131:3 142:22 143:7 144:22,23 145:13 150:12 151:1,7 153:10 155:3,16,23 156:2

putting (4) 94:19 99:17 101:6 103:16

pyramid (1) 133:12

 

Q

 

quantum (2) 51:14 53:17

query (1) 136:21 question (31) 2:22 3:3

8:19 15:2 21:3 22:10 23:19 54:15 54:17 61:14,20 62:9 64:11,13,14 64:24 65:12 69:11 73:1 82:23 83:11 84:15 100:17 121:25 124:14 126:24 134:9 142:15 146:1 150:16 157:5

questioning (1) 50:4 questions (12) 4:22 41:18 60:6 78:17 83:10,14 108:19

132:22 145:9 151:18 154:21 156:9

quickest (1) 120:23 quickly (3) 18:8 73:6

127:14

quid (2) 132:5 135:7 quiet (2) 63:5,7 quite (47) 8:11 13:7

14:12,17 24:1,4,19 28:10 29:17,25 40:15 44:12 51:2 56:23 57:15,15 58:6,7,18 63:24 65:18 67:1,18 84:1 90:24 92:18 94:5 94:10 100:20 103:10,20 106:18 111:19 112:24 116:1,19,24 118:6 131:9 138:1 145:4 149:14,23 155:15 160:6,13,25

quo (2) 132:5 135:7 quote (1) 51:5 quoting (2) 60:17

63:20

 

R

 

raise (1) 148:14 raises (1) 151:18 raising (1) 131:21 range (10) 90:20

101:8 116:3,17,20 116:24 117:2,3,20 117:22

rates (1) 84:19 rational (1) 119:18

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L15/90/51

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L15/90/52

175

July 11, 2016 Day 46

 

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superiority (1) 62:13 supervising (1) 32:18 supplied (1) 161:8 support (5) 33:25

109:9 110:2 117:16 144:7

supposed (3) 87:22 135:14 149:1

supposing (2) 95:17

100:20

Supreme (2) 81:23 126:16

sure (10) 4:22 37:17 49:20 81:9 86:2 103:23 108:23 149:17 155:19 159:8

surplus (3) 52:4 132:23,24

surprising (4) 3:17 85:14 98:18 114:10

surprisingly (1) 109:23 survival (1) 65:1 survive (1) 64:24 suspect (1) 4:17 suspicion (2) 29:22

64:1

suspicious (3) 36:18 36:19 114:11

sustained (1) 133:16 sweep (1) 62:14 sworn (1) 55:21 synopsis (1) 43:4 system (4) 39:8 76:18

76:20 77:19

 

T

 

tab (2) 17:7 53:1 table (2) 73:6 105:21 tack (1) 134:7

take (29) 2:6 5:17 26:16 35:11 42:24 46:6 50:20 53:6 57:11 61:23 62:2 64:3 65:4,13,21 68:18 96:1 97:11 97:14 98:4 105:18 106:10,19 111:14 111:25 156:14 159:16 160:5,17

taken (12) 4:9 5:2,5 13:2 14:9 31:4 36:19 81:7 87:16 100:21 104:5 149:13

takeover (1) 33:16 takes (8) 33:3 60:5 68:17 78:3 92:8

94:2,5 101:2 talk (1) 14:17 talked (1) 91:3 talking (4) 13:5 66:1

73:8 130:14 tangle (1) 124:10 Tarasova (2) 107:4

136:20

Tarek (3) 126:1,19,23 tax (3) 29:22 71:8

145:24

team (2) 77:12 160:11 technical (5) 27:15

122:11 153:16 154:24 155:22

teeth (1) 152:9 Teknopark (1) 145:16 tell (15) 6:15 14:20

20:21,25 21:2 24:11 32:3 55:20 55:21,22 56:1,3 59:21 72:19 95:3

 

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L15/90/53

176

July 11, 2016 Day 46

 

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99:18 100:2,5 111:1 117:17 119:3 119:8 127:16 128:6 130:22 136:24 137:15 140:22 148:23 154:11

ways (6) 34:25 59:17 61:25 86:5 95:20 121:20

we’re (2) 82:10 96:25 we’ve (3) 44:12 116:9

126:2 weather (1) 14:14

Wednesday (1)

120:20

week (12) 72:25 80:11 80:13 82:5,6,7 89:4 102:9 107:13 116:6 131:8 155:19

weekend (1) 1:7 weeks (1) 80:10 weigh (1) 155:12 weighing (1) 155:7 weight (1) 74:23 weird (1) 159:25 welcomed (1) 79:12 went (12) 36:10,15

41:13 45:11 47:18 84:3 85:20 86:25 115:18 122:20 123:4 145:19

weren’t (10) 60:22,22 85:13 103:17 114:18 115:11 119:14,15 122:18 135:16

western (54) 5:17,20 10:3,12,17 12:2,3,4 12:20 13:11,20 15:16 22:1 32:21 33:4,7,16 40:6 66:2 67:21 84:19 87:16 87:16,18,22,25 88:3,9,14,22 103:5 103:23 104:2 109:6 109:14,16,19,21,25 113:8,18 115:15,19 116:7 118:5,23 124:12 125:1,3,18 133:2,4 147:7,16

whilst (5) 88:3,8 109:20 128:12 160:9

whopping (1) 62:8 wide (3) 117:2 138:10

149:14 widely (1) 147:16 wider (1) 76:20 wild (1) 118:24 willing (2) 36:24

131:23 win (1) 156:18 wins (1) 27:18

wish (5) 1:24 13:1 78:9 156:14,17 withdraw (2) 49:4

79:1

witness (31) 2:16 18:18 24:13,14 40:22 42:9,11 49:15 50:8 54:24 57:20 64:17 66:1 68:17,18 77:8 141:15 144:13,17 144:22 146:15 148:20 149:21 150:8,24 153:21,22 153:22 154:1,6 155:7

witnesses (14) 5:14

 

9:18,22 10:10 20:14 21:14 74:25 77:16 89:23 91:3 150:5,17 153:11 159:7

witnesses’ (2) 155:12 155:25

wonder (3) 38:7 42:8 135:3

wondered (2) 118:14 119:7

wood (1) 40:19 woodwork (1) 101:10 word (2) 48:8,9 words (9) 17:11 73:21

91:8 99:14 117:22 128:18 131:1 135:5 141:9

work (9) 30:17 44:17 63:1 82:12 100:1 132:11 144:16 155:25 160:12 worked (3) 9:12 77:10

161:7 working (5) 29:17

82:9 87:23 140:9 145:20

works (1) 156:1 world (6) 4:1 61:16,17

63:7 66:14 68:20 worried (1) 64:8 worse (2) 66:21 75:17 worth (7) 97:21 101:3

101:8 111:7 115:13 119:19 122:6

worthless (1) 76:10 wouldn’t (15) 56:6

61:24 62:2 66:9,11 68:6 93:23 95:3 111:25 124:19 135:8 140:7 146:21 155:7 158:16

wrestle (1) 159:7 wriggle (1) 24:20 writ (2) 11:8,9 write (5) 81:6,6,20

97:12 137:3 write‐off (2) 112:22

113:5

writing (5) 80:9,18

131:3 134:5,15 written (31) 13:18

50:18 70:22 72:3 82:20 84:25 85:16 87:7 88:25 90:13 101:19 104:24 106:18 108:15 112:24 115:12 116:6 121:6 122:10 131:10 134:6 139:13 142:9 143:7 143:17,23 147:6 148:3 149:20 156:21 158:20

wrong (13) 3:17 16:2 24:16 39:5 48:25 49:3 67:23 79:11 118:11 125:7,8 130:4 132:3

wrongdoing (7)

121:25 122:21 124:14,15,22 125:5 125:6

wrongful (2) 125:14 125:16

wrongfully (1) 124:24 wrongly (1) 4:14 wrongs (1) 156:24 wrote (4) 85:12 111:9

112:8 151:19

X

  

X (1) 154:1

 

Y

 

Yatvetsky (2) 107:22 148:5

Yatvetsky’s (1) 108:25 year (2) 126:5 128:5 years (5) 30:21 54:25

79:3 122:21 156:25 yield (1) 95:8

Yuri (1) 123:25

 

Z

 

Zelyenov (1) 140:1 zero (1) 76:13

 

0

  

1

 

1 (6) 44:10 50:23 72:21 90:21 161:22 164:3

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10 (4) 45:3 47:10 68:24 144:20

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16th (3) 40:22 42:9,11 17 (2) 72:16 129:1

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179 (4) 128:1 129:9 130:2,10

18 (4) 3:1 38:3 39:2 51:16

180(a) (1) 134:2

19 (3) 2:25 3:2 151:19

19.15 (2) 105:8,14

 

2

 

2 (3) 19:17 53:1 161:22

  1. (4) 37:14 69:1,22 69:25
  1. (1) 44:14

2.15 (1) 69:4

20 (3) 32:21,23 51:10

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102:12,17 128:3 130:3,6,20 133:21 133:25 136:13,15 143:6,22 144:10

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82:11 133:21 134:17

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3 (8) 11:8 17:6 19:15 19:16 21:23 27:2 88:8 112:15

3.21 (1) 120:3

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3.31 (1) 120:5

3.5 (1) 45:1

3.745 (1) 105:17

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4 (5) 3:2 40:4,11 41:19

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42(h) (1) 128:6

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5

 

5 (7) 2:20 9:4 25:13,13

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6

 

6 (1) 73:11

6‐year (1) 130:1

63 (3) 144:14,22 153:25

666 (4) 85:10 86:18,19 86:20

671(2) (1) 145:10

 

7

 

7 (3) 49:18 97:2 144:20

70 (2) 53:3,9

705 (1) 127:19

709 (1) 136:3

71 (1) 53:11

75 (1) 29:13

755 (1) 152:11

756 (1) 152:11

 

8

 

8.33 (1) 90:23

80 (1) 93:10

808 (1) 87:7 808(4) (1) 87:14

81 (1) 143:17

82 (1) 164:4

855 (1) 112:13

857 (1) 102:6

858 (1) 102:7

865 (3) 90:18 110:15 110:18

873(3) (1) 90:3

876 (2) 91:7,14

877 (1) 147:1

8821 (1) 89:12

89 (1) 144:1

9

  

9 (2) 4:23 86:21

9.5 (1) 44:24

90 (2) 112:16 137:16

909 (1) 13:18

916 (1) 148:6

917 (1) 148:6

924 (1) 148:7 931(2) (1) 90:18

94 (3) 14:18,25 49:24

944 (1) 147:23 945(4) (1) 107:20 95 (1) 49:24

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