Posted 22 сентября 2020,, 12:34

Published 22 сентября 2020,, 12:34

Modified 24 декабря 2022,, 22:38

Updated 24 декабря 2022,, 22:38

Who is fighting for Norebo in London court?

Who is fighting for Norebo in London court?

22 сентября 2020, 12:34
One of the most dramatic cases for Russian business is being played out in the London High Court—the so-called Norebo case over maintaining a grip on a share of Russia’s largest fisheries company based in Murmansk.

By Ivan Petrovskiy

The Norebo case stands apart from other disputes between Russian businessmen in British courts. The country’s entire fisheries industry, which has long being subject to criminal influences in the 1990s, is at stake. Moreover, the case is laden with so many curious details critical to understanding the entire situation pitting against each other two men who were once friends—Vitaly Orlov and Aleksander Tugushev, as Nezavisimaya Gazeta points out.

The Forbes magazine has reported extensively on the conflict. We will therefore not delve into the details, but concentrate instead on the key issues.

Both Vitaly Orlov and Aleksander Tugushev graduated from the same institute—the Murmansk Higher Marine Engineering School. In the middle of the 1990s, Tugushev started his own business—a small fisheries company made up of a small fleet of Soviet-era trawlers. Orlov was hired by a Swedish firm that purchased fish from Russian fisheries and made money reselling it to Norway and other countries. One of Orlov’s suppliers was Tugushev’s company.

In 1997, Orlov and his Norwegian partner Magnus Roth started their own business – Ocean Trawlers – and in 2001, together with Tugushev, founded a Russian company called Almor Atlantika, with Tugushev holding a share of about 15 percent.

In September 2003, Tugushev opted to leave business for a career as a government official. By order of then-prime minister Mikhail Kasyanov, as reported by the Finmarket news site, he was named the deputy of the state fisheries group Goskomrybolovstvo. In accordance with Russian legislation, as a government official Tugushev was obliged to abandon all his business interests to avoid conflicts of interest. So Tugushev clinched a deal to sell his shares to Roth and Orlov.

Aleksander Tugushev’s career change coincided with developing reforms in Russian fisheries. The government decided to do away with the system of assigning catch quotas — 40 percent were sold off through federal auctions and 60 percent distributed in Moscow on the basis of requests from regional authorities. This arrangement degenerated into total local corruption marked by bloodbath in the industry and shootings of government officials and businessmen alike. As a result, Tugushev’s career as an official was a short one. And it ended badly. As reported by the daily Kommersant, he ended up behind bars after a mass operation by the Interior Ministry’s Moscow organised crime unit – 150 officers carried out simultaneous searches and arrests at 15 different addresses in connection with allegations of extortion and bribes involving the Polluks company in Khabarovsk region.

According to the newspaper, investigators found the owners of Polluks had asked Tugushev to award them quotas for 50,000 tonnes of pollock as the new system threatened their very existence. Under the system of “historical principle”, a new company from Russia’s Far East had little chance of securing the volume of fish needed to pay back credits secured for the two trawlers they had purchased.

Investigators said Tugushev sought $3.7 million for his services, according to Kommersant, with half to be deposited in a Latvian bank. After Polluks failed to secure the quotas, its owners demanded their money back. During the investigation, charges of extortion were changed to fraud. And in February 2007, Tugushev was sentenced to six years in prison, according to Kommersant.

This episode was to play a key role in the Norebo London case, but more on this later. After his release from prison, Tugushev tried to start his own business, but this proved to be a failure. Orlov’s business, on the other hand, was thriving. And he took on his friend as a consultant – a job Tugushev held until 2013.

Norebo has undergone a growth boom over the past 15 years – it bought fisheries companies in Russia’s Far East and North-West regions, seeking out companies with large fishing quotas, a key factor in the case being heard in the London court.

According to media reports on the dispute, Tugushev demanded the return of what was supposed to have been his share before he left the company to work for the government. Orlov denied such an agreement had ever existed. Legal negotiations on the matter continued until early 2016, though the first threats were also issued at this time.

According to the publication Inform-24, Tugushev’s lawyers – Artyom Begun and Pavel Krotov - called for their client’s demands to be met. “If you do not agree, criminal proceedings will ensue”, - the publication quoted an ultimatum issued to Orlov.

As reported by the RBK news service, the following people were included among those Tugushev had sought to “help resolve the matter”: “Among the names mentioned were businessman Ilya Traber, also known as the Antique Dealer (responsible for controlling ports on behalf of the St. Petersburg Tambov criminal gang), as well as member of parliament Adam Delimkhanov, a friend of Chechnya’s president”. Delimkhanov was the object of several prominent investigations and, as reported by the Interfax news agency, was sought by Interpol following the murder of the Yamadayev brothers (who fought on the separatist side in the first Chechen war and then switched sides).

Businessman Ilya Traber was also sought under an international arrest warrant, according to Spanish investigators, in connection with the “Russian mafia” money laundering case in southern Spain. Novaya Gazeta newspaper, quoting Monaco police, reported that Traber was “linked to the Tambov criminal gang”.

Media reports have linked Krotov with Delimkhanov. According to the Urals news site, Pavel Krutov bought up debt of prominent Russian businessmen. The scheme, the site said, was simple: Krotov bought up debt at a significant discount, after which Delimkhanov appeared on the scene and debtors paid up, to the last penny.

The St. Petersburg-based website described Artyom Begun as the “partner” of Tambov leader Vladimir Kumarin, though the lawyer has repeatedly denied this.

Tugushev does not deny knowing Traber and, according to Forbes, called him “a very erudite person”. Their friendship apparently came about when Tugushev was negotiating a credit to buy back his business from Orlov.

And Traber’s name is destined to appear further on in the story.

In 2016, Vitaly Orlov consolidated 100 percent of ownership of Norebo after buying up the portion held by his old partner, Magnus Roth. Within months, Bloomberg, and then Forbes, proclaimed Murmansk native Orlov a billionaire business owner – the first and so far only instance involving the fishing industry. It is, however, uncertain whether Forbes took account of the company’s debt burden taken on when buying up shares.

Norebo had established itself as a completely new type of Russian fisheries company, a transparent “white” business with international accounting standards, with branches throughout the world and major international contracts.

Aleksander Tugushev’s own affairs were somewhat less brilliant – no grounds were found In investigations into the theft of shares of Almora Atlantic despite searches conducted at Norebo’s offices.

Kommersant reported that he became a prime figure in a criminal investigation into extortion involving the shares of Orlov’s company. And this is where the most mysterious developments begin.

In June 2018, the High Court in London began examining Aleksander Tugushev’s case against Vitaly Orlov, Magnus Roth and Norebo top manager Andrei Petrik. Tugushev’s demands remained the same, according to Forbes - $350 million for his share of the company.

It is not cheap to launch legal proceedings in London – beyond the means of most businessmen. Some experts have estimated at 20 million pounds the cost of the legal proceedings over the past two years.

Where did Aleksander Tugushev get the money? The situation is similar to that of someone who has paid for an all-inclusive holiday in Turkey and embarks instead on a trip with a lady friend to a private Pacific island with a villa and yacht.

Such an undertaking would be viewed as madness if you were unaware that the lady friend was a well-heeled heiress with the prospect of a wedding providing income far in excess of expenses. Some of it – a good chunk – would of course have to be paid to the sponsors behind the trip. It could be assumed that – should Tugushev win the case – a third of Norebo could be split between him and those who paid the costly legal fees.

It was no coincidence that London was chosen as the site to have it out with his rival. English legal procedures are quite different from Russian procedures.

“The main advantage to having the case tried in the London High Court is the chance to have the decision applied in many foreign jurisdictions”, - Dmitry Gorbunov, partner in the legal firm Rustam Kurmayev and partners, told Kommersant. “In addition, Anglo-Saxon law allows for a wider presentation of evidence, for example, verbal agreements”.

On what grounds could Britain be chosen as an appropriate jurisdiction to examine a dispute between two Russian businessmen about the ownership of a Russian company? The Law Society Gazette says it is the fact that Vitaly Orlov often visits Britain and owns two flats in London. So how does one interpret Orlov’s arguments in the case documents that he lives in Murmansk and occasionally flies to London on business and to visit his children who study and work in Britain? The court paid no heed of this – which is taken to mean that if it happens, that constitutes grounds for the case to be considered in Britain.

But first Tugushev had to get to Britain and that was not easy. Britain refuses entry visas to those who have been jailed for more than four years. But lawyers found a proper loophole.

As the APN news website said: “The operation on getting Tugushev to London was overseen by the London consulting firm Effective Advisors Limited, which belongs to another fugitive from Russia, Yuliy Kaloev”.

According to Kommersant/United Kingdom, Kaloev moved to Britain back in 2012, a move that could be described as forced flight.

Kommersant said Kaloev kept gaining experience up until the 1998 financial crisis by working in executive positions in various Russian banks.

But after he lost money on a pyramid bond scheme, he took another look at his strategy and became known in markets the head of the “Ost-Vest Group” investment company. He said he was looking after worthy causes, seeking out foreign investors for Russian business ventures, but also embarked on his own projects – stores featuring brand-name imported clothing.

Kaloev saw the next crisis in 2008 as a time for opportunities – shares lost their value, but you could buy them up for next to nothing. Kaloev settled on “Kaluzhskiy Myasokombinat” – the Kaluga meat packing plant, a regional enterprise with a long history – and plenty of problems.

Kaloev bought the plant and promised to invest in reconstruction. But running a real plant was perhaps too much for the businessman -- the reconstruction never came. And in early 2012, the website said the staff appealed to the prosecutor’s office, citing many months of unpaid wages.

An investigation showed that the plant was essentially bankrupt – there was nothing to pay the 600-strong workforce. It also had debts of more than 1 billion roubles (state bank Sberbank being the biggest creditor). The investigation showed that credits taken out to fund reconstruction were channelled by the owner to offshore accounts in Cyprus, where they effectively disappeared. Facing a jail term, Kaloev fled to London. And the plant he ruined was shut down and remained that way for nearly four years until a new investor was found. More than 600 people lost their jobs.

RIA news agency reported that in March 2013 a court ordered Kaloev’s arrest in absentia and a warrant was issued. But as is well known, there is no extradition on the Thames. Once Kaloev was in London, there was much talk that his problems with the law were linked to political persecution. This intensified as the website reported that after he left Russia, his apartment became the home of Alfa Group top manager Vladimir Ashurkov, known for providing financial help to Alexei Navalny’s Anti-corruption Foundation.

Kaloev did nothing noteworthy in the fight against corruption, but similar media reports focused on his reputation in Britain as a “victim of the Putin regime”.

APN said Tugushev also “had the option to play the political card”. A letter was sent to Britain’s Foreign Office stressing that the criminal case for extortion involving the Poluluks company in 2004 was “politically motivated”.

Of course, you are unlikely to find anything political in documents relating to a 16-year-old legal case. Not even his close relationship with ex-prime minister Mikhail Kasyanov, who became one of the opposition leaders. When Tugushev was arrested, Kasyanov had yet to make any declarations about his political ambitions.

“Nevertheless, for the Foreign Office, the letter drafted by the respected legal firm Douglas Solicitors LLP served as sufficient grounds to recognise Tugushev, the man accused of fraud and extortion, as a political prisoner and give him the green light for entering Britain in early 2019”, - APN reported.

But just who are the people paying Aleksander Tugushev’s legal expenses?

At the first hearings, his lawyer refused to divulge their names to the court. And in formal terms, they were not obliged to do so. But after numerous scandals connected to the source of money held by dubious people, Britain began to look at such things with greater caution. So the names of the sponsors had to be divulged. And not just the sponsors, but also people whose reputation would raise no questions. And they found such people.

It was Vitaly Orlov who first revealed the names of the sponsors. He told Kommersant that, according to his information, the trial was being financed through a firm known as 17 ARM, registered in the United Arab Emirates. According to its official website, the company’s founder is a British aristocrat, Lord Clanwilliam. Members of its advisory board include former foreign secretary Sir Malcolm Rifkind, life peer Lord Ken MacDonald, former British chief prosecutor, the former Minister of State for Security and Counter Terrorism, Baroness Pauline Neville-Jones and another peer, Lord Anthony St John. The company’s aim is to provide financing for legal cases.

“Ordinarily, we will not consider cases where the asset value is less than 75 million pounds”, - the company’s website notes.

British media later confirmed this information, including the Guardian. The daily quoted former Justice Minister Baron Edward Fox as saying glibly that the emergence of a business financing commercial lawsuits turned the courts not into a means of establishing the truth as much as a means of generating income.

Vitaly Orlov, told Kommersant that British aristocrats with great fanfare in such lawsuits can serve only as a means to protect people who truly finance Aleksander Tugushev. But he said the real sponsors could, to put it mildly, make a bad impression on a prim London court.

But finding such people turned out to be not so difficult.

“In his visa application in 2019, Tugushev identified a different company which agreed to pay his legal expenses – Cypriot firm Akrostar Enterprises Ltd”, - APN reported. In the official Cypriot register of legal entities, Akrostar is owned by 17 Arm with all its lords in tow. Everything appeared squeaky clean.

But there was one small detail.

17 Arm took over the company on 15th May 2019. It had previously belonged to the Vismatic International Ltd. Company registered in the British Virgin Islands. According to the data base of the British Bureau of Investigative Journalism, the company “showed up” in the so-called “Panama Papers” which exposed the names of thousands of owners of companies registered offshore. On the basis of these documents, it becomes apparent that Vismatic was founded by Roman Spiridonov, a Russian national.

Traber, again

Very little is known of Roman Spiridonov.

A private businessman, he has given no interviews and there are no photographs of him in the wide-ranging data bases of news agencies.

His name first appeared in business media in 2011.

According to Kommersant, the top managers of the company Energeticheskiy Standart - Roman Spiridonov and Igor Solgayev -- bought the Samaraorgsintez plant – which produces phenol and acetone.

Media reports put the value of the deal at $100 million – taking into account debts of $60 million. And, over the course of several months, the two partners bought another two petrochemical plants in Samara region – SIBURA from Leonid Mikhelson and Renova from Viktor Vekselberg – and set up the SANORS holding.

Talks on selling SANORS began in 2013 and the sale was announced at the St. Petersburg Economic Forum in 2014. Business media quoted sources as saying the deal was worth $1 billion. But the deal was not clinched until March 2015 and the value declined – affected by the devaluation of the rouble and yet another economic crisis and in the end, according to Kommersant, the two partners came away with $300 million.

After the deal was completed, the two partners – Spiridonov and Solgayev – went their separate ways.

RBK reported that Spiridonov became a minority shareholder in the St. Petersburg Oil Terminal (PNT), a company with a difficult legacy. In the 1990s, petroleum products were sent from Russia to the West, turning those who oversaw these shipments into millionaires. At the turn of the millennium, the St. Petersburg terminal became the theatre of a vicious war of control over its operations.

According to RBK, the main owner of PNT today is Mikhail Skigin – he came into this asset from his father, Dmitry Skigin, who died in 2013.

Robert Eringer, an advisor to Prince Albert of Monaco, who has investigated the sources of money held by Russian companies in the principality said that not is all as it seems, according to an RBK report. He described companies’ officers there as “token figures” and alleged that the system of legalising funds in Europe is under the control of a “Russian mafia” with links to “highly-placed officials”.

The report refers specifically to Ilya Traber, who, in the 1990s, was chairman of the oil terminal’s board.

Another of Aleksander Tugusev’s probable sponsors could well be Vadim Gurinov.

Gurinov is closely linked with all the main heroes in the story – with Akeksander Tugushev, with Roman Spiridonov and even with Lord Clanwilliam.

According to Forbes, Gurinov began his business career producing consumer goods – the firm he owned jointly with Dmitry Kostygin, the man who became the founder of the Lenta retail chain, began by selling Turkish-made Collin’s jeans and then switched into groceries – pelmeni, mayonnaise, ketchup. In 2003, they sold the Petrosoyuz company to Heinz.

In 2003, after Gurinov left the business, he was recruited to work in Russia’s biggest petrochemical company, Sibur, which, at the time, belonged to Gazprom under the man who now heads the Russian Football Union, Aleksander Dyukov – He had previously worked as a top manager at PNT Skiging-Traber.

A year later, as reported by the business news site, he took on a bigger project, the Stroitransgaz construction company, one of Gazprom’s largest contractors, with turnover worth billions of roubles. Gurinov took on the job of general director.

According to Forbes, he subsequently became a shareholder and general director of the company Russkoye More – Dobycha (Russian Sea – Production), renamed Russkaya Rybopromyshlennaya Kompaniya (Russian fishery production company).

He spent only a short time in fisheries – about a year – as the company was a project more on paper than elsewhere. But in 2012, it began buying up companies in Russia’s Far East and currently holds the second largest number of fishing quotas, second only to Norebo.

Guron’s departure from the company did not mean he lost interest in the fishing industry. Kommersant reported that in 2017 he founded the Dalnevostochnaya Promyslovaya Kompaniya (Far East Commerial Company) specialised in the harvesting of mackerel and sardines in the Far East region.

His links to Lord Clanwilliam – a legal sponsor in the Norebo case in the London High Court – date from 2015 at the very least. According to the website of Companies House, Britain’s registrar of companies, the lord became an advisor to two of Gurinov’s companies registered in Britain - Halamar (Golden Gate) and Halamar (Chancery Lane) Ltd.

It is unknown what activity these companies engage in. But, according to documents, it becomes clear that Lord Clanwillam stepped down from the companies two months before taking over the firm that is helping Aleksander Tugushev in his legal proceedings.

Unclear future

Unlike most cases in Russian courts, it is impossible to predict who might win this legal case.

Any ruling depends on too great a number of factors being considered by the judge. Any single detail might prove to be the most important of those factors.

But one thing is clear: the legal proceedings themselves, whatever the outcome, are of no benefit to Norebo, but, rather, sap is strength as well as the funds of its shareholder. Should it lose, the consequences could well be extremely unpredictable.

One-third of the company is in the hands of a hostile partner – always a great risk for business. And as we can see, at the end of the trial, there will not be a sole partner – individuals linked to Norebo’s competitors are involved.

This is not merely a risk for the shareholders, but involves problems for thousands of rank-and file workers, the fishermen who are being held hostage by a corporate war between their bosses.

In this trial, Tugushev looks like no more than a “frontman” – or perhaps a hostage In a group with not one, but two false bottoms – “delegates from the criminal world”, bogus lords and dubious intermediaries.

With such a collective of interested parties of greatly varied backgrounds, the consequences might well go beyond a mere cash payment. There is a good chance they will want to break up the assets into pieces, and we would be not far off from the sad story of the Kaluga meat packing plant. The confused London proceedings look particularly absurd as Tugushev, in his “quest for the truth”, has by all accounts no grounds to count on securing British citizenship.

In terms of the development of fisheries, the potential attack on Norebo could amount to a negative signal for the market In that building up a large and transparent business provides no guarantee for safeguarding it.