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. Last Updated: 07/27/2016

Trawlers Net International Debt Row

A $250 million debt row between a Moscow boat leaser and a Far East fishing company ended up in London's High Court of Justice this month, sucking into its wake 11 supertrawlers, a Greek tycoon, a Spanish shipyard, South Korea's port authority, the Russian government and the Paris Club of creditor nations.

The British court, traditionally the world judicial center for maritime disputes, upheld a claim by offshore branches of Moscow-based leasing company Rybkomflot and ordered fishing company Dalmoreprodukt, or DMP, to pay $115 million in back rent for using 14 Rybkomflot trawlers over the last decade.

Rybkomflot's floating fish factories were built in Spain in the early 1990s with financing from several Spanish banks. The banks were happy with what looked like a lucrative deal until it became clear that Rybkomflot was having problems collecting lease payments from Dalmoreprodukt.

The new Russian government came to the rescue, assuming the debt — assesssed at $313 million — which was added to the Soviet Union's existing debt to the Paris Club of sovereign creditors. Moscow then ordered Rybkomflot to pay $200 million up front and restructured payments for the remaining $113 million over 15 years.

Lacking the cash, Rybkomflot was forced to find a creditor and ended up borrowing from Yerania, a company owned by Greek millionaire Anastasis Laskaridis, who took the vessels as collateral. Rybkomflot then managed to win a South Korean court verdict that gave Rybkomflot clear title to 11 of the ships that are currently docked in Pusan, the country's largest port.

Under a deal it struck with Yerania, Rybkomflot is allowed to find a new customer to lease the 14 trawlers. Rybkomflot skipper Oleg Pukhov said Thursday that this is how his company intends to repay Yerania.

But while the relationship between Yerania and Rybkomflot remains amicable, DMP continues to argue that Rybkomflot is to blame for the whole mess.

DMP's general director, Yury Dyadenko, said Rybkomflot failed to pay DMP and its subsidiary dozens of millions of dollars in proceeds from sales through Rybkomflot, making it impossible to pay for the supertrawlers.

Pukhov denied any products were sold through his company and said the London court dismissed DMP's counterclaim.

That dismissal, together with the ruling in favor of Rybkomflot — although not enforceable in Russia — would likely be an advantage for Rybkomflot as it pursues the case in Russian courts, according to Baker&MacKenzie partner Sergei Avramov.

The decision will also help the government, still a Rybkomflot creditor, settle some of its Paris Club debt.

For its part, however, DMP, which claims to be the top fishing company in the Far East, says it will contest in court — by citing Rybkomflot's debt — any attempt by Rybkomflot to find a new leasor, Dyadenko said. He said legal action against Rybkomflot was under way but refused to name the court.

Meanwhile, Rybkomflot is in trouble from the Property Ministry, which is challenging the way it was privatized in the early '90s. The company is a chunk of the former Fisheries Ministry, which fell apart along with the Soviet Union. Rybkomflot was salvaged from the wreckage by its managers, and a controlling stake in Rybkomflot has been held by the Rifer company since 1992.

The ministry does not want Rybkomflot to go under, since it's in the government's own interest that the vessels it owns are disposed off efficiently, rather than sold off by a foreign businessman.