Vitaly Orlov is still unable to unfreeze assets

The owner of the Norebo group, Vitaly Orlov, is about fishing and business.
In London, litigation continues around Vitaly Orlov, Russia's largest fishing group, Norebo: former businessman partner Alexander Tugushev insists that he has the right to a third of the business. Vitaly Orlov told Kommersant about the dispute in London and the fisheries.

- At the end of July, the High Court of London refused to renew the order to freeze your assets by $ 350 million, issued upon a statement by Alexander Tugushev. Have you got access to assets?

- We are now in the process of removing this “freezer” in different jurisdictions. Mr. Tugushev received the decision to freeze a year ago, in a court session at which we were not present: neither I nor my lawyers were notified, and the court relied only on the data provided by Mr. Tugushev.

Unfortunately, the system works in such a way that we could not immediately present our arguments to the court against the decision made in July last year; It took almost a year to prepare the hearings, and only then they listened to us and saw our arguments. Initially, there was an order to freeze assets in an English court, followed by subsidiary orders in different jurisdictions, in those where Mr. Tugushev was able to find any of my assets. After that, I disclosed the assets, according to the decision of the English court, and now the reverse process is underway. The procedure is not immediate, the decision came into force in England on July 31, and now there is a gradual removal of auxiliary "freezers" in other jurisdictions.

- What assets are we talking about?

“The court orders were for bank accounts in the Isle of Man and Guernsey, the two apartments I have in London, the accounts and shares of TTC in Hong Kong, where I am a co-owner with my old partner Magnus Roth.

- Did freezing somehow affect your business?

- Naturally, such a court order, which Mr. Tugushev widely publicized, caused a lot of questions from partners, creditors, and other market participants. It was a serious decision of a foreign court, and in fact, we still did not fully appreciate the damage. Mr. Tugushev was forced to agree with the decision of the English court, and therefore did not appeal against this decision.

- You will have to continue litigation in London, although you tried to challenge the decision on jurisdiction in the Arbitration Court of the Murmansk Region ...

- To my regret and disappointment, the English court found sufficient grounds for communication with England and the court of appeal rejected the request for review of this decision in jurisdiction. That is, the main process will go on in England. Although I remain a staunch supporter that the dispute between two Russian citizens residing in Russia regarding Russian assets that form part of the so-called strategic industry of the Russian Federation should certainly be considered in Russia.

But now we understand that we will have to sue in London, and now we are very seriously preparing for this.
As for Murmansk, this is not some kind of independent process, but our formal statement to the Russian court that we do not agree that this process should be considered in England. This is not an attempt to resist the decision of the English court, but a kind of preventive measure of protection so that later in the future they will not tell us: you did not say that you are against the consideration of the lawsuit in London ...
- When was the last time you met with Alexander Tugushev?

- In February 2018, on his initiative. He wanted to meet, as I understand it now, in order to get a record of our conversation and then use it. That is, he had no serious intentions to resolve the problem then.

“Then he outlined his claims to a third of the Norebo?”

- His claims began much earlier, we had rather lengthy negotiations on the settlement of mutual claims, which today did not end with anything, despite the fact that we shook hands in September 2015.

- Your lawyers have repeatedly said that in the English court of Alexander Tugushev, third parties are financing. Do you have an idea who this is?

- He personally stated in the English process that he was receiving funding from some “fander” from Russia, but this was very carefully hidden. We do not fully know who finances Mr. Tugushev. But we have good reason to believe that funding is being provided through a specially created company to allegedly seek out assets called 17ARM.

This company is managed by the British aristocrat Lord Clanville (Patrick James Mead, was on the boards of Eurasia Drilling, AFK Sistema, etc. - Kommersant), which has had many Russian transactions over the years. The company also obviously has the support of four highly qualified British advisers. This is Sir Malcolm Rifkind, a former Foreign Minister, a very famous, influential man. In addition, the council includes Lord MacDonald (Kenneth Donald John MacDonald), who used to be the head of the prosecutor's office in England and Wales, Baroness Neville-Jones (Lillian Pauline Neville-Jones), who once headed the joint intelligence committee of Great Britain. The fourth member of the council is Lord St. John (Anthony Tudor St. John), the current member of the House of Lords. None of these people, according to our data, finance the lawsuit. Apparently, they represent a cover in order to thus create the appearance of the cleanliness of the actions of those who fund this process.

- Who can still be the ultimate sponsor?

- Real sponsors in Russia do not want to openly appear and hide their identification very intensely, probably because they do not want to be tied to dirty money and frankly illegal dubious tactical actions. For example, the lawyers Mr. Tugusheva received and used in the English process information about my movements across the Russian border for several years. Subsequently, they admitted that it was obtained informally from Russian migration services. Further, in the English trial, the same lawyers submitted a letter from supposedly “anonymous well-wishers” who sent completely confidential information by email, which was basically irrelevant to the dispute, which is prohibited by Russian law to disclose. I will not say now what information this is, but it cannot be legally obtained in Russia. In addition, a criminal case was opened to collect evidence for the English trial.

- What about the criminal case?
- Now the case is closed on the grounds that the crime event itself is missing. During the criminal case, very serious investigative measures were carried out using heavily armed law enforcement officers in Murmansk, very serious documents were seized from the company, servers, documents from my bank cell (they soon somehow ended up with Mr. Tugushev), personal documents that generally had no relation to this case. In addition, there were threats of physical harm to me personally ...

- Alexander Tugushev in a London court insisted that you permanently reside in England. And how much time do you spend now in England and how much in Russia?

“Even Judge Carr ruled that I live most of the time in Russia.” At the time of the adoption of the order on the freezing of assets in 2018, I spent 22 days in England, in 2017 - 52 days. Even now, in connection with the process, I do not spend more time in England.

- Does the process as a whole somehow complicate the core business?

- Yes, it is very distracting, this must be dealt with, and the costs are appropriate. Nevertheless, my team and I are doing everything possible to minimize the damage.

“Do you have any idea how long the debate will go?”

- This is a very difficult question. Since it became clear that the process will go on in London, we are preparing a response to the original lawsuit, and this process is not quick.

- When are you planning to submit feedback?

- The deadline must still be set by the court.

“Have you discussed the lawsuit with Magnus Roth?” What is his attitude?

- He went out of business in 2016, long before Mr. Tugushev’s lawsuit appeared. Now we don’t particularly communicate.

“Norebo participated in the allocation of quotas for investment purposes. How is the construction of ships going and when will you get the right to quotas?

- This right arises after the commissioning of the facility and testing. The regulator has yet to actually clarify these rules at what point the investor will be entitled to quotas. I’ll explain what’s the point: we have the right to develop in a particular calendar quota year on the basis of an order from the Federal Fisheries Agency, which determines both types and amounts in tons between users. This happens at the end of the year preceding the quota year.

That is, if we are talking about 2019, then such orders were issued at the end of 2018 and it is impossible to make changes to the quotas of 2019: they are already distributed. And a situation arises when a vessel or plant was commissioned in January or February, and the allocation of quotas for this year has already occurred and you will be idle all year. As for the construction of ships, it is being carried out according to the plan: three out of ten vessels that we plan to build are currently in production. There are moments, this is all new for us, and indeed for the entire industry. Therefore, there are many questions, but the process as a whole is proceeding normally.

- The Russian fishing company is building factories under quotas for investment purposes with a partner. Have you not considered such an option?

- Due to the fact that we have already begun the construction of a processing plant in Murmansk before the investment quota program was announced and processing was determined as part of the development strategy, we already have an expertise. The investment quota processing plant will be part of the complex that we already have. We seem to supplement our facilities with the goal of producing another type of product.

- What volume of products is being processed now?
- This year we plan to send about 16 thousand tons of raw material for processing onshore, while our fleet is able to process a significant amount of raw material on board the vessel, at sea. This is what we call factory ships, which both catch and produce almost finished products.

- Is it consumer packaging?

- What is produced at sea is not consumer packaging: products require recycling and packaging, but it is minimal. As for those vessels that produce almost finished products, say, fish fillets, this is the minimum processing on the shore. To make products in retail packaging at sea is almost a very difficult task due to the lack of space. That is, packaging requires, quite simply, a lot of space, and in the sea, on board a ship, a struggle for every meter.

- How are the sales of your first Borealis brand going?

- We gradually entered almost all the major federal networks. We have plans to reach the volume of 5 thousand tons of finished products per year. Today we are doing so far less than half.

- What is the share of retail packaging in total revenue?

- So far, insignificant.

- Can you disclose the overall performance of the group for the first half and the forecast for 2019?

- We do not disclose financial indicators. Partly because they are connected by certain confidentiality agreements with our main lenders. As for the catch, we finished 2018 with a good indicator - more than 600 thousand tons. A smaller plan for 2019. This is due, in particular, to the fact that catch quotas in the North Atlantic have been reduced by the main types of fishing that we conduct.

- Are you planning to expand the range of extracted resources? What are the main types for you today?

- Cod and haddock - this is a significant amount of catch, we also have serious positions in pollock and herring - both in the Pacific and North Atlantic. We do not consider any significant increase in volume precisely for new species. At this stage, we are looking more to get more profit, more value added from those resources that are. Plus, we are very seriously investing, as you know, in the construction of ships. Therefore, now we are not considering aggressive removals or any serious access to other fisheries. In fact, the fisheries are already quite regulated not only in Russia, but throughout the world.

- Your main creditor is Sberbank? How has the process affected your relationship?

- The process, of course, could not go unnoticed. And, of course, Sberbank, as the main creditor, monitors the situation. We are actively cooperating and exchanging information with him; they are aware of all the processes. But so far, everything is fine.
- What is the leverage now?

- I would not want to disclose.

- How many products do you export and supply to the domestic market today?

- On average, over the past two years, we supply about 40% of the catch to the Russian market. Moreover, this figure is slowly growing. In general, if we look at the distribution by country, Russia is our main market for revenue. Of course, there are more exports.

- Are the export conditions more favorable than in the domestic market?

- Traditionally, species such as cod are highly valued on the world market. We see a very interesting development in pollock. That is, the completely obvious substitution of imported products, in particular, of Chinese origin. I'm not talking about traditional types of consumption for Russia, such as mackerel, herring, blue whiting, halibut. You can’t hold any categories, such as the fact that only cheap fish is consumed in Russia - no! For example, Russia’s main market for halibut halibut is Russia, no one in the world can give a better price. Smoked halibut in Russia is hard to beat.

- What are your main foreign markets?

- If we talk about the views of the North Atlantic, then here the European countries are the basis of the sales market. The UK remains one of the key markets. We also sell to North American markets. This volume is not very large, but sensitive. As for the positions of the Pacific Ocean, the distribution there is this: pollock fillet is Russia and Europe, China remains one of the significant significant buyers of products, namely the raw materials that are processed there. Well, a significant amount we sell to African markets. This applies to species such as herring, blue whiting and small mackerel - it is in great demand there.

- The industry is actively discussing changing the rules for issuing crab quotas and switching to auctions. How do you feel about this?

- So far, the regulator has assured us that the distribution of resources through the auction system will relate exclusively to crab stocks. We rely on this and believe that the existing system will be preserved. We believe that this system allows both the fishing industry and the state to count on an effective system for the development of the sector.

It seems to me that it has been proven over the past ten years that stability and clear rules of the game are very important for market participants.
As for crab auctions, we believe that the regulator also has other tools to increase the fiscal burden on very profitable types of fishing. And not necessarily through auctions.

- Do you mean collection rates?

- The collection rates can be set by analogy with the export of oil and gas, where fees change almost every month depending on market conditions. Today, tracking and understanding the conjuncture of various types of products is not a big deal. In general, we do not agree that we transferred part of the crab quotas to the auction.

- Do you plan to participate yourself, as I understand it?

- Yes.

- Nevertheless, the Federal Antimonopoly Service (FAS) has long wanted to introduce auctions for other types ...
- I repeat that we hope that the regulator will leave the system in the form in which it operates today. At least for the period when the investment quota program is in effect. It seems to me that it would probably be very unfair to announce an auction and to withdraw some amount of quotas that were used for the construction of ships and for the construction of factories.

Those who build ships and factories today, they are not counting on the investment quotas that they will receive. The quota, which will be obtained under the investment program, is hardly enough to load the vessel with work for two months out of eleven in a year, given that one month it is necessary to engage in technical support of the vessel, repair, and its preparation. That is, all those who build ships and factories, they do not rely only on investment quotas, this is not economically justified. They rely on other quotas, and not only in these forms, to support this program. I think the regulator understands this.

- There is a feeling that the state’s attention to the industry has become more. Do you notice this?

- Yes, it is obvious that in recent years the attention of regulators to the industry has become much higher. This is from the FAS, and from the tax service. But if we talk about the same tax authorities, we do not see that there is any kind of bias. The fact that more control is exercised by the tax authorities is actually not bad: if you play by the rules, there are no problems. The same applies to FAS.

- What do you attribute such increased attention to in recent years?

- It seems to me that there is an understanding that the industry is profitable and that replenishment of the budget can be more significant if tax collection and control over the industry are more serious.