Last month we duly notified the Oslo Stock Exchange of the failure by the Russian state owned company Sevmash to respect a ruling last year by the Swedish Arbitration Institute, a ruling that went in their disfavour.
Sevmash is a large navy shipyard near Archangel which is famous for building, and is still building, nuclear submarines. In 2004 Odfjell placed a large order for up to 12 chemical product tankers, each of about 45,000 tons capacity. Whilst initially applauded as a milestone in bilateral relations etc. this contract came to naught. This because of excessive and continuing delays and a Russian refusal to complete the order unless Odfjell paid up significantly, this in spite of Odfjell already in 2006 having agreed to increase the price by about 10%. By 2008 Odfjell finally decided to cancel these contracts.
The arbitration panel concluded, and unanimously, on 30 December 2009 that Sevmash was guilty of wilful misconduct, and awarded Odfjell damages of USD 43 million plus reimbursement of legal costs and 8.5% interest for any delay in settling the award.
Today the outstanding amount is around USD 47 million, all included. This continuing settlement failure, effectively by the Russian ministry in question, is obliging Odfjell to take action these days via Russian courts, most likely in Archangel, a very disappointing turn of events.