The Noga case, which those in Russia had thought was closed for good, has made itself known again. Yesterday, the Russian Finance Ministry acknowledged that funds in the Paris accounts of the Central Bank, RIA Novosti information agency and a number of other state companies in VTB Bank France SA and Calyon Bank, worth up to $70 million, had been frozen. Noga considers the 2006 agreement under which U.S. businessman Alex Kogan bought its debt invalid. The Finance Minister accuses Noga of misinforming the courts and Noga lawyers are ready to seek $800 million from Russia.
It became known yesterday that bailiffs in Paris froze the assets in France of a number of Russian state companies and agencies in response to a suit by the Swiss Noga Co. So far, only the Russian Finance Ministry and the VTB press service have confirmed that fact. They did not specify the amount of assets involved or the names of their owners. Federal state unitary enterprise RIA Novosti has confirmed that its assets were frozen. Its editor-in-chief Svetlana Mironyuk said that ˆ79,000 was affected in VTB Bank France SA. She added that the warrant that the bailiffs were acting on was dated January 2 and stated that the “movable property of the Russian government” was liable to seizure. Kommersant has learned that assets of state companies and agencies have been frozen in two banks so far – VTB Bank France SA and Calyon Bank. The deposits of Central Bank structures were frozen in the latter bank. The Central Bank is not commenting on that information. The total sum of the funds that could be frozen, according to the statement issued yesterday by the Finance Ministry, could come to 50 million euro.
It is not yet known specifically what suit by Noga, whose owner Nessim Gaon has been in court against Russia since 1994, led to the actions. Noga lawyer Antoine Korkmaz told Ogonek magazine, which covered the freezing of the Russian accounts in France yesterday, that the warrant was issued last summer, after the June 5 decision of International Commercial Arbitration in Paris and the rejection of a Russian appeal of that decision in the French Supreme Court at the end of last year. Korkmaz's office stated yesterday that Gaon will have a comment on the situation no earlier than Wednesday. The decision of the French Supreme Court has not yet been published. Noga scored another success in the Federal Tribunal of Switzerland on December 24 when that court ruled that the preliminary freezing of the funds of the Moscow Center for Automated Air Traffic Control, part of the IATA system, of up to 200 million Swiss francs (about $180 million) was legal. The court rejected the appeal of the Russian side filed by a subsidiary of the Air Traffic Servicing State Corp. It is possible that the warrant is connected with that case. Noga's Swiss lawyer Carlo Lombardi of the PTAC firm, who handled that case, declined to comment.
Anton Kostenko, a partner at EPAM, said that “the keys words in the story are enforcement proceedings.'” If Russian lawyers do not provide proof by February 2 that the frozen accounts are not assets of the Russian Federation or the warrant is not disputed, the assets will be automatically taken off the accounts without further action by Noga. Kostenko expressed surprise that the assets of legal entities were frozen. In spite of the fact that they are affiliated with the government, their assets are legally not state money. Noga lawyers refer to a 2002 agreement between Russia and Noga in which Russia declined sovereign immunity that makes the freezing of those assets legal.
The Russian Finance Ministry is not commenting on the situation. It considers Noga's actions illegal, saying that Russia has owed Nessim Goan nothing since 2006. The legal basis for all of the actions by Noga and its partners to seize Russian assets is a 1997 decision in favor of Noga by the Stockholm Arbitration Court. Noga has been bankrupt since 1993 and has unsettled debts with BNP Paribas , Banque Cantonal de Geneve and Calyon (formerly Credit Lyonnais , part of the Credit Agricole group). Those banks concluded an agreement with Noga on the assignment of debt. In its turn, Noga was given the right to demand payment of Russia's debts to the banks. Those banks were the ones from which Kogan claims to have purchased the Russian debt to Noga, with the agreement of the Russian Finance Ministry and using credits from unnamed Russian state banks.
“After we bought the accounts receivable for the full sum connected with the assignment of debt of the consortium of banks, Gaon no longer had a mandate,” Kogan said. “Consequently, the story with the Noga firm can be considered over. All the rest of the demands are ungrounded.” He estimated the amount of the debt at $100-200 million. That is the main debt recognized by the Stockholm Arbitration Court with interest and fines. But Kogan stipulated that the debt assignment agreement was “extremely complex” and different courts could, in theory, interpret it variously. Relations between Kogan and the Russian Finance Ministry, Kogan says, are also unregulated. He still has to “draw up certain documents.”
There is no documented confirmation that the agreement is recognized in Swiss and French jurisdictions. Kogan states that International Commercial Arbitration in Paris confirmed Russia's debt to Noga and not the Russian Federation's debt to the banks, which he purchased. “The lawyers hired by the Russian side say that Noga has deceived the French courts,” a Finance Ministry spokesman stated. “Noga's only goal is its intention to force the Russian government into negotiations on the settlement of its financial claims. Lawyers for the Russian Federation also note that the freezing of Central Bank accounts is a violation of French banking law.'”
The Russian Foreign Ministry has already sent a note to the French Foreign Ministry about the actions of the bailiffs. The Finance Ministry intends to protest their actions as well. Alex Kogan, who is located in the United States, intends to solve the problem in the European Union and Switzerland this week. But it looks like Russia's problem with Noga will be very serious this time. Unprotested court decisions allow Noga to freeze funds and other assets worth about $250 million - $70 million in the EU and $170 million in Switzerland. In the IATA, funds paid to Aeroflot by Western airlines for flying across Russian territory may be frozen. French lawyers contacted by Kommersant say that any Russian state assets worth up to 50 million euro may be frozen on February 2. Gaon's lawyers are talking about seeking about $800 million from Russia in connection with the court decisions in Paris and Geneva and Noga has already sued the Swiss government for 1.1 billion Swiss francs ($1 billion) for obstructing its seizure of Russian funds in the country in 2003. It is possible that Gaon is preparing for the final battle with the Russian Finance Ministry, a year and a half after writing off its debt.