Stena might still win the battle but lost the war already

-- 15 February 2009 --
PHOTO: Fedoren -

On February 13, the St. Petersburg Arbitrazhniy Court refused to enforce the award made by the international tribunal in Stena RoRo AB v. Baltiyskiy Zavod OJSC.

Stena, a leading Swedish shipbuilder, will most likely win the appeal but even then a local victory will not disguise the overall defeat.

In August 2005, Baltiyskiy Zavod, one of the oldest shipyards in Russia, and Stena RoRo AB of the Stena group entered a turnkey contract whereby the Russian shipbuilder agreed to manufacture two vessels with an option to build another two. The contract, valued 240 mln Euro, a rare contract of the kind for the Russians, seemed like a fabulous opportunity. But there was a catch. The works were to be financed through a loan secured by pledge of the Baltiysky Zavod's shares.

Just days before the contract was concluded the Baltiyskiy Zavod was overtaken by the United Industrial Corporation, one of the largest Russian industrial and development groups close to Kremlin. The new shareholder did not approve the deal and asked the Swedes to back off.

Stena had no choice but to hire another company and pay extra 58 mln US dollars for each vessel. In 2008 the arbitration tribunal in Stockholm made an award in favour of Stena. However, instead of the 145 mln Euro claimed by the company, only 20 mln Euro have been awarded.

In December 2008 Stena applied to the St.Petersburg Arbitrazniy Court to enforce the award in Russia. Baltiyskiy Zavod, on the other hand, had appealed to a court in Sweden to set aside the decision of the tribunal on the grounds that the contract was not approved the Board of Directors of Stena and, therefore, is void.

This appears to be a temporary failure and Stena most probably will enforce the award and get some cash. The overall picture, however, seems gloomy. The project which looked like a no-lose bargain ended in a puff of smoke.





Baltiyskiy Zavod:

Baltiysky Zavod (the Baltic Shipyard) is one of the oldest shipyards in Russia. It is located in Saint Petersburg in the south-western part of the Vasilievsky Island. Together with the Admiralty Shipyard it built most of the Russian battleships as well as nuclear powered icebreakers. Shareholders: the United Industrial Corporation - 88%, the rest - 2,6 mln minor shareholders. The State keeps the 'golden share'.

United Industrial Corporation:

United Industrial Corporation (OPK) is one of Russia's largest diversified corporations managing more than 300 bn rubles' ($9 bln) worth of assets and include International Industrial Bank, People's Bank of the Republic of Tyva, Severnaya Verf, Baltiysky Zavod, Iceberg Design Office, the Ulugkhem Coal Basin, one of the world's largest cocking coal deposits, shares in JSC OKB Sukhoi and JSC 'Aviation Holding Company 'Sukhoi'.

Stena RoRo AB:

Stena RoRo AB, is a part of Stena Sphere, one of the world's largest shipbuilders and operators. Stena Sphere is a family owned conglomerate with headquarters in G?teborg and more than 17,000 employees and revenue of 6.5 billion US dollars.