Lawyers, other representatives, expert(s), tribunal’s secretary

Second and Final Award

A. The Parties and their representatives

1.
The Claimant, East-West United Bank S.A. (hereafter referred to as the "Claimant") is a bank incorporated in Luxembourg and whose registered office is situated at 10, Boulevard Joseph II, L-1840 Luxembourg.
2.
The Claimant is a wholly owned subsidiary of Sistema Public Joint Stock Financial Corporation ("Sistema"), which is heavily invested in telecommunications and televised content platforms.
3.
The Claimant is represented in this arbitration by Morgan, Lewis and Bockius UK LLP. Condor House. 5-10 St. Paul’s Churchyard. London. EC4M 8AL. The telephone number is +44 20 3201 5000. The e-mail addresses of the relevant solicitors in that firm are peter.sharp@morganlewis.com and paul.mesquitta@morganlewis.com. At the evidential hearing, the Claimant is also represented by Dominic Kennelly of 3 Verulam Building, Gray’s Inn, London WC1R 5NT, UK.
4.
The Respondents are part of a group of media companies (the "Group"), and are as follows:

(i) Progress Studio LLC (referred to as the "First Respondent"), which is incorporated in St Petersburg, Russia;

(ii) Movie Production Center LLC (referred to as the "Second Respondent"), which is incorporated in Moscow, Russia;

(iii) New Media Distribution Company SEZC LTD (referred to as the "Third Respondent" or "NMDC"), which is incorporated in the Cayman Islands;

(iv) New Media Programming (referred to as the "Fourth Respondent" or "NMP"), which is also incorporated in the Cayman Islands; and

(v) Nova Century Holdings LTD (referred to as the "Fifth Respondent" or "NOVA"), which is incorporated in Gibraltar.

The Group also includes New Century Distribution GmbH (referred to as "New Century"), which is incorporated in Switzerland.

5.
The First and Second Respondents are wholly owned subsidiaries of New Century, which is a subsidiary of NOVA, the Fifth Respondent. NOVA is a subsidiary of NMP, the Fourth Respondent, which is a subsidiary of NMDC, the Third Respondent.
6.
The Respondents are represented in this arbitration by GSC Solicitors LLP, whose address is 31-32 Ely Place, London EC1N 6TD, UK and the telephone is +44 20 7822 London. The relevant solicitor at that firm is Barry Samuels. His e-mail address is bsamuels@gscsolicitors.com. The Respondents are also represented by Barbara Dohmann QC and Daniel Burgess of Blackstone Chambers, Blackstone House, Temple, London, EC4Y 9BW.

B. Arbitration Agreement and appointment of the Tribunal

7.
By a Request for Arbitration dated 28 February 2018, the Claimant requested arbitration of a dispute with, at that time, the First and Second Respondents. It invoked the provisions for arbitration quoted below from an agreement in writing (the "Agreement") dated 23 August 2013, which was subsequently amended and restated as described in the next part of this Award. The Third, Fourth and Fifth Respondents were joined later as parties to this arbitration.
8.
Under the heading "Arbitration", Clause 39.2 of the Agreement as amended and restated reads as follows:

(a) Any Dispute shall be referred to and finally resolved by arbitration under the LCIA Arbitration Rules (for the purpose of this Clause, the Rules).

(b) The Rules are incorporated by reference into this Clause and capitalised terms used in this Clause which are not otherwise defined in this Agreement have the meaning given to them in the Rules.

(c) The number of arbitrators shall be three. The claimant (or claimants jointly) shall nominate jointly one arbitrator for appointment by the LCIA. The respondent (or respondents jointly) shall nominate jointly one arbitrator for appointment by the LCIA. The LCIA shall appoint the chairman.

(d) The Parties hereby agree that any restriction in the Rules upon the nomination or appointment of an arbitrator by reason of nationality shall not apply to any arbitration commenced pursuant to this Clause 39.2.

(e) The seat, or legal place of arbitration, shall be London, England.

(f) The language used in the arbitral proceedings shall be English. All documents submitted in connection with the proceedings shall be in the English language, or, if in another language, accompanied by a certified English translation.

(g) Except as permitted under Clause 39.4 (Option to litigate), the jurisdiction of the English courts under s45 and s69 Arbitration Act 1996 is excluded."

The word "Dispute" is defined in wide terms in Clause 39.1 of the Agreement.

9.
Under the heading "Governing law", Clause 38 of the Agreement provides:

"This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law."

10.
In accordance with the provision for arbitration quoted above, the Claimant nominated Christopher Symons QC of 3 Verulam Building, Gray’s Inn, London as an arbitrator, and the First and Second Respondents nominated Michael Brindle QC of Fountain Court chambers, Temple, London, as an arbitrator. Mr Symons and Mr Brindle were duly appointed by the Court of the LCIA, which also appointed David St John Sutton of 20 Essex Street, London as the third arbitrator and chair of the Tribunal on 22 May 2018. The three arbitrators so appointed are referred to in this Award as the Tribunal or "we".

C. Outline

11.
On 11 December 2018, the Tribunal made a Partial Final Award, which was amended by a Memorandum of Corrections dated 10 January 2019. The Partial Final Award as amended, is referred to herein as the "First Award". As explained in the First Award, the dispute between the Claimant and the Respondents (referred together as the "Parties") was reduced to whether the principal, interest and costs claimed by the Claimant pursuant to the Agreement should be paid immediately or by staged payments. The background to how that dispute arose and developed is described in the First Award as is the procedural history leading up to that award.
12.
The disposition part of the First Award reads as follows:

"For the reasons stated, the Tribunal awards the Claimant the sum of US$9,150,024.89, being the principal sum outstanding under the Agreement, such sum to be paid by the Respondents on or before 31 March 2019.

The Tribunal reserves jurisdiction to make another award or awards in respect of any remaining issues, including the Claimant’s claims to interest and costs." (paragraphs 75 and 76)

This Award addresses the only remaining issues, namely, interest and costs.

13.
As stated in the First Award, the Respondents confirmed that the defences and cross-claim advanced by them in this arbitration were withdrawn, so there is no longer an issue that the Claimant is entitled to an award of interest and costs. It remains for the Tribunal to determine in this Award the amounts to be payable to the Respondents in respect of those claims and the date of payment.
14.
The Parties agreed upon the exchange of written submissions to address the amounts of interest and costs so payable, and the Tribunal received those submissions as follows:

(i) Claimant’s first submission on 30 November 2018;

(ii) Respondents’ reply submission on 11 December 2018;

(iii) Claimant’s submission in response on 17 December 2018;

(iv) Respondents’ submissions in response on 18 December 2018.

Having carefully reviewed those submissions and comments on them as identified hereafter, the Tribunal proceeds to examine and determine each claim.

D. Interest

15.
The Claimant seeks interest as follows: -

(a) Outstanding interest which has accrued under the Facility Agreement, being overdue interest and default interest until 28th September 2018 in the sum of US$1,244,700.02;

(b) Default interest from 28th September 2018, which it has calculated to 30th November 2018 to be a further US$211,670.15;

(c) (a) plus (b) totals US$1,456,370.17;

(d) Continuing interest post-Award under Clause 8.3(a) of the Facility Agreement at LIBOR plus 9.25%, compounded quarterly. Clause 8.3 stipulates that contractual default interest is payable both before and after judgment;

(e) Alternatively, interest pursuant to the Tribunal’s powers under the Arbitration Act and/or under the LCIA Rules.

16.
The Respondents’ response states that the Claimant has failed to explain or justify the rate which it seeks to apply. However, it appears that the only specific point at issue is whether 3 month LIBOR or 6 month LIBOR should be applied in the compounding process. Thus, the Respondents helpfully put forward their own calculation based upon a 6 month rather than 3 month period. On this basis the amount sought by the Claimant represents an overcharge of US$ 26,212.87. The Respondents are content to pay interest up to and including 31st December 2018 in the sum of US$1,524,233. We note that the Respondents do not dispute that post- Award interest remains payable at rates stipulated in the Agreement.
17.
In reply the Claimant has asserted that under Clause 9.1 (c) of the Facility Agreement an interest period of 3 months is to be applied, but not (it is accepted) if the Borrower has selected a different period in a "Selection Notice". Although the Respondents contend that the Borrower had always chosen a 6 month period, the Claimant denies this and points to the lack of a Selection Notice. Furthermore, the Claimant points to an email of Joop Vestjens dated 27th March 2014 which evidences an agreement between the relevant parties to apply a 3 month interest period. The Claimant says that this remained the position thereafter, as is shown by an email dated 29th September 2014. In any event the Claimant points out that the bulk of interest claimed is default interest, where Clause 8.3(a) of the Agreement provides that the duration of each interest period is selected by the "Agent" (acting reasonably). The Claimant, who is the Agent, alleges that it has acted reasonably, in the light of the position prevailing before default.
18.
The Respondents claimed that 6-month interest periods were always claimed. There is reference to a document of 30th June 2017, but also to earlier Utilisation Requests. But the Respondents were not able to identify a Selection Notice. Despite this the Claimant itself belatedly discovered, and revealed by a letter dated 21st December 2018, a Selection Notice of 29th June 2017, stipulating 3 months in respect of US$1,200,000 of the loan, but 6 months for all remaining balances. It was quite unclear from the Claimant’s letter of 21st December 2018 how this affected the calculations, and the Tribunal sought more detail. The Claimant gave that detail in a further letter of 2nd January 2019, accompanied by a detailed schedule of calculations.
19.
According to the Claimant's further explanation, the error in failing to identify a Selection Notice has no effect upon the calculations. In other words, the Selection Notice of 29th June 2017 had been taken into account in the calculations earlier provided, even though the Selection Notice itself had not been specified. Understandably, the Respondents remained unconvinced, as set out in a final letter to the Tribunal dated 4th January 2019. The point is well made that the Claimant has always been less then clear in its interest explanations and that full transparency is required.
20.
It is unfortunate that the Selection Notice was not revealed earlier, and also unfortunate that the true position was not made clear in the Claimant’s letter of 21st December 2018. Nonetheless, we accept the Claimant’s position as now explained. Prior to 29th June 2017 the Borrower had not chosen a 6 month period, in that we find that there was no earlier Selection Notice. Indeed, the parties had operated an effectively agreed 3 month period, even if the Borrower made reference to 6 months from time to time. After 30th June 2017 the Claimant did operate the chosen interest periods for the two different parts of the loan, but the defaults of the Borrower introduced elements of default interest as early as 2017. The loan was accelerated on 15th January 2018 and thereafter all the claims are for default interest, where the Claimant had the right to choose the interest period.
21.
We accept the explanation now set out in detail in the "Breakdown and Timeline for Interest Calculations to date" sent with the Claimant’s letter of 2nd January 2019. In any event after default, where the bulk of the interest claim falls, it was for the Claimant to choose the period, provided that it acted reasonably. It did so act. The Respondents have requested further calculations, but have not, in our opinion, been able to point to any clear error in the latest calculations set out in the letter of 2nd January 2019.
22.
Accordingly, we award:

(i) Interest and default interest to 30th November 2018 in the sum of USS 1,456,370.17 as asked by the Claimant;

(ii) Default interest accruing from 30th November 2018 until payment of the First Award on all sums unpaid thereunder. Such interest shall accrue at LIBOR plus 9.25% compounded quarterly.

23.
Because post award interest accrues at the same rate and for the same interest periods as pre-Award default interest, it does not matter that 30th November 2018 is not the date of either the First Award or this Award. The Tribunal now has some updated figures beyond 30th November 2018, up until 28th December 2018 but these are not necessary for our award and have only been provided (not having been sought) following the lack of clarity in earlier explanations. We will remain with the figures as calculated up to 30th November 2018 which are the sums which the Claimant has actually claimed and which we are satisfied to be due and payable.

E. Costs

24.
As stated in the previous award, the Respondents confirmed that the defences and cross-claim advanced by them in this arbitration were withdrawn, so there is no longer an issue that the Claimant is entitled to an award of interest and costs. That follows both from the withdrawal of the Defence, from the contract between the parties and from Article 28.4 of the LCIA Rules.
25.
Clause 16.3 of the Facility Agreement provided:

"The Company must on demand pay to each Finance Party the amount of all costs and expenses (including legal fees) reasonably incurred by that Finance Party (or where a Default has occurred, incurred by that Finance Party) in connection with: (i) the enforcement of, or the presentation of any rights under, any Finance Document..."

26.
Article 28.4 of the LCIA Rules provides:

"The Arbitral Tribunal shall make its decisions on both Arbitration costs and Legal Costs on the general principle that costs should reflect the parties’ relative success and failure in the award or arbitration or under different issues, except where it appears to the Arbitral Tribunal that in the circumstances the application of such a general principle would be inappropriate under the Arbitration Agreement or otherwise. The Arbitral Tribunal may also take into account the parties’ conduct in the arbitration, including any co-operation in facilitating the proceedings as to time and cost and any non-co-operation resulting in undue delay and unnecessary expense. Any decision on costs by the Arbitral Tribunal shall be made with reasons in the award containing such decision."

27.
The Respondents have also referred us to Article 28.3 of the LCIA Rules which provides so far as material:

"The Arbitral Tribunal shall also have the power to decide by an award that all or part of the legal or other expenses incurred by a party (the "Legal Costs") be paid by another party. The Arbitral Tribunal shall decide the amount of such Legal Costs on such reasonable basis as it thinks appropriate. The Arbitral Tribunal shall not be required to apply the rates or procedures for assessing such costs practised by any state court or other legal authority.

28.
The Tribunal has had the benefit of submissions from the Parties on costs as follows:

(i) Claimant’s submissions on costs on 30 November 2018;

(ii) An exchange of emails between the parties regarding counsel’s fee notes and costs generally between 3 and 6 December together with an update of the Claimant’s Appendix I on costs. The exchange was followed by a decision from the Tribunal in terms: "Having considered the Respondents’ request for more details of the Claimant’s costa submissions, the Tribunal has decided not to give any directions. If the Claimant produces inadequate support for its claim to costs, the claim may be refused or reduced when the Tribunal carries out its assessment."

(iii) Respondents’ submissions in reply on 11 December 2018;

(iv) Claimant’s response to that reply on 17 December 2018;

(v) Respondents’ comments to that response in the letter of 18 December 2018.

29.
The Claimant claims a total of £209,208 in respect of its solicitors’ costs and £16,920 in respect of counsel’s fees and disbursements of £5,914.80 a total of £232,042.80. The Respondents counter by submitting that the Claimant’s solicitors’ fees should be £79,762.50 but they accept Counsel’s fees as reasonable (in spite of the dispute about lack of fee notes) and challenge the disbursements in relation to Russian Lawyers and for lack of particularity. The Claimant also claims a further £2,585 in relation to the submissions that the Claimant has had to prepare on costs.

The correct approach in this case

30.
There is no dispute that the Respondents must pay the costs of the Claimant. The members of the Tribunal are unpersuaded by the Claimant’s submissions that it does not have to show that the costs claimed are reasonable. While clause 16.3 of the facility agreement suggests that the costs do not have to be reasonably incurred we believe there are two reasons why it would be inappropriate for us to adopt such an approach. First the costs we shall award are in our discretion and following from LCIA Rule 28.3 shall be on a reasonable basis. Costs that are incurred unreasonably should not in our view be recoverable. In addition, if the costs are not reasonably incurred there will always be an issue as to whether those costs are in fact incurred in connection with the enforcement by the Claimant but are rather costs incurred that go beyond what is required for enforcement. However, we do not need to go down that route. We shall not award the Claimant any cost we consider to be unreasonable.
31.
We do not feel it is necessary to spend time debating where the burden of proof lies. It is, in our view, up to the Claimant to satisfy us that the costs claimed are reasonable.
32.
The Tribunal has had considerable experience in dealing with costs following an Arbitration and we are satisfied that the amount of detail provided by the Claimant is acceptable and in line with what we would have expected. This is not the same exercise as may take place in a court of law. Using our experience it is for the Tribunal to determine whether the amounts claimed are reasonable and we do not find a lack of time records inhibits us in our task. We would not expect to be able to identify "the specific items of work undertaken"1 nor would we expect more detail as to which fee earner did which particular piece of work. Similarly we do not consider it essential that we have sight of counsel’s fee notes, although it is quite usual to see Counsel’s fee notes when considering the costs. In this case first the Claimant’s counsel’s fees are quite obviously reasonable and second they are not now disputed.
33.
We reject the Respondents primary submission that we do not have enough information upon which to evaluate the costs.

Russian lawyers

34.
It is a matter for the Claimant which lawyers, and how many, work on the case. If the amount charged for those lawyers is unreasonable then the costs will be disallowed. We reject the submission that in some way the Claimant was not entitled to use the lawyers of choice. Where some of the material to be dealt with was in Russian and instructions were being taken from people whose native tongue is Russian we find it unsurprising that the Claimant has involved Russian lawyers. It appears as though Grigory Marinchev was the client relationship attorney and was involved in drafting the facility arrangement from the outset. But even if he was not so involved provided the overall cost of representation was reasonable it does not seem to us it is for the Respondents to say who the Claimant should have representing them. As the Claimant pointed out in their response at the hearing the Claimant chose to have junior counsel representing their side with the partner level attendance coming from Russia. That was a matter for the Claimant.

The Commercial Court Proceedings

35.
The Claimant has assured the Tribunal that none of the fees being claimed relates to the Commercial Court proceedings. We have studied the fees claimed and the amounts claimed and there is nothing which justifies the Tribunal going behind what the Claimant and its solicitors have said. The Respondents urge us to make some specific deduction under this heading, but we can see no justification for that and we are not prepared to make any deduction.

Rates to be charged

36.
Once again, the Tribunal’s experience of London solicitors’ rates comes into play. The hourly rates charged for partners was £645-£685 per hour, for associates £390 per hour and for trainees £200-215 per hour. These rates are by no means unusual and do not come as any surprise to the Tribunal. They are not unreasonable rates. What is of course important is that the fee earners are deployed in a sensible fashion to ensure that the partners are not doing work which could be done by a trainee. We can see no justification in reducing the rates recoverable as suggested by the Respondents.

The fee earners employed

37.
The Respondents refer to the Claimant’s team as "an enormous team of ten fee earners"2. The first point we make is that it is entirely in the discretion of the Claimant how many and which fee earners they employ. It is not the number which is relevant. As pointed out by the Claimant it is unsurprising a number of trainees were employed since they move seats on a regular basis. This was a substantial claim and the Respondents chose to raise very serious allegations against the Claimant. This took the claim outside a normal debt collecting exercise and it is no surprise that in addition to Counsel a number of fee earners were involved.

Disbursements

38.
This is a modest figure of £5,914.80 which includes the client’s travel costs. We are not prepared to make any reduction in relation to this sum.

The hours worked

39.
The Respondents have been through the months of 2018 and commented on the hours spent in each month. It is of note that in spite of the complaints of lack of details this exercise appears to have been accomplished without difficulty. As we have said above the Respondents offer £79,000 odd against a claim of £209,000 odd. This is wholly unrealistic. As the Claimant points out in their response3 the Respondents claimed the sum of £59,615 for a single day in the Commercial Court4. However, we do think that when looked at overall there should be some modest reduction in the fees claimed.
40.
We note that Counsel was not employed to prepare the Statement of Claim5 but only in relation to the Statement of Reply. The Respondents criticism in relation to the hours spent preparing the Statement of Claim therefore lose some of their force. Nevertheless, the work undertaken and charged for between January and 29 May 2018 when the Statement of Claim was served does seem to us to be excessive. At this time what was in prospect was a debt collecting exercise albeit for a substantial amount. It is not clear how much further work was done on the Statement of Claim in May, but an additional amount was changed in that period as well.
41.
The costs of Amending the Statement of Claim and the consequential amendments to the Defence were agreed to be paid by the Claimant6. The amendments arose from the decision in the Commercial Court proceedings and resulted in the joinder of the additional 3 parties as Respondents. We take that into account in our conclusions.
42.
Once the Defence and Cross-Claim were served it seems to us that the Respondents only have themselves to blame for the work that had to be done by the Claimants. When a party is faced with very serious allegations we would expect it to counter such allegations with all the material at their disposal. More advice is inevitably needed. We are not prepared to reduce the costs at all for this period. We have considered the Respondents criticisms in relation to witness statements, the CMC and the period building up to the hearing and we do not find the charges unreasonable taking into account the allegations the Claimant was facing.

Conclusions and decision on costs

43.
For the reasons given in paragraph 40 above we think that the fees prior to the service of the Statement of Claim should be reduced. We think the appropriate reduction is one of £15,000.
44.
In addition, the costs of Amendments following the decision in the Commercial Court proceedings were agreed to be paid by the Claimant. These costs were very modest but since the Claimant should not only bear its own costs of the Amendments but the Respondents as well we deduct an additional £10,000 under this head.
45.
We see no reason why the Respondents should not bear the Claimant’s costs of preparing its submissions on costs. We do not find the Claimant has acted either "unreasonably and inappropriately"7 nor did we find the Claimant’s information "inadequate, unfocused or incomplete". We are prepared to allow these costs in the sum claimed namely £2,585. Had the Claimant sought further costs in relation to interest calculations, we would have refused them as we take the view that the Claimant has been less helpful in this area than it might otherwise have been.
46.
The effect of these conclusions is that the Respondents shall pay the sum of £209,627.80 being the sum claimed of £232,042.80 less £25,000 plus £2,585.

The Arbitration Costs

47.
There is no dispute that the Respondents should bear these costs.
48.
The total amount of the costs of the arbitration (other than the legal or other costs incurred by the parties themselves), up to the date of this our Final Award, have been determined by the LCIA Court, pursuant to Article 28.1 of the LCIA Rules to be as follows:

Registration fee £ 1,750.00
LCIA’s administrative charges: £ 15,475.76
Tribunal’s fees and expenses £130,104.34
Total costs of arbitration£147,330.10

Towards these costs the Claimant has paid £97,289.10 which includes the Registration fee, deposits lodged and interest accrued. The Respondent has lodged £50,040.99 which includes deposits lodged and interest accrued.

Time for payment

49.
The Tribunal is of the opinion that, in the absence of agreement, the interest and costs awarded to the Claimant should be paid by 31 March 2019.

F. Disposition

50.
For the reasons stated, the Tribunal awards and orders that the Respondents pay to the Claimant by 31 March 2019 the following sums:

(i) US$ 1,456,370.17 for interest and default interest incurred up to 30 November 2018;

(ii) £ 209,627.80 for the Claimant’s costs, and

(iii) £97,289.10 to reimburse the Claimant for the costs incurred by the Claimant towards the costs of the arbitration.

51.
The Tribunal also awards and orders the Respondents to pay to the Claimant default interest accruing from 30 November 2018 until payment on all sums ordered to be paid under the First Award.
52.
The Respondents should also bear the costs of the arbitration and reimburse the Claimant as stated in paragraph 50(iii) above.
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