When it collapsed, it had huge, relatively modern fleets, none of which were subject to a mortgage. Within a few years, something had gone badly wrong. The companies went from a position of being in a good state to a state of insolvency, which led to a huge amount of litigation as vessels were arrested and creditors brought proceedings to get their money back. Shaw and Croft partner Bob McCunn says that some of the mismanagement can be attributed to the fact that the systems used by the new companies were not as tight as they needed to be in the commercial world. It is not unusual for Russian businessmen to conclude high value deals and draft their contracts there and then on a one-page document.
Corruption is also a problem in some of the new companies.
And the problem was not just limited to internal corruption. Foreigners took advantage of individuals, some of whom were very naive. McCunn recently acted in a case arising from a joint venture between a Russian and a Greek company. Our client put its ships into the joint venture and the Greeks were then supposed to bring them up to scratch and manage them, but the Greeks went off with all the money. Internal corruption is also a problem.