Market muddle

The accuracy of rate assessments used by expert witnesses has come under fire at the $800m Sovcomflot corruption trial in London.

Colin Pearce, of Causeway Tanker Consultancy, was pressed on his methods of coming up with market levels for the periods when defendant Yuri Nikitin was allegedly chartering tankers from the Russian owner at soft rates.

Pearce, former chartering chief at Shell and Angelicoussis, admitted assessing a rate was an inexact science but defended his use of Clarksons data as a valid method of giving a figure at times of infrequent published deals.

After a comment by Justice Andrew Smith that the hearing was “becoming an arid theoretical debate,” barrister Steven Berry, for Nikitin, got down to brass tacks and showed the court a document from broker Gibsons detailing all the known suezmaxes time charters from 2001 to 2004.

During the time of the fixture of Sovcomflot’s 155,000-dwt suezmax Romea Champion (built 1992), to a Nikitin company at $19,000 per day, there were only six time charter deals between January and June 2003.

Berry pointed out that as two were for 12 years, this brought the number down to four, two of which were 159,000-dwt Sovcomflot vessels, the SCF Sayan and SCF Caucasus, (both built 2002) fixed for $27,000 per day over a year and $22,500 per day for 18 months respectively, according to Gibsons.

But Berry said based on depositions in this case, those figures were wrong and should have been $25,000 per day and $15,000 per day profit share on a six plus six month basis.

He also claimed another fixture was incorrect and said there were no directly comparable deals on which to assess the rate for the Romea Champion.

(Click here to read earlier exclusive reports from the Sovcomflot corruption trial as well as the interlocutory judgments in full.)

Berry also referred to four fixtures that were missed by Gibsons in the period between November 2002 and October 2003, including two involving Romea Champion, and two for two other Sovcomflot ships.

The charter rates of two 151,000-dwt Novoship tankers, the Kaspiy and Kuzbass (both built 1998) were also overstated in 2003, by about $3,500 per day each, he said.

Pearce said: “You are exaggerating the fact that these deals were missed because they took place over nearly a year.”

Berry asked him: “Isn’t this a completely hopeless way to assess rates?”

“I didn’t assess my market rate using any of these fixtures. I used Clarksons,” Pearce responded.

Berry said: “Would you not agree the market rate was $19,000 per day?”

“I disagree,” the consultant answered.

Berry pressed: “You preferred to rely on Clarksons and ACM.”

“They are independent and consistent with each other,” Peace said. “I can’t say the rate for Romea Champion is okay because it was the only deal done. That’s a gross over-simplification. Brokers are more sophisticated than that.”

The trial continues.