Latvia has spent an additional 1,922 euros on legal services since the 18th of May this year in its ongoing dispute with former PNB banka owner Grigory Guselnikov, the State Chancellery has revealed.
The payments were made to the Geneva-based law firm Lalive.
In addition, a payment of 150,000 euros (133,782 euros) was made to cover administrative expenses at the International Centre for Settlement of Investment Disputes (ICSID).
Overall, the proceedings have already cost the Latvian state more than €7 million. However, the State Chancellery previously promised to disclose the final amount once the legal proceedings have concluded.
The State Chancellery currently has no information on when a ruling can be expected.
As previously reported, PNB banka, then known as Norvik banka, and its owners at the time — Aglaya Guselnikova, Alexander Guselnikov, Grigory Guselnikov, Pyotr Guselnikov and Yulia Guselnikova — initiated proceedings against Latvia at ICSID in 2017.
According to the statement of claim obtained by LETA, the bank and its shareholders are seeking compensation from Latvia for losses they allege resulted from the state’s “unlawful actions or omissions”.
The complaint estimates that the losses could amount to hundreds of millions of euros, although no specific figure has been provided.
The claim is based on an alleged violation of the bilateral investment promotion and protection agreement between the United Kingdom and Latvia.
The Guselnikov family argues that, since December 2015, the bank had been subjected to disproportionate, unjustified and continuous pressure from Latvian state institutions and officials, including the then Financial and Capital Market Commission (FCMC).
The regulator is accused of repeatedly increasing capital adequacy requirements to levels described as unreasonable, disproportionate and higher than those generally required in Latvia’s banking sector and under the European Union’s fourth Capital Requirements Directive.
The claim also alleges unreasonable and damaging actions concerning the valuation of the bank’s assets, repeated audits and the imposition of significant restrictions on its operations.
In the ICSID proceedings, Guselnikov alleges that these regulatory measures were maintained or intensified following instructions from a “very high-level, senior Latvian official connected to the financial sector who had influence and moral authority over the FCMC”.
The bank’s former chairman of the management board, Oliver Bramwell, previously confirmed to the Associated Press that the official referred to in the claim was former Bank of Latvia Governor Ilmārs Rimšēvičs.
Rimšēvičs is mentioned by name in only one episode of the claim, relating to 24 April 2017, when he allegedly instructed Bramwell to suspend negotiations concerning a potential share swap involving Russia’s Norvik Bank Russia and Ukraine’s Sberbank.
“Exceeding his authority, the central bank governor demanded that [the bank’s largest shareholder, Grigory] Guselnikov undertake to refrain from investing in Sberbank Ukraine, for which there was no justification and over which he had no lawful authority in relation to Mr Guselnikov,” the claim states.
It also alleges that the senior official repeatedly demanded bribes from Guselnikov, both directly and through intermediaries, but that Guselnikov did not pay them.
The claim states that “in 2016 and 2017, a senior Latvian official demanded that Guselnikov pay bribes”.
The meetings were allegedly arranged by Renārs Kokins, whom the claimants understood to be “one of the senior Latvian official’s closest associates”.
The bank’s shareholders note in their claim that Kokins was not a Latvian public official but allegedly “attempted to establish an informal channel of ‘cooperation’ between Guselnikov and the senior Latvian official”.
In their application to international arbitration, Guselnikov and the other bank shareholders also name former insolvency administrator Māris Sprūds, alleging that he too demanded bribes from Guselnikov.
“In cooperation with Sprūds, a notorious figure in Latvia’s insolvency administration circles, the fraudulent creditors of the Winergy [wind farm] planned to misappropriate funds borrowed from the bank, thereby preventing the bank from recovering them,” the claim states.
The document notes that loans associated with Winergy totalled 60 million euros.
The developers of the Winergy project allegedly failed to repay loans worth tens of millions of euros. However, the parties subsequently reached a settlement, and the wind farm came under the bank’s control.
In its claim, the bank accuses Latvia of actions that obstructed its day-to-day operations and implementation of its business plan, including the sale of its Russian subsidiary.
According to the claimants, these actions not only prevented the bank from preserving its original value but also hindered its ability to generate profits.
The Guselnikov family is asking the arbitration tribunal to “declare that Latvia has breached its obligations under the [United Kingdom–Latvia] agreement and international law in relation to the claimants’ investments”.
They also want the tribunal to order Latvia to fulfil its obligations concerning those investments.
As previously reported, representatives of PNB banka announced in late June 2019 that a group of American and European investors had acquired a 60% stake in the bank.
The bank’s representatives also stated that the new controlling shareholders were not interested in continuing the bank’s legal proceedings against the Latvian state, the FCMC and the European Central Bank (ECB).
However, PNB banka’s operations were suspended on the 15th of August, 2019, and on the 12th of September the Riga City Vidzeme District Court declared the bank insolvent.
The suspension was intended to prevent the outflow of the bank’s funds.
Vigo Krastiņš was appointed administrator of the bank’s insolvency proceedings.
On the 15th of August 2019, the ECB, acting as PNB banka’s direct supervisor, determined that the institution was failing or likely to fail.
The European Single Resolution Board subsequently decided not to place PNB banka into resolution, meaning that no measures would be taken to stabilise its operations.
In light of these decisions, the FCMC suspended the provision of financial services by PNB banka and declared deposits unavailable.
The ECB made its determination after finding that the bank had failed to comply with regulatory requirements and assessing its financial condition.
According to the bank’s 2019 report, before its operations were suspended, Guselnikov held 23.47% of PNB banka’s shares, having previously controlled 95.97% directly and indirectly.
The remaining shareholders collectively held 76.53%, although none individually owned 10% or more.
The shareholders included Roger Edward Tamraz, Antoine Baaklini, Dolly Khoury, George Mgalobishvili, Marc Jean-Louis d’Hombres, Michel Fayyad, Nikolai Paskalayev and Said Meraik.
The Riga City Vidzeme District Court is currently examining an application by PNB banka’s insolvency administrator Krastiņš seeking to recover 32 million euros in damages from former members of the bank’s management and supervisory boards.
The defendants include former bank owner and supervisory board chairman Guselnikov, his deputy on the supervisory board, former Danish Prime Minister and NATO Secretary General Anders Fogh Rasmussen, and supervisory board member August Hanning, a former head of Germany’s foreign intelligence service.
The six other defendants are former supervisory board member Peter Michael Odintsov and former management board members Bramwell, Anna Verbicka, Natālija Ignatjeva, Dmitrijs Kalmikovs and Aleksejs Kutjavins.
Krastiņš explained to LETA that his lawsuit targets nine former members of PNB banka’s management and supervisory boards.
He is asking the court to hold them jointly and severally liable for losses allegedly caused to the credit institution before its operations were suspended.
According to Krastiņš, those losses resulted from decisions that also released Guselnikov from debt obligations.
He stressed that the alleged losses were connected to transactions between the bank and a group of investors led by US citizen Tamraz, whom Guselnikov had introduced as the bank’s new owners shortly before its closure.
Latvian Television’s investigative programme De facto previously reported that the court had agreed to freeze apartments and houses belonging to several defendants.
These included property in Denmark worth more than 700,000 euros belonging to former supervisory board deputy chairman Rasmussen, as well as a house in Germany owned by supervisory board member Hanning.
Shares in companies owned by both men were also frozen.
According to the report, former bank owner Guselnikov officially owns almost no assets, apart from shares in a Cypriot company valued at six euros.
These assets are unlikely to be sufficient to recover the bank’s losses even if the court rules in favour of the claimant.