Category Archives: trade

Here’s The Latest In A Russian Oligarch’s $100 Million Yacht Paint Lawsuit

Melnichenko boatReuters/Tim ChongRussian billionaire Andrei Melnichenko’s 394-foot mega-yacht “A.”

Andrei Melnichenko has extra reason to be concerned about the sunlight — and we aren’t talking financial transparency. The owner of Eurochem, a large Russian producer of fertilizers, says he has evidence that sunlight on his surfaces reveals rash, blotches, separations, lines, starring and sagging. He says he’s paid to see his face reflected on the surfaces, but because the job has been botched, he can’t. The damage he is estimating at $100 million.

That’s not Melnichenko’s person we are talking about, but the surfaces of his boat, a motor yacht named A, after his wife Alexandra, and owned by the two of them through a succession of offshore companies, starting with Niedes Ltd. of British Virgin Islands, A Yacht Charter Co. of Isle of Man, and currently Bermuda Yachts Ltd of Bermuda.

Since July of 2010 Melnichenko’s New York lawyer, Patrick Salisbury, has been suing the international paints and coatings corporation, the Dutch-registered Akzo Nobel through three of its paint subsidiaries for covering the yacht with paint which failed to reflect and failed to stick. Akzo Nobel’s shares are listed over the counter in the US, and it has a current market capitalization of almost $18 billion. One of the subsidiaries does business in New Jersey, where it calls itself “one of the most reliable marine coatings suppliers in the world.”

The case docket, No. L002634-10, in the Superior Court of New Jersey commenced with Melnichenko’s claim dated July 8, 2010. By late last month, it was running to 116 filings. Altogether, the file holds 260,000 pages, including 300 exhibits, 27 witness depositions, and dozens of contracts. So far it has cost both sides several million dollars. It is the biggest product liability claim ever made by a Russian against an international supplier.

A boat-painting expert has reportedly testified that there were no serious surface defects in the paint job causing the poor reflectivity which is the nub of the Melnichenkos’ complaint. Akzo Nobel argues that “as the only harm alleged is the subjective lack of reflectivity in the paint, Plaintiff essentially argues that paint damaged itself.”

Andrei MelnichenkoAP Photo/Sergey PonomarevAndrei Melnichenko is pictured on the left.

More detail on the Awlgrip-brand paint, and on what Mr and Mrs Melnichenko have claimed about themselves in the court papers, were sealed this past July by the presiding judge, Kenneth Grispin, on the ground that they may contain trade and commercial secrets for the paint company, and privacy issues for the Melnichenkos.

That sum, the complaint alleges, has been calculated from “ascertainable losses of at least $100 million plus attorney’s fees and costs… These ascertainable costs include those required to correct the paint and coatings defects and repaint the entire Vessel, which will take at least 18 months. Further, these costs include the loss of use of the yacht and cost of a replacement yacht during the repair period.”

The shipbuilder, Blohm & Voss, is being sued separately and elsewhere for €13 million.

According to International Paint LLC, the New Jersey company which is immediate target of the court action, the Melnichenko claim is misdirected. If the paint job turned out to be as non-reflective as the Melnichenkos are claiming, the alleged damages “if any, were not the result of any act or omission on the part of International Paint LLC, but exist by reason of operation of nature over which International Paint LLC had no control.” In short, Mother Nature is to blame. Or to be specific, Aeolus, God of the sea winds, Briareus, God of the sea storms, Oeolyca, in charge of sea waves, the Harpies (gusts and water spouts), not to mention Poseidon, God of all the sea.

According to a source close to the case, “independent inspection concluded there was nothing wrong with the paint job. They [Mr & Mrs Melnichenko] were happy with the job. They signed off their acceptance. A normal paint (ship) job would last four to five years. But that depends on the weather and sea.”

The court record reveals an uncharacteristic reluctance on the part of Melnichenko’s wife Alexandra to put her mouth where her husband’s er, lawsuit is. In September of this year, according to one of the filings by lawyers for the Akzo Nobel group, the court was told that Mrs Melnichenko had been notified that she should appear for a deposition in the spring of 2012. It then took the paint group almost a year to compel her to appear.

Akzo Nobel is also accusing the Melnichenkos’ lawyers of withholding another dozen witnesses whose testimony, the company says, is required for the court to adjudicate the claims, including Philippe Starck, the designer of the exterior shape and interior decoration of the boat.


Cameron’s EU strategy dealt blow by Hollande and House of Lords

PM to press Hollande on EU reform

David Cameron and Francois Hollande at the Swan Inn in Swinbrook, Oxfordshire

David Cameron’s European strategy was unravelling on Friday as the prime minister’s carefully crafted compromise over Britain’s future within the EU was dealt a double blow by the French president and peers in the House of Lords.

François Hollande made it clear at an Anglo-French summit in Oxfordshire that he would not agree to a significant change to the EU treaty this side of the 2017 presidential elections.

As Mr Hollande threatened to disrupt Mr Cameron’s plan for a treaty change in Europe ahead of a promised “in-out” referendum in 2017, Labour and Liberal Democrat peers further undermined the prime minister’s aims by killing off a bill designed to enshrine that pledge in law.

The action by peers incensed eurosceptic Tories, as Conservative headquarters denounced the peers as “enemies of democracy”. Mr Cameron tried to contain the unrest, promising to get behind a fresh backbencher attempt to get an EU referendum bill into law.

But some eurosceptic Conservatives, frustrated by the Lords and incensed by Mr Hollande, moved on to the attack. Mark Pritchard, a backbencher, called on the government to bring forward its own EU referendum bill, regardless of Lib Dem opposition. “A manifesto pledge just may not be enough for some voters,” he said.

“These two events put him under enormous pressure,” said another leading eurosceptic. “He has failed to back MPs on EU referendum legislation except through a risky private members’ bill, while Hollande has reinforced what we all know. He has a mountain to climb to have any hope of repatriating any powers.”

Mr Cameron had hoped to unite his party behind him on Europe in early 2013 when he promised a referendum on EU membership based on a renegotiation and repatriation of powers from Brussels. The prime minister hopes that by getting Britain a “better deal” in Europe, he can campaign in 2017 for an “in” vote.

But his referendum pledge has failed to contain febrile eurosceptic backbenchers who have continued to push Downing Street for further concessions on Europe.

They had bounced the prime minister into backing the private members’ bill, put forward by backbencher James Wharton, to bind him tightly to a promise of an in-out referendum. They have continued to press for more, with 95 MPs this month calling on the prime minister to secure for national parliaments a veto over current and future EU laws.

Meanwhile, Mr Hollande poured cold water on Mr Cameron’s plan for a major change in Britain’s relationship with the EU in an awkward day for the “entente cordiale”.

Making it clear that he has no desire for a new treaty – which could trigger a referendum in France – he said: “If there are going to be amendments to the text, we don’t think for the time being that is urgent. We feel that revisions to the treaty are not a priority.”

The French president’s warning threatens to disrupt Mr Cameron’s plan for a treaty change before his proposed “in-out” EU referendum in 2017 and confirmed the frosty state of relations between the two leaders.

Here’s The Hungarian Currency Chart Everyone Is Talking About Today

Screen Shot 2014 01 30 at 5.08.09 AM

We want you to keep up on your emerging market currency horror show memes.

So just for your edification, today everyone is talking about how the Hungarian Forint is getting smoked.

Here’s the Euro vs. the Forint going back a week, showing how much the Euro is surging against it.

The current level represents a 3-year low for the Forint against the Euro.

The Global Rally Has Completely Collapsed


Global stock markets and emerging market currencies have gone from gains to losses in the span of the morning.

Efforts by emerging market central banks to stem the bleeding have already failed, as traders have faced rate hikes in Turkey and South Africa.

S&P 500 futures are down nearly 1.0% heading into the start of North American trading. The U.S. dollar-Japanese yen exchange rate is also falling sharply, indicative of fears over global liquidity.

Meanwhile, 10-year U.S. Treasury futures are rallying, currently up 0.3%. The yield on the 10-year Treasury note is 2.71%, down 4 basis points from yesterday’s close, and gold futures are up 1.3%, trading at $1,267 an ounce.

The charts below show the action in various markets. Across the top from left to right are S&P 500 futures, the dollar-yen exchange rate, and the euro-dollar exchange rate. Across the bottom from left to right are gold futures, 10-year U.S. Treasury futures, and June 2016 eurodollar futures.

Last night, the Central Bank of the Republic of Turkey announced massive rate hikes at the conclusion of an emergency meeting to shore up the Turkish lira, which has been plummeting to new all-time lows over the past several trading sessions. The lira surged on the announcement, but has since given up all of its gains and then some.

U.S. Treasury and S&P 500 futures have been correlated with the dollar-lira exchange rate since the CBRT announcement. When the lira goes down, it seems that S&P 500 futures are going down and Treasury futures are going up.

The lira took a big hit at 8:20 a.m. ET this morning, when the South Africa Reserve Bank unexpectedly announced that it would hike interest rates as well.

“The question is why the response to these moves is so aggressive and so negative,” says Steven Englander, global head of G-10 FX strategy at Citi.

“It is possible that investors fear that the EM central banks have fired their last shot, and will be unable to follow through with more tightening, or that their economies/politics are too weak to support rate hikes.”

Emerging markets have been suffering portfolio outflows since the Federal Reserve floated the idea of winding down its quantitative easing program last summer, and the pain has intensified since it actually began the tapering process in December.

The big event today is the announcement of the Fed’s latest monetary policy decision at 2 p.m. ET. Economists expect the Fed to move forward with another $10 billion reduction in the monthly bond purchases, despite recent weakness in emerging markets.

Furthermore, some expect the Fed to modify its forward guidance on the likely future path of short-term interest rates.

“What is in play at today’s FOMC is the forward guidance language and reference to EM tensions,” says Englander.

“With respect to domestic economic conditions and monetary policy, the market is now focused both on whether the first policy hike will be sooner than indicated and whether the subsequent hikes will be quicker. Today there is no particular need to change the language. The FOMC may be mindful of the concentration of market risk on the side of sooner and faster, and away from its baseline. If it changes the language it would probably to emphasize how shallow the upward path of rates will be.”

Islamic Banks, Stuffed With Cash, Explore Partnerships in West

Ibrahim Mardam-Bey, a group president at Taylor-DeJongh.

Andrew Testa for The New York TimesIbrahim Mardam-Bey, a group president at Taylor-DeJongh.

A noted Muslim law scholar, Yusuf DeLorenzo, recently pored through the books of Continental Rail, a business that runs freight trains up and down the East Coast.

Along with examining the company’s financial health, Mr. DeLorenzo sought to make sure that the rail cars didn’t transport pork, tobacco or alcohol. He was brought in by American investment bankers who want to take rail cars bought by Continental Rail and package their leases into a security. The investment is being built for banks that are run according to Islamic law, which, among other things, prohibits investments in those three commodities. If the cars are acceptable, or halal, the deal will be one of the first in the United States to be completed in compliance with Islamic law.

“It’s a new territory for all of us,” said John H. Marino Jr., chief executive of Continental Rail.

The deal is a sign of how banks that comply with Islamic law are making inroads into the global banking scene and how Western businesses are working to meet the expectations of those banks. The banks can’t find enough acceptable places to park their money, many industry insiders say, so investment bankers are scurrying to assemble deals.

Over the last 30 years, the Islamic financial sector has grown from virtually nothing to over $1.6 trillion in assets, according to data from the Global Islamic Financial Review, an industry publication. The financial crisis has only encouraged the growth. Industry assets grew 19 percent in 2011 and 20 percent in 2012, in contrast to the less than 10 percent growth at non-Islamic banks in most of the world.

Until recently, Islamic banks have largely put their money to work in the Middle East — or, if they invested in other parts of the world, in real estate. Real estate is among the most popular investments under Islamic law, also known as Shariah, because a deal can be structured that does not require interest payments, which are prohibited by Shariah. But as the banks grow larger they are looking for new, more diverse places to put their money.

The deal with Continental Rail is attractive because the rail cars will spin off lease payments, rather than interest, and can be bought in bulk. The cars are also in the United States, which will help bring geographic diversity to the bank portfolios. The deal was brokered by a newly created team at Taylor-DeJongh, a Washington investment bank, looking to bring money from Islamic banks to the United States.

Yusuf Talal DeLorenzo, a Shariah scholar, at his home office in Ashburn, Va., in 2005.Ken Cedeno for The New York TimesYusuf Talal DeLorenzo, a Shariah scholar, at his home office in Ashburn, Va., in 2005.

There are similar pushes around the world. A few non-Muslim African countries, including South Africa, have recently been talking about raising money using the Islamic financial instruments known as sukuk, which function much like bonds. Prime Minister David Cameron of Britain announced in late October that England planned to become the first European country to issue sukuk. The global bank Société Générale is preparing to raise money from Islamic banks in the coming months.

“There is a gap between all the money coming in to Islamic banks and the deployment of that money into real economic assets,” said Sayd Farook, the global head of Islamic finance at Thomson Reuters. “A crazy amount of money has gone into their coffers and they need somewhere to invest it.”

The first modern Islamic banks were founded in the 1970s, motivated by the Quran’s ban on riba, which has been interpreted as any fixed payment charged for money lending. Islamic banks have focused instead on putting their money into real assets and property, and sharing any resulting profits from the performance of an asset. Muslim mortgages, for instance, are structured so that the bank buys the house and then sells it to the occupant slowly over time. Stocks are generally considered acceptable as long as the companies issuing the stock adhere to Islamic law; casinos, banks and weapons companies are forbidden.

Islamic banks have religious scholars, like Mr. DeLorenzo, review their operations on a regular basis. Yet some Islamic scholars have criticized the banks for straying too far from the spirit of the Quran into the speculative realms of Wall Street. Sometimes it is hard to tell the difference between a Western investment and a Shariah one. For instance, an Islamic bank’s fixed-deposit account ties up a customer’s money for a set period of time, like a certificate of deposit. Instead of offering interest, the account offers a share of the profit from its investments. The “profit rate” of a one-year deposit currently is 1.9 percent at one major Middle Eastern bank.

There is a debate among Islamic scholars about what qualifies as halal. “The industry is going through soul-searching,” said Ayman A. Khaleq, a lawyer specializing in Islamic finance at the Morgan Lewis law firm in Dubai. “It’s far from settled.”

5 Startups Google Might Acquire Next


Google’s acquisition of Nest was monumental for the hardware community. Not only did it represent a major company seeing value in a startup, it cemented that startup’s place in Google’s ecosystem, which is no small feat.

Hardware is one of the most exciting startup frontiers, but at the same time is notorious for causing investors to lose hundreds of millions of dollars. Considered the double black diamond of startups, hardware is just plain hard business for entrepreneurs.

One of the things that makes it so challenging is a lack of consistent acquisitions. Hardware startups are often forced to become standalone businesses, winning capital from a handful of investors just to compete against multi-billion dollar conglomerates. Makerbot and Nest now have the opportunity to change this, but it won’t come without a fight. Here are a few startups who could turn things around for hardware makers–and why Google might have an eye on them.

With a simple wristband, this startup made tracking health fun. And by targeting users outside the tech scene, Fitbit found a way to connect with people like suburban moms, thanks to its suite of products that provide actionable results all day. From sleeping to exercising, Fitbit has built an experienced team that Google might find rather useful.

DropCam makes networked video look easy, even though it’s anything but. A software company, it just happen to make a connected video camera that can serve a variety of applications, including watching your house, pets, and/or children. Dropcam could help Google improve its video products, especially as it tries to make Hangouts a staple at work.

Electric Imp
Tony Fadell knows Electric Imp’s team well, as it was founded by some of the best Apple engineers. Its focus on making Wi-Fi more accessible could also be valuable to Google as the latter moves further into the wearable tech space.

3D Robotics
If drones are the future, then 3D Robotics is the next Makerbot. Its drones are ubiquitous, while its rich developer community is helping them become the Android OS of drones. If the startup succeeds as the clear market leader, it could help Google build up its momentum in robotics innovation.

Thalmic Labs
Gesture technology is the future and this team is leading the way. Without personally knowing how deep its engineering and design teams are, Google may want a team to re-imagine gesture technology for all of the hardware products it is building.

This startup owns action video/image capture, which has turned out to be a huge market. Its demographic is also technical and boasts a devoted user base that Google probably can’t get enough of. GoPro’s marketing prowess could also help Google sell people on the idea of Google Glass as a gadget that’s cool, not incredibly dorky.


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