Siberian Court Rejects $16B Claims Against BP

MOSCOW (Dow Jones Newswires), Nov. 11, 2011

A Russian court Friday rejected two multi-billion dollar claims against BP PLC brought by minority shareholders in the U.K. oil major's Russian joint venture TNK-BP Holding.

The court handed the U.K. oil major a much-needed win in its ongoing legal struggles related to a failed deal with Russian state oil company OAO Rosneft (ROSN.RS). However, with new lawsuits and arbitration hearings pending, BP's problems in Russia--where the company sources a quarter of its oil--aren't over yet.

The arbitration court in the Siberian town of Tyumen, where TNK-BP Holding is registered, ruled against a small group of minority shareholders, who allege BP acted against the company's best interest by dismissing a bid to replace the U.K. company in a share swap and Arctic exploration deal with Rosneft.

The latest problems with Russian court authorities are reminiscent of similar troubles BP had in 2008 during a public dispute with its Russian partners in TNK-BP, an episode that came to epitomize for many in the West the difficulties of doing business in Russia.

Facing steadily rising legal and administrative pressure, BP's current chief executive, Bob Dudley, who then was head of the joint venture, ultimately fled Russia and BP gave up significant control of the 50-50 operation.

"Today's decision is a positive contribution to the investment climate in Russia," said Jeremy Huck, head of BP in Russia.

Lawyers at Liniya Prava law firm representing the plaintiffs, whose claims totaled over $16 billion, said they intend to appeal Friday's court decision and that the litigation shows "Russia still has a long way to go to achieve compliance with the international standards of corporate law."

The lawyers urged "such a reputable multinational as BP" to honor its commitments to protect the rights of minority shareholders.

"In actual fact, we are seeing just the opposite," said lawyer Dmitry Chepurenko. "At the same time, BP never misses a chance to claim that its Russian business is being pressured."

BP said the claims were "absurd and legally groundless, because there were and could be no losses arising which would allow TNK-BP to claim damages."

BP announced the Rosneft deal in January, but its billionaire partners in TNK-BP Ltd.--the parent company of TNK-BP Holding--had blocked BP's alliance with Rosneft in court, as they said it violated their shareholder agreement. BP eventually pulled out of the deal in May and was later replaced by U.S. oil giant ExxonMobil Corp. (XOM).

The case about missed opportunity in the Arctic brought by the group of minority shareholders in TNK-BP Holding mirrors the one made by Alfa-Access-Renova, or AAR, the influential Russian billionaire shareholders' consortium in TNK-BP. AAR has asked the Stockholm arbitration panel to rule on whether BP should pay damages to its Russian partners for breaking the TNK-BP shareholder agreement. AAR and the plaintiffs in the Tyumen cases say there is no connection between them.

In addition, the board at TNK-BP Holding last month voted against a request by the minority shareholders to join the Tyumen lawsuit against BP. However, that vote is now being questioned in court by the plaintiffs, who say two BP-nominated directors charged in the initial lawsuit took part in the vote.

Copyright (c) 2011 Dow Jones & Company, Inc.


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