Oil giant BP’s 50 percent-owned Russian affiliate TNK-BP will find itself fighting its British parent in court for billions of dollars in compensation if a board decision next week goes the way of the other main shareholders.
BP and the quartet of billionaires who own the other half ofRussia’s No.3 oil producer have clashed over BP’s failed bid to open up a new Russian investment stream and strike an exploration and share swap deal with state-controlled Rosneft.
Through their Alfa-Access-Renova (AAR) consortium, the group of Soviet-born businessmen successfully blocked the Rosneft deal in May. Rosneft has since turned toU.S.based ExxonMobil as a replacement partner.
Now minority shareholders in the listed subsidiary of 50-50 joint venture TNK-BP Ltd, TNK-BP Holding, are seeking damages of over $13 billion (8.3 billion pounds) in a Russian court from BP and two nominees on the board of TNK-BP Holding, Peter Charow and Richard Sloan.
TNK-BP Ltd controls 96.5 percent of TNK-BP Holding. The rest is in free float.
A BP spokesman in Moscow said “there is no merit to the lawsuits against directors since there were in fact no damages in the form of lost profits.”
AAR, which declined formal comment, has said it has no connection with the suit brought by TNK-BP Holding shareholder Andrey Prokhorov.
But sources close to the consortium representing four tycoons — Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik — have said they are sympathetic to the damages suit but are not trying to force BP out as an owner.
Although the original BP-Rosneft deal was championed by Prime Minister Vladimir Putin, who has announced plans to return to the presidency next year, the government has refrained from intervening directly in the ensuing TNK-BP shareholder row.
“We have always emphasised that this is a corporate conflict. We have never taken sides… although it’s quite unpleasant for us that this conflict, this action, exists,” Deputy Energy Minister Anatoly Yanovsky told reporters inParison Tuesday.
Directors have put forward a motion to be discussed on October 24 that the company should back the lawsuit, a TNK-BP spokesman said on Tuesday.
“At the request of one of the TNK-BP Holding directors, on October 24 the board of directors of TBH will consider the question of whether or not to join the lawsuit being put forward by one of its minority shareholders,” the spokesman said.
“The prerogative of deciding TBH participation in these legal proceedings lies within the exclusive jurisdiction of the board of directors of TNK-BP Holding and does not involve participation of the company’s management.”
TNK-BP Holding has a nine-member board — with four representatives each from BP andAAR. The sole independent director, David Lasfargue, would have an effective casting vote on whether to pursue the action.
Sources said the AAR nominees would probably back the motion but the position of Lasfargue, who declined comment, was unclear. It was also not clear whether BP’s nominees would attend the board meeting, potentially depriving it of a quorum.
AAR is meanwhile seeking a ruling by a UK-based arbitration tribunal that blocked the BP-Rosneft deal over whether BP is liable for damages to TNK-BP. Sources say a ruling may take a further six- to nine months.
In the lawsuit, filed in the West Siberian town of Tyumen, TNK-BP’s base, Prokhorov claims TNK-BP suffered damages because BP decided not to act via its existing Russian joint venture in the Rosneft deal, in violation of an exclusivity clause in the TNK-BP shareholder agreement.
There is a potential snag facing the Prokhorov case, which is due to be heard on November 10-11, however.
Konstantin Lukoyanov, a lawyer for BP, said a Russian judge had refused Prokhorov more time to attract other investors to his case. He holds less than 1 percent and needs to get over the 1 percent threshold in order to legally file a lawsuit in such cases.
“As of today, TNK-BP Holding has no legal right to join the minority shareholders lawsuit,” Lukoyanov said.
