Plan for BP lawsuit put to TNK-BP board

Written by The Financial Times | Updated: Oct 26 2011, 05:35am hrs
By Catherine Belton in Moscow and Sylvia Pfeifer in London

TNK-BPs management has recommended that its main board discuss filing a suit for billions of dollars in damages against BP over its failed alliance with Rosneft, the state oil champion, after advice from two law firms.

The move would significantly raise the pressure on the UK oil group as it battles a number of lawsuits over the proposed Rosneft deal.

They include one from its Russian billionaire partners in TNK-BP, which is under Stockholm arbitration proceedings, and another from minority shareholders in TNK-BP seeking $13bn in compensation through Siberian courts.

Lawyers from two international law firms, Fried, Frank, Harris, Shriver and Jacobson, and Shearman & Sterling, have told the senior management of TNK-BP that there are strong grounds for the company pursuing legal claims arising out of the events involving BP and Rosneft.

The lawyers recommend filing suits against BP and the BP-nominated directors on TNK-BPs main board in the UK and the British Virgin Islands over claims that the UK oil group breached a shareholder pact that grants TNK-BP the right of first refusal over any new venture in Russia or Ukraine, according to a copy of a letter to TNK-BPs general counsel, seen by the Financial Times.

The claims for damages would inevitably be very substantial and would run into billions of [US dollars], the lawyers said.

The recommendation to table the suits for discussion on the TNK-BP board was one of the last moves by Maxim Barsky, who stepped down from his position as deputy chief executive last week due to frustration over delays to his expected appointment as chief executive.

Mr Barsky urged the TNK-BP main board to meet at the earliest possibility to discuss the potential claims, according to a copy of the proposal seen by the FT.

A person close to TNK-BPs senior management said the proposal had been supported by the management board, which is under the operational control of BPs Russian billionaire shareholders known as AAR.

TNK-BP declined to comment.

BP declined to comment, saying: This concerns an ongoing arbitration process which is subject to strict confidentiality.

BP has denied breaching the shareholder pact, while Rosneft has said it would never have considered TNK-BP as partner in the alliance.

The Financial Times Limited 2011