Rosneft, BP, AAR and the legal issues

Amidst reports that Rosneft may seek compensation for the failed share swap and Arctic development joint venture with BP, Business RT spoke with Andrey Goltsblat, managing partner at Goltsblat BLP, about the legal questions.

RT:  Who could Rosneft sue, BP or AAR? And, what for, exactly?

AG:“In my opinion and the best information available, I believe that it is likely that Rosneft will sue BP, because it sounds like BP didn’t disclose the particular covenant that they had with their partner, AAR, with the TNK-BP venture, which should tell BP that BP should have told AAR or got their consent before entering any deals in Russia to explore for natural resources.  And I assume BP knew about it, but ignored it, and as a result obviously Rosneft suffered and the deal was suspended and finally cancelled.  So I  think, in my opinion, it is very likely Rosneft may sue BP.”

RT:  But why would BP actually do that I the first place? Didn’t it seem weird to you that such a multi billion dollar deal signed at the highest level, would have had such a clause which was ignored?

AG: “Well there might be a number of reasons.  Obviously I do believe that lawyers knew about that clause and lawyers informed BP, but unfortunately sometimes in Russia more people rely on relations with the government or with the other level of officials, rather than on the law, and that basically sometimes may cause trouble.  And I think that is a very difficult situation and BP probably thought that that clause is not that important, yet, as they are dealing with the government they are told that the deal is blessed by the Prime Minister and that there shouldn’t be problems to overcome with that clause, which finally was not true.”

RT:  So this whole delay that we have seen, the deal being cancelled, so Rosneft can demand compensation.  How high are the chances do you think, of winning the case?

AG: “How the chances were of winning the case or how they are now?”  

RT:  How high are the chances that Rosneft might win compensation from BP?

AG: “I think the chances are- I wont say 80% or 90%, but I think over 50%.”

RT:  So how will this affect the reputation of BP, Rosneft and TNK-BP?

AG: “I think that BP’s reputation was already not very good as a result of the Mexican Gulf disaster, and that deal obviously didn’t add any reputation to BP either, so I assume that BP’s reputation would have fallen down, which is obviously not good for British pension funds who invested a lot on BP shares.  And as regards AAR and Rosneft, I don’t think their reputation will be hurt, as a result of this deal, breaking up.  And I think  Rosneft is a good company and its got potential to enter into such kind of deals with any other major oil producers, which I think they’ll do.”

RT:  Do you think there is any chance BP and Rosneft might form a new deal?

AG:  “Obviously there are chances that BP and Rosneft may form a new deal, but I doubt it is going to be a deal about exploration of the Arctic Sea.  There might be a different kind of deal, but the chances obviously are there.”