BVI Court Rules Against Sibir In Dispute With Sibneft

by Amanda Banks, for LawandTax-News.com, London

05 December 2005

The Eastern Caribbean Supreme Court in the British Virgin Islands last week issued a ruling against Anglo-Russian oil firm Sibir, dismissing an application for legal jurisdiction in the BVI for actions lodged by the company in July, 2005 against Sibneft, its former chief Roman Abramovich and six associated companies over their involvement in the alleged illegal dilution of Yugraneft's 50% share in the Sibneft Yugra joint venture.

At issue is a partnership between Sibir Energy and Sibneft, formerly controlled by London-based oligarch Roman Abramovich, who is now perhaps better known for his ownership of the English soccer champions Chelsea. Known as Sibneft-Yugra, the venture, established in November 2000, was formed to develop the South Priobskoye oilfields in Western Siberia. Each party owned 50%, with Sibir contributing the field licenses and Sibneft the means of development.

However, Sibir claims that in September 2002 and February 2003 Sibneft arranged shareholders meetings at which Sibir's interest in Sibneft-Yugra was diluted from 50% to 0.98%. Sibneft formally maintained its 50%, with the remainder being eventually transferred to three offshore companies, one registered in Panama City, and two others registered in the BVI, which were later revealed to be controlled by Sibneft. The offshore companies holding the new shares then sold these to three other companies, registered in Cyprus and the BVI.

The Court made the ruling following a three day hearing that was held in September 2005. The ruling dealt exclusively with the matter of legal jurisdiction and did not address the substantive merits of the Sibneft Yugra case, an outcome which has disappointed Henry Cameron, Sibir's Chief Executive.

"We are surprised and disappointed this Court did not agree the BVI is the right and proper forum to deal with this case - particularly when two of the three companies used to carry out this fraud and two of the three companies that currently hold the misappropriated stakes are themselves registered in the BVI," he stated following the decision.

Mr Cameron said that the firm plans to appeal against the ruling, noting that: "The fundamental merits of our case remain."

Mr Cameron continued:

"Is it credible that Sibir would give up virtually all its stake in a venture that is worth billions of dollars for no consideration at all? Similarly is it credible that three offshore companies controlled by Sibneft would be able to acquire a 49% stake in this multi-billion dollar venture for a total cost of $17,894. The only answer to these absurdities is the return of the interest in Sibneft Yugra."

"Since Sibir brought this action control of Sibneft has passed to Gazprom. Sibir recognizes that Gazprom was not involved in the illegal dilution of Sibir's interests. The company is confident that when Gazprom carefully reviews Sibneft's pleadings in the case they will appreciate that there is no honest or commercially credible explanation for the dilution and will recognize the need to restore Yugraneft's interest in the joint venture. We are determined that Yugraneft, which is now a subsidiary of MOGC, which in turn is controlled by the City of Moscow, will get back full ownership of 50% of Sibneft Yugra."

Recommended