Dudley's Departure Angers Russian Partners In TNK-BP

by Ulrika Lomas, Tax-News.com, Brussels

30 July 2008

The decision by TNK-BP's Chief Executive, Robert Dudley, to leave the country and run the business from abroad has potentially critical tax implications for the business, was the warning from several Russian billionaires fighting BP for control of the joint venture.

It is believed by AAR, the Russian investment group which co-owns the joint venture with BP, that Mr Dudley, who left Russia last week, may have secretly set up an office in London, prompting them via a letter to demand that BP confirm his location.

The letter, released by Stan Polovets who is chief executive of AAR, also confirms that the company has sought advice from auditors PwC and will pursue Dudley and the UK company for compensation if his relocation has unintended tax consequences for shareholders of the joint venture.

AAR has been locked in a bitter battle with Dudley over the running of BP for months, with AAR reportedly hounding Dudley to step down from his role - something which Dudley has so far refused to so.

In a statement issued earlier this week, Mr Polovets announced, according to reports, that:

"We are deeply alarmed that if the centre of TNK-BP's management and decision-making is transferred to a country other than Russia, then the TNK-BP group, or companies within the group, may become liable for the payment of profits tax or other taxes in that country."

He added:

"The seriousness of this risk and the magnitude of the potential tax liabilities have also been confirmed by TNK-BP's external auditors, PwC. AAR will look to BP and Mr Dudley personally for compensation.... should TNK-BP be required to make such tax payments."

However, Mr Dudley has spoken out to defend himself, assuring that he has taken legal advice on the ramifications of working from an overseas base, and has been advised that choosing to do so will not create any long-term difficulties for the business.

A spokesman for BP told the Independent on Monday night that:

"We have received the letter and we consider it private – we will respond in due course."

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