Roman Abramovich Faces BVI Court Over Allegations Of Illegal Share Dealings

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

27 September 2005

Roman Abramovich, Russia's wealthiest man and controller of the country's fifth largest oil firm, Sibneft, spent much of last week in a courtroom in the British Virgin Islands over his part in an alleged fraud involving the ownership of shares in a $4 billion joint venture to develop a Russian oil field.

At issue is a partnership between Sibir Energy and Sibneft, controlled by London-based Abramovich, perhaps better known for his involvement with 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.

"We have promised to pursue those responsible for the dilution of our interests. We have started proceedings in the British Virgin Islands because BVI companies have been used as vehicles to commit the fraud," Henry Cameron, Chief Executive of Sibir Energy, commented in a statement at the start of the proceedings in July.

"We have also sued Sibneft and Roman Abramovich because we believe they directed and procured the dilution of our interests. Mayor Luzhkov has already stated that he is throwing the full support of the City of Moscow and the Moscow Oil & Gas Company behind our efforts to ensure that the share of Sibneft-Yugra is returned to Sibir," Mr Cameron added.

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