Royal Dutch Shell Plc  .com Rotating Header Image

Shell withdraws NAM guarantee, but why?

 

NAM had made provisions for € 495 million to compensate for earthquake damage, according to the annual report. That is a pittance compared to the final costs. Last week, NAM lost another lawsuit about the decline in value of houses. That damage is valued at at least € 1 billion. The ‘Groningen file’ will cost billions.

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad

Carel Grol • Entrepreneurship

Shell withdrew the so-called 403 statement for NAM, which concerns liability for subsidiaries, last June. This has been overtaken by newspaper Trouw. Does Shell, therefore, lose its responsibility for compensating for the damage caused by the damage? Shell Nederland states that NAM will meet all its obligations, but experts doubt that. Politics The Hague is furious. Five questions about this legal provision, which can have far-reaching consequences.

What is a 403 statement?

In short, this statement means that the annual accounts of a subsidiary do not have to be published. One of the conditions is that the parent company with a 403 certificate is jointly and severally liable for the debts of the subsidiary. The latter is crucial in the Groningen file. The damage will go into the billions. The NAM caused this damage.

Why would a company withdraw its 403 statement?

There are countless companies in the Netherlands that have issued a 403 certificate for their daughter. Withdrawal occurs regularly, says lawyer Maarten Schepel, specialized in corporate law at UdinkSchepel Advocaten. ‘For example if things go badly with a subsidiary, or when a sale arrives.’ Usually a 403-statement is not withdrawn when it goes very well with a subsidiary.

What does it mean that Shell has withdrawn its 403 statement?

In the end it is all food for lawyers. The 403 statement ‘covers’, provided it is properly drawn up, not the liability for a wrongful act of the subsidiary, Schepel states. In other words: according to this statement Shell would not be liable for the damage caused by the cracks. This changes when a settlement is made by the NAM. Then a contractual obligation arises for the NAM. This obligation does fall under the 403 statement and Shell is then jointly and severally liable for it. By withdrawing the 403 statement before a settlement is made Shell is not legally required to pay for the damage caused or caused by the NAM and for which it will be suitable in the future.

So also not for the already existing damages?

These damages are the result of an unlawful act and according to the lawyer this is not covered by the 403 statement. Result: if there ever comes a settlement about the damage caused by the recent earthquake in Zeerijp, then that comes on the board of the NAM and Shell does not have to pay for it. This is all strictly legal, says Schepel, because it can of course be that there is political or social pressure on Shell to pay.

Conclusion: bad for the Groningers, good deal for Shell?

NAM had made provisions for € 495 million to compensate for earthquake damage, according to the annual report. That is a pittance compared to the final costs. Last week, NAM lost another lawsuit about the decline in value of houses. That damage is valued at at least € 1 billion. The ‘Groningen file’ will cost billions. Jacqueline Broeren-Berns, attorney at Van Benthem & Keulen, therefore speaks of a ‘harm-reducing action from the point of view of Shell’. If Shell is ‘only’ a shareholder, the company can not be held directly liable by NAM creditors. ‘I can imagine that Shell no longer wants to be jointly and severally liable for payment of the earthquake damage, especially since the total extent of the damage that will result from this is still unknown.’

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellnews.net and cybergriping.com are all owned by John Donovan

Comments are closed.

%d bloggers like this: