The Independent: Shell settles reserves lawsuit for $353m

By Saeed Shah
Published: 12 April 2007

Shell is to pay European investors $353m (£177m) in compensation over the reserves overbooking scandal that hit the oil giant in 2004.

A group led by 50 European institutional shareholders, including UK fund managers, are also in line for $96m from a fine already levied by the US Securities & Exchange Commission. Yesterday’s out-of-court settlement is likely to lead to a deal with US investors which would mean a further pay-out of $80m.

It is believed to be the largest financial recovery in Europe for a European-based securities claim. The law firm that brought the action, Grant & Eisenhofer, said: “It is certainly the first class-wide settlement of a securities claim by European investors.” Shell said it struck the settlement “without admitting any wrongdoing”. The company’s general counsel Beat Hess said: “For us, it is an important step in closing legal proceedings related to Shell’s recategorisation of reserves.”

The UK investors that took part in the class action claim were Axa, F&C, Morley, Railways Pension Trustee Company, Co-Operative Insurance Society and the Universities Superannuation Scheme. Jay Eisenhofer, of Grant & Eisenhofer, said: “European investors do not have the same options to pursue securities claims that are available to US investors through class actions. By coming together in such a large fashion across multiple countries, and petitioning the Amsterdam Court of Appeals to work directly with Shell to settle their claims, this group of trans-European investors has struck a uniquely European resolution to settling a European securities claim.”

In 2004, Shell slashed its proven oil and gas reserves by 20 per cent, leading to the departure of three top executives, and the reorganisation of its corporate and management structure.

Rene Maatman, chief legal counsel at ABP, the Dutch pension fund that was part of the European lawsuit, said: “The shareholders will be entitled to an amount which is equal to approximately 10-13 per cent of their estimated damages.”

Shell also paid $90m to settle a lawsuit brought by employee shareholders in 2005.

The total paid by Shell over the reserves scandal will be close to $700m in fines and compensation. Last year, the company claimed it would “vigorously defend itself” against the European claim settled yesterday, which was first filed in the US courts, but later in the year Shell took a $500m charge against potential claim payouts.

http://news.independent.co.uk/business/news/article2442079.ece

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