Royal Dutch Shell Plc  .com Rotating Header Image Shell’s $450m payout hailed as class action breakthrough

Author: [email protected]
Published: 19/04/2007 02:10

US-style class action disputes took another step towards entering Europe’s legal market last week after a groundbreaking shareholder action settlement between Shell and some of its investors.

The $450m (£229m) settlement, one of the first of its kind in Europe, was between energy giant Royal Dutch Shell and a spread of European investors. Both sides agreed the deal after the European investors opted out of a wider class action by shareholders in the US.

The suit, originally filed by investors in the US last January, claimed Shell had committed securities fraud after allegedly overstating its oil and gas reserves by amounts worth more than $100bn (£51bn) between 1997 and 2003.

A group of more than 50 investors and shareholders from nine European countries, who collectively own more than one billion shares in the energy giant, announced on 11 April they had accepted the $450m payout.

UK lawyers predict the settlement could encourage US class action specialists to enter the European market in the hope of securing roles on similar disputes.

US class action firm Cohen Milstein Hausfeld & Toll is to launch in London on 7 June. Name partner Michael Hausfeld said: “The settlement is a breakthrough. It was a test of the commitment of the parties involved and an illustration of their desire to try to craft settlements beneficial to both sides.”

US class action specialist Grant & Eisenhofer name partner Jay Eisenhofer led a six-lawyer team representing the group of investors, which included six UK funds, including AXA Investment Managers and The Co-operative Insurance Society.

LeBoeuf Lamb Greene & MacRae corporate partner Ralph Ferrara represented Shell, with top Dutch independent De Brauw Blackstone Westbroek advising the company on local law.

Commenting on the settlement, Eisenhofer said: “This is truly an unprecedented settlement of a large-scale European shareholder dispute. The scale of recovery and the sheer collective unity of the investor group are both unique in a European context.”

Major group actions in the UK are still relatively rare due to strict limits on the level of success fees and the higher chance that the losing party will have to shoulder the other side’s legal costs.

Ince & Co head of energy business Denys Hickey said: “The US plaintiff Bar could be pushing to export its brand of claims handling to Europe but there are still significant problems, not least of which are the costs involved if you lose.”

Comment submitted for publication by John Donovan

The June 2005 Royal Dutch “unification” AGM”, arising from the reserves scandal, commenced and ended with a classic Shell TV commercial being shown on giant screens. It featured the legendary crooner Bing Crosby singing the virtues of Shell ending with the memorable concluding lyric: “You can be sure of Shell!”  How could anyone have forecast that The Wall Street Journal would end up publishing a headline, as it did the other day, saying “Shell settles U.S. fraud case”. Bing must be turning in his grave.

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