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Money.CNN.com: Argentine Judge Rejects Shell Injunction Against Government Fines

August 24, 2007: 11:30 AM EST

BUENOS AIRES -(Dow Jones)- An Argentine judge has rejected a request by the local unit of Royal Dutch Shell PLC (RDSA) for an injunction against fines the government has levied against the company for allegedly failing to supply the domestic market, a company spokesman said Friday.

Nestor Kirchner’s administration has levied 55 fines totaling 55 million pesos ($17 million) against Shell since it reactivated a 1974 “Supply Law” in October of last year amid reports of diesel shortages.

That law allows for fines and imprisonment for company executives who fail to meet domestic demand.

Shell filed for an injunction July 2, and Judge Diego Zysman rejected it Thursday, the Shell spokesman told Dow Jones Newswires. Shell can now appeal Zysman’s decision, although the company had not yet decided whether to do so, he said.

Of the nation’s four main fuel retailers, which also include Repsol YPF (REP), ExxonMobil (XOM), and Petrobras (PBR), only Shell has been fined by Kirchner’s price control point man, Commerce Secretary Guillermo Moreno.

In newspaper ads published Friday, the company said “the discrimination that Shell is the object of is inadmissible. So is the violation of constitutional guarantees and the distortion of (government) institutions to shape this discrimination.”

Shell noted that although it only accounts for 13% of the retail fuel market, it has been subject to 64% of the 800-some inspections carried out by Moreno’s agents this year. The company also said it is exceeding supply requirements. The government is requiring retailers to increase supply by roughly 7% on the year, but Shell says it has increased supply by 11.3%.

The newspaper ads were signed by Shell Argentina President Juan Aranguren, who Moreno now wants to imprison, according to media reports. To that end, Moreno is slated to testify before another judge, Marcelo Aguinsky, on Monday.

Officials in Moreno’s office were not immediately able to comment on the matter.

The legal threat is the latest in a string of government measures against Shell that began in March 2005, when Kirchner called on Argentines to boycott Shell stations after it raised prices, a move that was followed by ExxonMobil.

Shell and ExxonMobil cited skyrocketing global oil prices for the pump price increases. Following Kirchner’s call to action, however, protesters marched on several Shell stations in Buenos Aires. As sales dropped off, Shell and Exxon quickly reversed the price hikes. Pump prices have remained more or less under de facto government control since.

In September last year, the government forced Shell to pull a new, more expensive premium diesel from stations by publishing a retroactive decree that required prior government approval for all new fuels. Moreno’s office also sent investigators to review Shell’s administrative records.

Meanwhile, Aranguren has broken ranks with other fuel retailers, steadily criticizing the government and refusing to participate in meetings called by Moreno.

-By Drew Benson, Dow Jones Newswires; 5411-4311-3127; [email protected] dowjones.com 

  (END) Dow Jones Newswires
  08-24-07 1130ET
  Copyright (c) 2007 Dow Jones & Company, Inc.

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