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Russians prepare ‘legal onslaught’ in battle with BP

Russians prepare ‘legal onslaught’ in battle with BP

By Russell Hotten

Last Updated: 2:18am BST 06/07/2008

The Russian billionaires fighting BP for control of their oil joint venture, TNK-BP, are lining up a legal onslaught in a bid to force the UK company into submission.

Lawyers, including Lovells and SG Berwin in the UK, have been appointed to start proceedings in six jurisdictions around the world in what could be just the beginning of a campaign to unsettle BP and divert management attention.

At a crunch meeting of the TNK-BP board tomorrow, the Russians will seek the dismissal of the joint venture’s chief executive Robert Dudley.

Because the balance of the board favours BP, the Russians, who operate under a consortium called Alfa-Access-Renova (AAR), expect to be defeated and are already planning their next step.

Lovells, one of the City’s top law firms, has been appointed to handle legal action in the UK and Russia; SG Berwin will cover the UK too, but also action in the British Virgin Islands; Sweden’s Vinge will cover affairs in that country; and the US litigation powerhouse Cravath Swaine & Moore will look after proceedings in America.

AAR was also this weekend in the process of appointing lawyers in Cyprus.

Viktor Vekselberg, one of the three Russians who together control 50 per cent of TNK-BP, called tomorrow’s meeting last Wednesday to discuss one motion that Dudley be sacked and another motion requesting BP nominate a new, “independent” chief executive.

Vekselberg, and his partners, Mikhail Fridman and Leonid Blavatnik, claim Dudley has repeatedly infringed Russian employment and tax laws.

They also say that TNK-BP’s financial performance has been woeful and that BP is stifling the joint venture’s expansion abroad.

BP says that all this is a smokescreen to mask AAR’s bid to get control of TNK-BP on the cheap.

Despite AAR’s claim that it is acting in the best interests of the venture, there are suspicions that it has a hidden agenda.

Either the Russian investors want control in order to sell the company to state energy giants Gazprom or Rosneft, or they want to force BP to sell to either of these companies.

Despite Kremlin denials that it is involved, speculation remains that the government in Moscow has engineered the dispute in order to get the lucrative energy assets back into state hands following their privatisation in the 1990s.

An ARR spokesman said last night: “We are very disappointed that BP has refused to engage in meaningful discussion with us about our proposals to reverse the underperformance of TNK-BP.

“Naturally we hope that they will agree on Monday to an independent CEO to lead the company’s development as an independent business able to grasp the huge opportunities open to it.

“In the event that we don’t make progress, sadly we will have no choice but to commence legal proceedings in Russia and internationally.”

BP insiders say that any attempt to tie it up in legal knots is not unexpected.

For example, Fridman’s Alfa Group and its subsidiaries have a history of launching legal action worldwide against joint venture partners and competitors.

The BP-nominated directors on the board look certain to back Dudley tomorrow.

A BP spokesman said: “Dudley has our full support. He has managed the company very well in the last five years for the benefit of all shareholders. He has ensured the highest returns to all shareholders.”

Prime Minister Gordon Brown is expected to raise the dispute in a private meeting with Russia’s President Dimitry Medvedev at tomorrow’s launch of the G8 summit in Japan.

Political pressure on TNK-BP has so far been led by European commissioners.

The British Government has hesitated to intervene as it fears that pressure from London could inflame an already bad relationship with Moscow following the poisoning of former KGB agent Alexander Litvinenko in 2006.

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