Tribunal to Rule on BP Dispute With Russian Partners

An arbitration tribunal hearing a long-running dispute between BP PLC and its Russian partners in the TNK-BP Ltd. joint venture has decided it will issue a definitive ruling on whether the U.K. energy giant breached their shareholder agreement when it pursued an alliance with Russia's state-owned oil company OAO Rosneft earlier this year, two people familiar with the matter said Thursday.

The arbitration tribunal in February upheld an injunction granted by a British court in January that blocked the Rosneft deal. Now that the tribunal has agreed to hear full evidence in consideration of a final ruling, it is only likely to issue a final ruling by late spring or early summer, one person said.

"The parties will meet in January or February to agree on process and schedule" for the proceedings, said the person.

The decision is the latest development in the standoff between BP and its partners in Russian joint venture TNK-BP. BP's partners in the venture are a group of Soviet-born billionaires collectively known as AAR.

If the arbitration tribunal issues a final ruling that BP did contravene its shareholder pact with AAR, that could in turn lead to a further escalation in hostilities between the two camps, which have had a fractious relationship since the joint venture was formed in 2003.

AAR had sought the decision by the tribunal that it will hear full evidence and then issue a definitive ruling, and BP had contested it, both people said late Thursday.

BP and Rosneft announced in January that they would swap shares in each other and jointly explore for oil in the Russian Arctic. But AAR claimed the deal with Rosneft breached AAR's shareholder agreement with BP, which stipulates that TNK-BP should be BP's sole vehicle for investing in Russia. AAR successfully sued to block the alliance, and Rosneft later partnered instead with Exxon Mobil Corp.

"AAR requested that the tribunal hear its claim that BP breached the shareholder agreement, and if the tribunal rules that BP has breached the agreement, then it would award AAR $1 in nominal damages," said one of the people familiar with the matter.

The other person said AAR would only be awarded "token damages" if the tribunal rules that BP had committed a "technical breach" of its shareholder pact with AAR.

The other person said, "The tribunal said to AAR, 'you can bring the case if you want to, and we will consider it.'"

AAR has said in the past that it was entitled to sue BP for damages over the failed Rosneft alliance, though BP has insisted that no damages were inflicted because the tie-up never materialized.

But one person expressed a view that a definitive ruling by arbitrators that BP had breached the shareholder agreement would strengthen a potential lawsuit against BP. The other person didn't express a view on the matter.

read more: Olympus Wealth Management