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March 29, 2011 6:27 PM

Skadden Takes Key Role in Nixing BP/Rosneft Alliance

Posted by Brian Baxter

A three-member arbitration tribunal in Stockholm last week blocked a $16 billion joint venture between British oil giant BP and Russian government-owned energy colossus Rosneft to explore for oil in the Arctic Circle.

Skadden, Arps, Slate, Meagher & Flom international arbitration partner David Kavanagh and global transactions cohead Scott Simpson in London led a team from the firm representing the Alfa-Access-Renova (AAR) group in objecting to the accord, according to U.K. publication Legal Week. A British court had issued an injunction against the deal in February, ordering it to be settled through arbitration.

BP and Rosneft in January agreed to form an alliance to explore for oil off Russia's vast Arctic coast. The deal saw Magic Circle firms Linklaters and Freshfields Bruckhaus Deringer advise BP and Rosneft, respectively. But BP, which already owns 50 percent of Russia's third-largest oil producer, TNK-BP, ran into opposition from other shareholders in that enterprise.

AAR, a consortium of Russian shareholders in TNK-BP, is backed by oligarchs Mikhail Fridman of Alfa Group, Len Blavatnik of Access Industries, and Viktor Vekselberg of Renova Group. The group claimed that BP had violated its agreement in the TNK-BP joint venture by denying them the right of first refusal on any other oil deals the London-based company planned on pursuing in Russia.

The ensuing dispute pitted the oligarchs against BP and Rosneft chairman Igor Sechin, who also serves as deputy prime minister of the Russian Federation. Legal Week reports that Linklaters litigation chief Michael Bennett in London advised BP in the arbitration with AAR.

Freshfields corporate partner Sebastian Lawson and associate Sergei Diyachenko advised Rosneft, which was not involved in the actual arbitration. Legal Week reports that senior corporate partner Charles Martin from British firm Macfarlanes advised TNK-BP's independent board of directors. (Oligarch German Khan serves as executive director of TNK-BP.)

The arbitration panel in Stockholm upheld the previous injunction issued by a British court, which put on hold the $16 billion agreement between Rosneft and BP. The panel did not rule on whether an $8 billion share swap--the largest between a private and state-controlled company in the oil sector--could proceed. AAR claims it should also be stopped on the grounds that it is a "strategic investment," Legal Week reports.

BP has said publicly it will abide by the arbitration panel's decision, but will try and resolve its differences with its Russian partners in order to pursue Arctic oil drilling in the future. BP, which has been busy on the transactional front in recent months as it seeks to offset $30 billion in costs from an oil spill in the Gulf of Mexico last year, also said it would seek approval of the share swap with Rosneft.

 

RELATED STORIES FROM THE AM LAW DAILY

Rosneft Taps Freshfields for $1 Billion Exxon Mobil Agreement

Freshfields, Linklaters Lead on $16 Billion BP/Rosneft Joint Venture

 

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