1/6/2009
By Sophie Baker
The largest securities fraud settlement ever has been reached in Europe, with a Dutch appeals court ordering Royal Dutch Shell plc to begin the payment of $381million, plus interest, to a foundation representing a group of institutional investors from 17 European countries.
Investors from Canada and Australia were also represented, and in total more than 150 institutional investors were involved. The landmark settlement resolves securities fraud claims that stem from the oil giant's inflation of its proven oil and gas reserves during the years 1997-2003.
The case is a landmark as a new statute, that had not before been applied to a securities case, in Dutch law allowed the court to accept a collective resolution as long as both sides were in agreement, even in the absence of a civil lawsuit.
The settlement covers all non-US purchasers of Shell stock that was obtained on European securities exchanges, principally in London and Amsterdam, during the period in which Shell was allegedly involved in illegal energy reserve accounting. European pension funds from the Netherlands, UK, Germany, Sweden, Luxembourg, France, Denmark, Austria, Belgium, Finland, Italy, Liechtenstein, Spain, Switzerland and Norway were represented in the form of public and trade-based employees.
Shell will make its payment to a foundation created to petition the Court of Appeals on behalf of the investor group, and US law firm Grant & Eisenhofer represents both this foundation and the pension funds. This fund held in excess of one billion shares of Shell during the period under question.
"We are pleased that the Amsterdam Court of Appeals has issued its final approval on this historic settlement, which represents a watershed outcome for European and other non-IS investors in gaining substantial, collective recovery in one of the most high-profile securities cases in recent years," commented Jay Eisenhofer, co-managing partner of Grant & Eisenhofer.
"It is important that investors have a proper mechanism and forum for pursuing securities claims in European courts - the Amsterdam Court of Appeals has done a tremendous service for advancing shareholder rights in its handling of the Shell case. This was a uniquely European resolution in the context of a securities fraud, but one that can present huge implications in other disputes going forward," he added.
Shell allegedly overstated more than $100bn of future cash flows over the six-year period covered by the case, based on billions of barrels of oil that were not actually held in its reserves.
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