“Rosneft” against Sistema: what is a multibillion-dollar dispute

The arbitration court of Bashkortostan on August 23 granted the petition of “Rosneft” to AFK “Sistema” partially, having decided to recover from last more than 136 billion rubles, the losing side has promised to appeal the decision. State oil company accused the Finance Corporation is that over time the ownership of “Bashneft” she deliberately devalued the Bashkir assets. TASS talks about the merits of the dispute, which included a vast amount of 170 billion rubles.

Why “Rosneft” has filed a lawsuit against Sistema?

The dispute is around the assets of the company “Bashneft”. From 2005 to 2014 “Bashneft” was part of the AFK “System”. In October 2014, the company was returned to public ownership, and in October 2016 50,1% of shares of “Bashneft” bought “Rosneft”.

In may 2017, Rosneft has filed a lawsuit against AFK Sistema, arguing that its actions in the period of ownership of “Bashneft” has led to the depreciation of the Bashkir assets. “We believe that there were actions and manipulations that decreased the value of “Bashneft”, — said TASS press-Secretary of “Rosneft” Mikhail Leontyev.

From definition of Arbitration court of Moscow it follows that the impairment of “Bashneft” has occurred as a result of reorganization of the company. AFK “System” was to eliminate the cross ownership structure of Bashneft. In the end, “Bashneft” has received 16,8% of its own shares in exchange for their share in the company “System-invest” and indirect shares in Bashkir power grid company (BESK) and the “Ufaorgsintez”.

The claim of “Rosneft” it is alleged that as a result of the reorganization of “Bashneft” has lost the right to the dividend of the company “System-invest” and lost control of BESK and “Ufaorgsintez”.

In addition, Bashneft had to write off the debt of the company “Sistema-invest” in the amount of 36.9 billion, as its debt as a result of reorganization moved one of the “daughters” of “Bashneft”, which became the creditor and the debtor immediately.


What is the amount required “Rosneft” from “AFK “System”?

Initially, Rosneft was required to pay damages in the amount 106,6 billion. However, shortly thereafter came the fall of the ruble and the head of “Rosneft” Igor Sechin reported that the company does not exclude revision of total claims. According to him, the assessment of loss of 106 billion rubles was carried out at the date of filing of the claim, and if you count in the price when the acts were committed, it will be 180 billion rubles.

As a result, in late may, the requirements were increased to 170,6 billion.

“We and about previous to the amount of claims has said that she is absolutely not justified. And is 170.6 billion rubles — this is from the realm of unscientific fantasy” — commented on these actions, the official representative of AFK “Sistema” Sergei Kopytov.

Why AFK “System” considers the claim unfounded?

In AFK “System” did not agree with the claim, noting that all corporate actions in respect of the assets of “Bashneft” was carried out in accordance with the law in order business development and growth of the company value.

Since the acquisition of Bashkir oil and energy Corporation has transformed the disparate structure of enterprises with opaque dividend and operating policies in a full-fledged vertically integrated oil company, argued representatives of the defendant.

According to Sistema, 2009-2014 revenue of Bashneft increased three times: from 215 billion to 637 billion; oil production increased 46% from 12.23 million tons to 17.81 million tons; capitalization increased more than six times — from $2 billion to $12.8 billion in addition, the oil company received the listing of the first (highest) level on the Moscow stock exchange.

Were there attempts to negotiate out of court?

AFK “System” has offered “Rosneft” to settle the dispute, after the extrajudicial evaluation of the results of the reorganization of “Bashneft”.

The basis of settlement agreements could be the engagement of an independent auditor from the “big four”. “Damages, which the plaintiffs say, are not confirmed neither by the growth of capitalization of “Bashneft”, nor the growth of its net profit. That is why our proposal is to engage an independent auditor,” said Sergei Kopytov.

Opponents failed to agree.

On June 26 FC “System” declared about the arrest of company-owned shares in MTS, “meds” and BESK in ensuring compliance within the framework of the dispute with Rosneft. To cancel the seizure of assets in court failed.

17 Jun AFK “System” has declared a technical default on credit obligations in the amount of about 3.9 billion roubles from-for arrest of the property under the claim “Rosneft”.

On 7 August the Eighteenth arbitration appeal court (Chelyabinsk) upheld the decision of Arbitration court of Bashkiria, has imposed a lien on the assets of AFK “Sistema” under the claim “Rosneft”. Representative AFK “System” declared that the court decision will be appealed.

On 8 August the Arbitration court of Bashkiria has begun consideration of the dispute, but postponed it until August 9 due to the late time. At the same time, the court will consider a number of petitions of the parties. AFK “System” has offered to enter into a process Natalia Golovkina, who conducted the audit of “Bashneft”. Representatives “Rosneft” declared a petition to limit the time of statements of the parties 15 minutes. Also AFK “System” declared the disqualification of a judge, but her request was not satisfied.

A decision was made by the court?

23 August 2017, the Arbitration court of Bashkiria has satisfied the claim of the oil company to partially Finance Corporation, decided to collect from AFC 136,273 billion.

Also the court decided to collect from “the System” and “System-invest” in favor of “Rosneft” the state fee of $ 159,740 thousand RUB

The representative of AFK “Sistema” Elena Demina said that the company will appeal against the court’s decision.