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Eurasia and Commonwealth appeal Scots court ruling over Azerbaijan oil
dispute
Sunday Herald
11:33pm Saturday 23rd February 2008
TWO sparring oil companies in dispute over access to oil and gas reserves in
Azerbaijan are heading to a Scottish court next year in a bitter
conflict-of-interest dispute over the oil riches of the wild Caucasus region.
The companies concerned - Eurasia Energy, based in Peterhead, and
Commonwealth Oil & Gas Company, which is a subsidiary of London-based Arawak Energy -
are in dispute over access to a 600 square-kilometre exploration block in the
shallow waters of the Caspian Sea in the former Soviet republic.
Azerbaijan, the epicentre of the so-called "Wild East", is a country with
proven reserves of crude oil of between seven and 13 billion barrels, according
to the US Department of Energy. The country, which borders Iran, Armenia,
Georgia and Russia, has huge potential in the eyes of Western exploration and
production companies following the completion of Baku-Tbilisi-Ceyhan pipeline
in 2006.
Despite a three-week hearing at the Court of Session in Edinburgh last
September, the dispute between Eurasia and Commonwealth is far from over. Last
week both Eurasia and Commonwealth declared they would appeal aspects of the
judgement issued by Lord Reed on December 14. They are due to return to court in
March next year.
At the centre of the dispute is the Peterhead-based oil executive, Nicholas
Baxter, president and chief executive of Toronto-listed Eurasia Energy since
November 2005. Baxter was one of the first Western entrepreneurs to tie-up oil
and gas deals in Azerbaijan after it broke from the USSR in 1991.
Baxter is contesting the decision of the court that he was in breach of his
fiduciary duties as a non-executive director of Commonwealth Oil & Gas.
The judge ruled Baxter secured exploration and development rights to a
600sq-km block from the State Oil Company of Azerbaijan (Socar) on behalf of
Eurasia, of which he had recently become chief executive. This was in breach of
his obligation to Commonwealth, where he was still a non-executive director.
Giving evidence, Alastair McBain, chief executive of Commonwealth's parent,
Arawak Energy, said he was "stunned" to hear that Baxter had taken rights to
the concession to a rival company. Even though McBain had earlier squeezed
Baxter out of executive responsibilities at Arawak/Commonwealth, he believed
that Baxter's ultimate loyalty would continue to be to that company, since
Baxter was one of Arawak's biggest shareholders, with a 3% stake. At today's share
price that holding is worth £6.2 million.
Since Eurasia does not appear to have materially benefited from its
memorandum of understanding with Socar, the whole court drama may in any case be
academic.
In February 2007, Eurasia failed to reach an agreement with Socar to extend
its rights to explore the so-called Alat-Deniz block.
Commonwealth, for its part, has cross-appealed the element of Lord Reed's
decision in Eurasia's favour - namely that, as an alleged knowing recipientof
confidential information given in breach of fiduciary duty, Eurasia should
compensate Commonwealth for loss of profits due to have come its way.
Commonwealth was originally seeking damages of some $117m (about £60m) asa result of
this.
But Baxter is contesting the ruling that he was in breach of his fiduciary
duties as a director of Commonwealth.
Jim Cormack, a partner in law firm McGrigors, which is acting for both Baxter
and Eurasia, said: "Basically the judge said that he had found in favour of
Baxter and Eurasia on all the material, factual issues. The judge found that
if there was a breach of fiduciary duty it was not knowingly done."
In these circumstances, the civil action, even after the appeal, seems more
likely to benefit future generations of lawyers rather than the sparring
partners as the case sets interesting precedents on the fiduciary duties of
directors. Meanwhile, both Eurasia and Commonwealth are likely to find themselves
deeply out of pocket.
From: Emil Lazarian | Ararat NewsPress
dispute
Sunday Herald
11:33pm Saturday 23rd February 2008
TWO sparring oil companies in dispute over access to oil and gas reserves in
Azerbaijan are heading to a Scottish court next year in a bitter
conflict-of-interest dispute over the oil riches of the wild Caucasus region.
The companies concerned - Eurasia Energy, based in Peterhead, and
Commonwealth Oil & Gas Company, which is a subsidiary of London-based Arawak Energy -
are in dispute over access to a 600 square-kilometre exploration block in the
shallow waters of the Caspian Sea in the former Soviet republic.
Azerbaijan, the epicentre of the so-called "Wild East", is a country with
proven reserves of crude oil of between seven and 13 billion barrels, according
to the US Department of Energy. The country, which borders Iran, Armenia,
Georgia and Russia, has huge potential in the eyes of Western exploration and
production companies following the completion of Baku-Tbilisi-Ceyhan pipeline
in 2006.
Despite a three-week hearing at the Court of Session in Edinburgh last
September, the dispute between Eurasia and Commonwealth is far from over. Last
week both Eurasia and Commonwealth declared they would appeal aspects of the
judgement issued by Lord Reed on December 14. They are due to return to court in
March next year.
At the centre of the dispute is the Peterhead-based oil executive, Nicholas
Baxter, president and chief executive of Toronto-listed Eurasia Energy since
November 2005. Baxter was one of the first Western entrepreneurs to tie-up oil
and gas deals in Azerbaijan after it broke from the USSR in 1991.
Baxter is contesting the decision of the court that he was in breach of his
fiduciary duties as a non-executive director of Commonwealth Oil & Gas.
The judge ruled Baxter secured exploration and development rights to a
600sq-km block from the State Oil Company of Azerbaijan (Socar) on behalf of
Eurasia, of which he had recently become chief executive. This was in breach of
his obligation to Commonwealth, where he was still a non-executive director.
Giving evidence, Alastair McBain, chief executive of Commonwealth's parent,
Arawak Energy, said he was "stunned" to hear that Baxter had taken rights to
the concession to a rival company. Even though McBain had earlier squeezed
Baxter out of executive responsibilities at Arawak/Commonwealth, he believed
that Baxter's ultimate loyalty would continue to be to that company, since
Baxter was one of Arawak's biggest shareholders, with a 3% stake. At today's share
price that holding is worth £6.2 million.
Since Eurasia does not appear to have materially benefited from its
memorandum of understanding with Socar, the whole court drama may in any case be
academic.
In February 2007, Eurasia failed to reach an agreement with Socar to extend
its rights to explore the so-called Alat-Deniz block.
Commonwealth, for its part, has cross-appealed the element of Lord Reed's
decision in Eurasia's favour - namely that, as an alleged knowing recipientof
confidential information given in breach of fiduciary duty, Eurasia should
compensate Commonwealth for loss of profits due to have come its way.
Commonwealth was originally seeking damages of some $117m (about £60m) asa result of
this.
But Baxter is contesting the ruling that he was in breach of his fiduciary
duties as a director of Commonwealth.
Jim Cormack, a partner in law firm McGrigors, which is acting for both Baxter
and Eurasia, said: "Basically the judge said that he had found in favour of
Baxter and Eurasia on all the material, factual issues. The judge found that
if there was a breach of fiduciary duty it was not knowingly done."
In these circumstances, the civil action, even after the appeal, seems more
likely to benefit future generations of lawyers rather than the sparring
partners as the case sets interesting precedents on the fiduciary duties of
directors. Meanwhile, both Eurasia and Commonwealth are likely to find themselves
deeply out of pocket.
From: Emil Lazarian | Ararat NewsPress