The dispute
As reported by the
financial press, BP intends to sell its stake in the TNK BP joint
venture which displeases its partner AAR. AAR claims the violation of
its existing shareholder agreement with BP which, according to AAR,
does not allow to give any confidential information about the joint
venture to third parties.
AAR Advisory Board members Leonard Blavatnik, Mikhael Fridman, and Viktor Vekselberg
AAR Advirsor Board member German Khan
An in-depth analysis of
this litigation necessitates the analysis of the shareholder
agreement and the joint venture, both in light of Russian (or any
other applicable) law. However, what I would like to do today,
without having access to this detailed information, is to write about
the major issues that play a role in this litigation:
Confidentiality
clauses
Let's first start with
some general comments on confidentiality clauses and their main
content:
To show you what lawyers
are able to do when you leave them without control, please read the
following example of a typical definition of confidential
information.
Confidential
Information shall mean, with respect to a party, all information (and
all tangible and intangible embodiments thereof), which is owned or
controlled by such party, is disclosed by such party to the other
party pursuant to this Agreement, and (if disclosed in writing or by
another tangible medium) is marked or identified as confidential at
the time of disclosure to the receiving party, or (if otherwise
disclosed) is identified as confidential at the time of disclosure to
the receiving party and described as such in writing within thirty
(30) days after such disclosure. Notwithstanding the foregoing,
Confidential Information of a party shall not include information
which, and only to the extent that, the receiving party can establish
by written documentation (a) has been generally known prior to the
disclosure of such information by the disclosing party to the
receiving party ; (b) has become generally known, without fault on
the part of the receiving party ; (c) has been received by the
receiving party at any time from a source, other than the disclosing
party, rightfully having possession of and the right to disclose such
information free of confidentiality obligations ; (d) has been
otherwise known by the receiving party free of confidentiality
obligations prior to the disclosure of such information by the
disclosing party to the receiving party ; or (e) has been
independently developed by employees or others on behalf of the
receiving party without access to or use of such information
disclosed by the disclosing party to the receiving party as evidenced
in writing (each, a Confidentiality Exception).
262 words in 2 sentences!
This is a score of 24.49 on the Gunning Fox index and means that you
need 24 years of formal education to understand the text on a first
reading. Good luck!
By the the way, did you
know that Goethe was a lawyer? Obviously, the profession has changed
since his death in 1832.
Confidentiality vs.
prohibition of assignment
The details of the
confidentiality clauses agreed upon by BP and AAR are not public.
However, I doubt that the “real” litigation is about
confidentiality issues here. It seems to be more about preventing BP
to sell its stake in the joint venture and, if BP succeeds
nevertheless, to obtain maximum damages. However, can you forbid your
partner in a shareholder agreement to sell his shares in the future?
The first obvious answer
to this question would be “Why not? After all, if he signs, it is
his own fault because he knew it before.” This line of reasoning is
called freedom of contract and is actually a fundamental civil law
principle in most jurisdictions.
However, the problem here
is that forbidding someone to sell his own shares impairs his
property rights. As property rights and their design are part of
people's fundamental rights, the above described agreement conflicts
possibly with the state's constitution which usually contains
people's fundamental rights.
In in the particular case
of shareholder agreements, it is widely accepted that,
- on the one hand, a joint venture often necessitates a binding engagement of the partners over a specific period of time (If everybody can step out immediately, it is no more a joint venture!);
- on the other hand, you cannot bind your partner forever.
Having said that, the
balance between freedom of contract and the fundamental property
rights will usually involve 2 main aspects:
- Time (Depending on the project, an engagement period of 10 years may be a good benchmark for the validity of a prohibition of assignment.)
- Serious and legitimate reason (To limit a person's property rights you need such a reason. Examples include social welfare, other interests of the community, and the profitability of the project.)
Resources:
- “Oligarchs threaten BP's Russia sale plans” in FT dated June 3, 2012
- “Russian watchdog targets TNK-BP dispute” in FT dated June 6, 2012
