Settlement Update: The Dutch Court ruled for granting jurisdiction in the Netherlands.
Overview
For nearly a decade, Petrobras allegedly engaged in a massive corruption scheme that went unchallenged until 2014, when, on October 27, 2014, it issued a press release stating that certain of its key executives were being investigated in connection with bribery and money laundering. Since then, prosecutors and federal police in Brazil have unearthed the countrys largest-ever corruption scandal by linking a ring of black-market money changers to a price-fixing and political kickback scheme at the state-run oil company.
Sworn testimony has revealed that Petrobras executives and Brazilian government officials accepted bribes from members of a cartel of construction companies in exchange for awarding inflated contracts to members of the cartel in connection with oil refinery construction, drilling rig construction, and other energy-related construction projects.
Brazilian federal police arrested the former head of Petrobras refining and supply department in March 2014. Since then, over 100 indictments have been issued by Brazilian authorities, and over a dozen executives linked to Petrobras have been convicted for offenses such as money laundering and racketeering. In November 2014, the SEC sent a subpoena to Petrobras requesting information about the widening corruption investigations, and the Financial Times reported that the United States Department of Justice (DOJ), which can bring criminal charges, opened an investigation into the company. Petrobras is expected to face the largest penalty ever levied by United States authorities, pursuant to the corruption investigation by the DOJ.
Litigation Update
NOTICE:
September 2018: The Dutch Court ruled for granting jurisdiction in the Netherlands.
The Dutch court ruled that the Company's own articles calling for arbitration, did not meet the standard for which Dutch courts determine to be valid ground to deny the investors and the Foundation constitutional access to bring litigation and claims against Petrobras in the Netherlands
Next Steps in the Dutch Litigation
With the favorable ruling announced on September 19, 2018, the District Court schedule in Rotterdam is as follows:
- October 18, 2018: Petrobras to file a skeleton argument-statement listing the various defenses Petrobras intends to present on both the merits and the standing of the Foundation;
- November 14, 2018: The Foundation can respond to that statement;
- December 18, 2018: A potential case management hearing will take place. Confirmation of the date of when this hearing will be decided by the court after November 14, 2018.
Eligible Transactions:
Investors who purchased common and preferred shares of Petrobras and/or bonds issued by Petrobras Global Finance B.V. or Petrobras International Finance Company S.A. anytime before July 28, 2015 should confirm their eligibility today.
Differences With U.S. Settlement:
The U.S. litigation and settlement left investors that purchased primary shares of Petrobras traded in Brazil and via linked markets in Europe and bonds bought outside the U.S., without any compensation for their investment losses in those securities and subject to Petrobras’ continued claims of innocence and calls for any dispute to be resolved via arbitration in Brazil.
The ruling is a big step toward investors’ outlook for recovery of some of the billions lost, whether losses incurred in U.S. dollars, Euros, Brazilian Reals (Real) or other currencies. The arbitration requirement has been much touted by Petrobras and reflected in the media. In the opinion of Battea Global Litigation Research, Inc., today’s ruling is definitely a big blow to Petrobras’ arbitration strategy.