Shell settles first pan-European securities fraud case

US law firm Grant & Eisenhofer (G&E) scored an advisory role on the first-ever pan-European class settlement of securities fraud claims.

G&E, representing a European investment group of more than 50 investors, including some from the UK, agreed to resolve claims against Royal Dutch Shell over the company allegedly having reported an “overstatement” of its oil and gas reserves.

The settlement is still awaiting approval from the Dutch courts, but when finalised the agreement is expected that the shareholders will receive $450m (£228.12m).

The announced settlement stems from Shell’s extreme inflation of its proven oil and gas reserves from 1997-2003, which led to massive financial restatements by the company beginning in 2004.

Estimates are that over a six-year period, Shell allegedly overstated more than $100bn (£50.69bn) of future cash flows, based on billions of barrels of oil that were not actually held in its reserves.

Although there is no legal mechanism to pursue class action, under a new statute never before applied to a securities claim Dutch law allows the court to accept a collective resolution of a dispute as long as both sides petition the court, even in the absence of a civil lawsuit.

The investment group, which holds more than one billion shares in Shell, comprises a number of public pension funds that invested in the oil company during the years that the company repeatedly overstated the true extent of its oil and gas reserves.

Managing partner of G&E Jay Eisenhofer advised on the settlement for the investment group, while Shell’s legal director Beat Hess spearheaded the deal for the oil company.