Shell accedes to $450m settlement

US firm Grant & Eisenhofer (G&E) landed 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 it is expected that the shareholders will receive $450m (£227.55m).

The announced settlement stems from Shell’s extreme inflation of its proven oil and gas reserves from 1997 to 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 (£50.57bn) of future cashflows, based on billions of barrels of oil that were not actually held in its reserves.

Although there is no legal mechanism to pursue a 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, so 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.

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