Credit Suisse sued over Azerbaijan oil joint venture

Jane Croft

(FT) - Credit Suisse is being sued in a High Court trial over alleged “shortcomings” in its role over the sale of a company with rights to the largest onshore oil and gas project in Azerbaijan.

Two companies owned by Zaur Leshkasheli, a Georgian businessman, allege that the Swiss bank failed to seek the best price on the 2008 sale of Caspian Energy Group, an oil firm set to up to work with the state oil company to develop the Kurovdag field, southwest of the capital Baku.

Mr Leshkasheli’s companies , which owned an interest in Caspian Energy, are suing Credit Suisse for alleged breach of contract and negligence.

Caspian, which was in a joint venture with the State Oil Company of Azerbaijan Republic (Socar), was eventually sold for $245m to Berghoff/GEA, a company linked to Russian oil magnate, Mikhail Gutseriev, the former chairman of RussNeft.

However, Mr Leshkasheli alleges that Credit Suisse did not consider alternative offers including interest from Gazprom, Russia’s fourth-largest oil and gas producer, and claims he might have received at least $700m more for his stake.

“What happened, or did not happen, with Gazprom Neft is perhaps the most glaring example, where its interest in acquisitions was known, its interest was keen, and it could have been exploited, but was not even explored,” written arguments for Mr Leshkasheli’s companies claim in the trial that opened on Monday.

Credit Suisse had granted the two companies a loan on terms that required Caspian to eventually be sold using Credit Suisse as a mergers and acquisitions adviser.

In opening arguments Jeremy Cousins, QC, representing Mr Leshkasheli’s companies, told the court that it was a legal principle that someone selling an asset on behalf of another owed a duty to obtain the correct price.

However, the Swiss bank, which is defending the claim and is expected to open its case on Tuesday, alleges in its written arguments to the trial that Mr Leshkasheli “did not explain to the bank when he obtained the loan that there were very serious issues brewing between him and Socar and he could not count on their co-operation in the sale.”

The sale to Berghoff/GEA “was the highest offer then available” and “the best price obtainable in the circumstances,” Credit Suisse claims.

“The Claimants have, with the benefit of hindsight and a microscope, sought to identify every conceivable mistake or shortcoming in the sales process in the hope of establishing a breach of duty,” the bank continues in its court documents.

The trial continues.