The Bashneft Case
Company Law
case RUDN
General
overview
The case concerns
AFK Sistema and
Bashneft (Rosneft
company)
Bashneft was originally a
regional oil company in the
Republic of Bashkortostan
and went through
privatisation in the 2000s.
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The Bashneft Case
Company Law
case RUDN
General
overview
In 2009, AFK
Sistema acquired a
controlling stake in
Bashneft for around
$2 billion.
Later (2014-2016) the state,
through Rosneft and other
agencies, challenged the legality
of that privatisation and sought
to recover the company or claim
damages.
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The Bashneft Case
Company Law
case RUDN
The Lawsuit
1) That the privatisation of Bashneft
(and associated restructuring) under
AFK Sistema was unlawful (for
example due to improper government
or regional authority actions) and
that as a result the state (via Rosneft
or other organs) suffered damage.
2) That AFK Sistema (and its subentities) engaged in restructuring of
Bashneft in 2013-2014 which allegedly
led to the removal of assets
(dividends, asset transfers) and/or
damage to the company’s value,
thereby harming Bashneft (as a
company) or the state’s interests in it.
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The Bashneft Case
Company Law
case RUDN
Course of the
case
In 2014, the Russian state-organised
actions began: for example, a court
ordered the seizure of Bashneft shares
held by AFK Sistema due to claims of
illegal privatisation. Investigations
opened into the deals around Bashneft
(2002-2009) and claims of abuse. On 8
December 2017, Rosneft and Bashneft
filed a lawsuit against AFK Sistema and
its subsidiary Sistema-Invest for
damages of about 131.6 billion rubles
(later amounts varied) for alleged removal
of dividends and weakening of Bashneft.
The arbitration court of the Republic of
Bashkortostan in August 2017 partially
upheld the claims and ordered AFK
Sistema to pay about RUB 136.3 billion.
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The Bashneft Case
Company Law
case RUDN
Outcome of the
case
The court found in favour of the state /
Bashneft side to an extent: AFK Sistema
was ordered to pay large damages (136
billion rubles) for the restructuring period.
The case resulted in the state (via
Rosneft) acquiring Bashneft: In 2016
Rosneft reportedly bought a 50.08%
stake from Bashkortostan region for
329.7 billion rubles, and Bashneft became
largely state-owned.
AFK Sistema’s share price collapsed; the
dispute significantly impacted its
financial standing and investor
confidence.
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