The former chairman of Shell, Sir Philip Watts, is to take the main City regulator, the Financial Services Authority, to a public tribunal to try to clear his name over the oil giant's reserves scandal. Breaking his silence for the first time since he was sacked by Shell in March with a £1m pay-off, Sir Philip said he was confident the tribunal would find that he had acted "properly and in good faith" over the episode, which caused massive damage to the company's share price and reputation.
Sir Philip's lawyers, Herbert Smith, wrote to the FSA yesterday, claiming that the regulator had breached its statutory obligations by publishing a damning report into the reserves scandal without giving its former chairman the right to make representations before publication.
Sir Philip's complaint is twofold: first that the FSA treated him unfairly by failing to observe the correct procedures; and second that it had prejudiced his position in respect of any action which might be taken against him in person.
The FSA notice, published in August, followed a £17m fine levied on the company and accused Shell of "unprecedented misconduct". The FSA criticised Shell for misleading investors by issuing false and misleading estimates of its proven reserves. The estimates, it said, were given despite indications and warnings over a three-year period that it had been overstating its reserves.
The disclosure on 9 January that Shell was cutting its proven reserves by 4.5 billion barrels, or 25 per cent, knocked nearly £3bn from the value of its quoted UK arm, Shell Transport and Trading. It subsequently emerged that Shell had known it might be overestimating reserves.
Although the FSA notice did not mention Sir Philip by name, his lawyers argue that it identified him by referring to a series of internal memos and company presentations that its then chairman would have seen.
In its letter to the FSA, Herbert Smith says that had Sir Philip been given the chance to put his side of the story, the FSA's findings would have been shown to be "fundamentally flawed".
Herbert Smith said it had contacted the regulator on three separate occasions before publication of the notice seeking assurances that it would comply with its statutory duties. "Nonetheless, in its haste to resolve its investigation into Shell, the FSA has flouted those obligations, leaving our client no option but to seek redress by way of a reference to the tribunal."
The tribunal will be the first full airing of the scandal in public and Sir Philip will be called to the stand to give evidence about his role in events. Even if the tribunal rules in his favour, he will have to pay his own costs, which could run into hundreds of thousands of pounds.
However, he is determined to try to restore his reputation. "I believe that a full and fair examination of all the facts will demonstrate that I have acted properly and in good faith at all times," Sir Philip said in a statement.
So far he has been formally interviewed once by the FSA and, although it has now closed the file on Shell, it has yet to decide whether to take any action against its former chairman.
It is not known when the tribunal will begin, nor how long it will last. The FSA refused to comment yesterday.
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