Kramer Levin Secures Another Victory for EIG Energy Funds XIV and XV in Petrobas Litigation

On July 30, 2019, Kramer Levin achieved another win for EIG Energy Funds XIV and XV on July 30, when a federal district court judge ruled that Petrobras had forfeited the right to arbitrate the 2016 lawsuit described below by waiting until April 2019 to claim it. The court also found that Petrobras had expressly waived arbitration earlier in the proceeding and had failed to show that arbitration was warranted on the merits. A Reuters article on the win is attached.

In July 2018, the D.C. Circuit affirmed a decision by the U.S. District Court for the District of Columbia that Kramer Levin client EIG Energy Funds XIV and XV, could continue to pursue their suit against Petróleo Brasileiro S.A. (Petrobras), the state-owned Brazilian oil company, in the U.S. federal courts, rather than in Brazil. Petrobras sought an en banc review, which was denied, and then filed a petition for certiorari to the U.S. Supreme Court. EIG filed an opposition to the cert petition, and the Supreme Court denied cert in March 2019. With this victory, discovery on the merits is now proceeding in the United States.

In the suit, which stems from the Brazilian “Car Wash” scandal, the Funds claim that Petrobras defrauded them and caused them to lose over $221 million. The EIG Funds invested in a company called Sete, a company formed by Petrobras to develop a fleet of drilling ships for oil operations in the Pre-Salt Reserves off the coast of Brazil. When Brazilian prosecutors disclosed that Petrobras and Sete procured millions of dollars in bribes from the drill ship builders, Sete’s senior lenders refused to provide financing that was critical to the success of the project and Sete went bankrupt, resulting in a total loss of the Funds’ investment. EIG is seeking the value of its investment plus interest and punitive damages.

The developments were reported on in an Aug. 1 Reuters article.