Whilst presenting a recent webinar on 'The Power and Impact of the Non-Executive Director', expert coach and In Touch Networks COO Anne Watson mentioned a legal case involving IPL that drew quite a lot of interest. Anne reached out to her contact Amelie Smith, an experienced barrister with knowledge of Corporate Governance, who has written the following summary and commentary on the case:
International Petroleum Ltd and others v Osipov and others (UKEAT/0058/17/DA and UKEAT/0229/16/DA)
International Petroleum Limited (IPL) is an oil and gas company headquartered in Australia. Alexander Osipov had worked for IPL since 2011 and was appointed its CEO in June 2014. In October 2014, he was dismissed from this role and his employment at IPL.
IPL is quoted on the UK Stock Exchange, (its listing in Australia was and remains suspended), and Mr Osipov brought proceedings in the UK Employment Tribunal (ET) for 3 counts of unfair dismissal and 4 counts of victimisation discrimination including whistleblowing. The defendants were the company IPL, a consultant (Sergey Matveev), a non-executive advisor (Dr Stuart Lake) and two of the company’s Non-Executive Directors: Frank TimiÅŸ and Anthony Sage. Mr TimiÅŸ is also the majority shareholder; Mr Sage is the company’s Chairman. The ET found for Mr Osipov and awarded compensation for unfair dismissal, injury to feelings and unpaid salary. That decision has now been upheld by the Employment Appeal Tribunal (EAT) with an award of £1,744,575.56. Having fought the case all the way through the ET and EAT as of 17th August 2017 IPL has requested permission to appeal some aspects of the EAT’s judgement in the Court of Appeal. Further developments are awaited.
The ET issued two judgements in April and December 2016 respectively, after the defendants appealed against the first judgement
. The second judgement found the company and Messrs TimiÅŸ and Sage jointly and severally liable for the award to Mr Osipov. Both judgements were the subject of an appeal and cross-appeal to the EAT which gave its judgement in July 2017.
The Employment Rights Act 1996 (ERA) under which Mr Osipov brought his claim has been amended more than once. The amendment that concerns Non-Executive Directors was made in 2013 by the Enterprise and Regulatory Reform Act (ERRA) which inserted section s.47B. A worker now has the right not to be subjected to detriment by a fellow worker in the course of that worker’s employment or an agent of the worker’s employer with the employer’s authority. The employer will be held liable too, whether or not the employer knew or approved unless the employer can prove that they took all reasonable steps to stop the worker doing the act in question or anything of that description. A further amendment made by the ERRA now means that the fellow worker or agent can also be held liable for the detriment.
The ET took the view that Mr TimiÅŸ was responsible for the decision to dismiss Mr Osipov and Mr Sage for implementing it. The EAT upheld this view and at no point did their counsel attempt to argue that Mr TimiÅŸ and Mr Sage were not workers. The ET had also held that Mr TimiÅŸ conducted himself as an Executive Director who regarded himself as entitled to exercise executive authority in relation to the day-to-day running of IPL because of his significant investment in the business, and that Mr Sage attended board meetings and clearly exercised managerial functions. Again, this view was upheld by the EAT. The ET had similarly ruled that Mr Osipov’s employment as CEO was governed by a Term Sheet which had been approved by the board of directors, (of which of course both Mr TimiÅŸ and Mr Sage were members).
Non-Executive Directors have the same status in law as Directors and thus are workers for the purposes of the ERRA. All Non-Executive Directors should be aware of the requirements of the ERA and of due process. If IPL had a disciplinary process in place it doesn’t appear to have been followed. IPL even argued at the ET that it had a very small HR department
and should be allowed to act with some practicality when dealing with removing a CEO. The ET unsurprisingly disagreed.
Notwithstanding a possible appeal to the Court of Appeal, so far there has been no response to this case from any of the Stock Exchange, the Financial Conduct Authority or the Niger government.
Prior to Mr Osipov’s appointment as CEO the company had run into difficulties with four production sharing contracts in Niger, it had not been able to pay the required licence fees to the Niger government and there was a risk that the government would withdraw the permissions. Mr Osipov wanted to issue tenders for works not wished to restore good corporate governance to the company. Mr Osipov sought to avoid suggestions of bribery and corruption in an industry and a country where there have often been problems in regard to corruption. Dr Lake did not want to issue tenders and nor the did the company, their preference was to award the contract without either a tender or a waiver from the company’s own management committee. The Niger government had not been asked if it would approve the direct award and lack of a waiver. The need for good corporate governance is a recurring theme in emails sent by and received by Mr Osipov.
Mr Osipov also asked that data belonging to a Chinese company be removed from IPL’s data room as the company was not authorised to hold it and the obtaining of that data was a potential breach of Niger’s Petroleum Code. Dr Lake did not wish to remove the data as he considered it was necessary for the production sharing contracts, IPL having apparently little data of its own about the blocks affected, and its loss would also affect the ability to sell the company.
Another issue raised by Mr Osipov was Dr Lake’s breaches of his advisory agreement with IPL, specifically introducing a company excluded by the agreement, holding a meeting with that company without a confidentiality agreement and disclosing the illegally obtained data to that company. Mr Osipov terminated the advisory agreement.
Dr Lake and Mr Matveev held a meeting in Niger without Mr Osipov’s knowledge and Dr Lake agreed a new appointee with the Niger government to the management committee, again without Mr Osipov’s knowledge or consent. The defendants criticised Mr Osipov for not establishing good relations with the Niger government but when he was appointed in June 2014 Mr Osipov was expressly instructed not to contact the government or to visit Niger, he was even replaced as a participant in a trip he was supposed to take part in.
Mr Osipov found himself being undermined, humiliated and excluded from meetings. He continued to try to do his job and told Dr Lake to stop interfering. Mr Matveev sent an email to Mr TimiÅŸ in September requesting that Mr Osipov be relieved of all his Niger duties. Dr Lake agreed and Mr Osipov was removed from the management committee. Mr Osipov protested to the Board in September and October to no avail. Ultimately, Mr TimiÅŸ instructed Mr Sage to dismiss Mr Osipov which he did without notice, any kind of process including the ACAS process and, it should be said, without any attempt to give Mr Osipov the chance to defend himself.
 For some reason, the ET decisions and the EAT decision are not available on the www.gov.uk
website although they should be.
 There is no reference to a legal department of any kind.
Amelie is an employed barrister who works in-house. She has wide-ranging commercial experience encompassing marketing, financial services, telecoms, software and manufacturing. Amelie is always interested in hearing about new opportunities, either fixed term or permanent, and can be contacted via email@example.com.