UK - The £3.1bn (€3.9bn) Lothian pension fund has been granted co-lead plaintiff status in a class action case against BP, for "recklessly failing" to maintain pipes which in turn led to the oil leak in Prudhoe Bay, Alaska in 2006.

Papers filed for the class action on February 29 2008 claimed during the period of March 31 2005 and August 4 2006, BP had knowledge of or "recklessly discarded" material facts and failed to disclose "material" information to investors about the maintenance of the Prudhoe Bay pipeline.

The decision to award Lothian pension fund co-lead plaintiff status on the case is the first time a Scottish pension fund has become a co-litigant in a US securities class action, according to Thomas Dubbs, senior partner at the law firm Labaton Sucharow, which is representing Lothian.

He said: "Lothian initiated the action as co-lead plaintiff in order to accomplish two objectives: the first is to gain compensation for the members of the pension scheme, and the second is to make a statement regarding its 'green' objectives, given the underlying facts deal with environmental issues."

Initial court papers refer to two spillages by the pipeline in 2006, in particular the first incident in March 2006 when more than 200,000 gallons of oil were lost following internal corrosion of pipes, but which BP's own internal investigation revealed could have been discovered earlier by the use of a "smart pig" - an industry recognised good practice.

BP was ordered to take remedial action as a result, including the use of a smart pig in its Prudhoe Bay pipelines, however the court papers claimed despite assuring investors its corrosion monitoring program was "robust" and aggressive" it "persisted with its inadequate maintenance".

In August 2006 BP confirmed it was shutting down production in Prudhoe Bay completely following a second leak resulting from another corroded pipe, however a US congressional investigation revealed cost-cutting at BP Exploration Alaska (BPXA) may have contributed to the spillage in March 2006.

The class action claims as a result of the market learning of BP's "wrongdoing" at Prudhoe Bay, including making "materially false and misleading statements", the "price of BP shares declined and the plaintiff and the class suffered a loss on their investment in BP".

Documents from the pension fund's latest committee meeting suggested the losses relating to BP shares is approximately $400,000, compared to losses of $3.2m in relation to the class action against Ericsson in which the pension fund is also playing a leading role. (See earlier IPE story: Lothian takes the lead and sues Ericsson)

The decision to award Lothian Pension Fund co-lead status was confirmed on April 17 2008.

However once the plaintiffs file an amended complaint, the case still has to proceed through the discovery phase - which can take between one to two years - before it finally reaches the jury stage, suggesting the process could last around three years.

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