Gonzi Cabinet paid €5 million court settlement to Shell, days after oil scandal

Nationalist administration reached court settlement with Shell over uncompetitive practice by Enemalta.

8 April 2013, 12:00am
Shell complained that it was not being granted access to the supply of jet aviation fuel.
Shell complained that it was not being granted access to the supply of jet aviation fuel.

Lawrence Gonzi's Cabinet agreed to a tax-free, €5 million out-of-court settlement with oil company Shell, just days after MaltaToday published documents that showed that commodities trader Trafigura had paid commissions to Enemalta consultant and former MOBC chief executive Frank Sammut for the supply of oil to the national energy corporation.

The settlement came nine years after complaints made by oil company Shell in 2004, leading the European Commission to issue a warning to the Nationalist administration in 2011 that it was "not ensuring independent verification of the separation" of fuel handling and storage facilities, while Enemalta - one of the suppliers of fuel handling services - was the manager of the storage and fuel supply facilities.

Shell had complained in 2004 that aviation fuel was supplied by the state-owned company, which also owned the storage facilities of oil, which included the Mediterranean Oil Bunkering Corporation (MOBC).

Following the liberalisation of the fuel market, Shell attempted to distribute fuel but claimed that Enemalta had prevented it from doing this through "uncompetitive measures".

Ironically Shell's complaint to the Malta Resources Authority came through the offices of Simon Busuttil, then a Nationalist MEP and a lawyer specialising in European Union law.

In 2004, Busuttil wrote to the Malta Resources Authority informing them: "Enemalta and the Maltese government are bound by law to ensure that the management of these infrastructures is transparent, objective, non-discriminatory and, in particular, that it does hinder the access of suppliers of ground handling services."

Needless to say, Busuttil was not aware at the time of the corruption taking place inside Enemalta, facts that would only emerge nine years later when police started investigating the kickbacks paid to Enemalta officials through oil representative George Farrugia, who was then representing Trafigura and Total. And of course the minister at the time, Austin Gatt, found it quite pointless to follow up Busuttil's concerns.

The Malta Resources Authority meekly directed the parties "to negotiate in good faith to arrive at a mutually agreeable fair cost-based charge for the services in question within four weeks".

Shell once again appealed to the MRA's appeals board, which decided that the decision by the MRA was null and void and that it should review Shell's original complaint.

But the Authority and government failed to act on the appeals board's decision, and Shell commenced legal procedures. It was only in January 2013 that the Gonzi cabinet chose to mitigate the legal repercussions by forking out a €5 million tax-free settlement.

Shell had been a household name in the early 1970s, together with Esso and BP. It all ended with Dom Mintoff's nationalisation drive but the plurality of fuel suppliers still failed to make inroads after Malta's entry into the EU.