Judge dismisses Yukos bankruptcy bid
Beleaguered Russian oil company Yukos lost its desperate bid for shelter in American courts when a Texas judge dismissed its bankruptcy case, saying the company did not have enough of a presence in the United States to establish US jurisdiction over a Russian company.
Yukos’ presence in the United States consisted only of two bank accounts in Texas and its displaced finance chief, who conducted business from his Houston home.
US Bankruptcy Judge Letitia Clark’s dismissal of the case forces Yukos to rely on European arbitration proceedings and so-far unsuccessful appeals in Russian courts in its battle against a disputed multi-billion back-tax levy.
It also squashes bankruptcy-related lawsuits stemming from the auction of a key subsidiary, Yuganskneftegaz, that essentially gutted the company. Those lawsuits include a €15.9bn claim against four state companies for allegedly breaking asset protection afforded under US bankruptcy law by participating in the December 19 sale. Those companies include state-owned natural gas giant Gazprom and state-owned oil company Rosneft.
“The debtor is not a United States company, but a Russian company, and its assets are massive relative to the Russian economy, and, since they are primarily oil and gas in the ground, are literally a part of the Russian land,” the judge’s 33-page opinion said.
“While there is precedent for maintenance of a bankruptcy case in the United States by corporations domiciled outside the United States, none of those precedents cover a corporation which is a central part of the economy of the nation in which the corporation was created.”
The Russian government had ignored the US proceedings, saying Clark had no authority on Russian soil.
But if Clark had accepted jurisdiction, continuing bankruptcy and litigation proceedings could have stifled business dealings by Gazprom and Rosneft outside of Russia.
Clark’s decision to throw it out opens the door for the planned merger of Gazprom and Rosneft, which has been on hold because of questions over Yuganskneftegaz’s new ownership.
The merger would lift restrictions on foreigners owning shares in Gazprom. The lifting of those restrictions is one of the most anticipated reforms of Russia’s post-Soviet marketplace.
Yukos spokesman Mike Lake said the company’s law firm, Fulbright & Jaworski, had not decided whether to appeal or ask Clark to reconsider her ruling.
Yukos filed the bankruptcy case in Houston in an unsuccessful attempt to block the auction of Yuganskneftegaz to help pay £15 billion in back taxes and penalties. The subsidiary produced 60% of Yukos’s oil.
The company’s only US operations are the business that finance chief Bruce Misamore conducts from his Houston home and two bank accounts – one to cover Misamore’s expenses, and the other to cover legal costs.
Yukos claimed the auction capped an 18-month Kremlin-driven crackdown to damage the company and punish its former chief executive, Mikhail Khodorkovsky, now on trial on tax charges, for backing opposition parties.
Yukos said the €21.7bn tax bill grew with penalties after the Russian government froze the company’s bank accounts and banned asset sales.
Russian president Vladimir Putin has characterised the government’s actions as an effort to ferret out shady business practices and dubious accounting.
