Dutch Supreme Court Rules Russia’s Bankruptcy Declaration of Yukos “Violation of Principles and Values Fundamental to Dutch Legal Order”
January 20, 2019
In a final ruling handed down on Friday, January 18, the High Council of the Netherlands, which acts as the country’s Supreme Court, has decided that “the 2006 Russian judgment declaring Yukos Oil bankrupt in the Russian Federation will not be recognised in the Netherlands.”
According to rechtspraak.nl, as a key consequence of this ruling, — which upholds an earlier lower courts appeals court decision — “it has been established definitively that the liquidator was not authorised to transfer shares in Yukos Finance to the Russian company OOO Promneftstroy and that Promneftstroy therefore did not become the owner of shares in Yukos Finance.”
With yet another court ruling that Russia’s case against Yukos was in violation of principles and values fundamental to legal order, this leaves Alexey Pichugin, Russia’s longest-serving political prisoner, as the last pawn in Russian President Vladimir Putin’s discredited power game to destroy Yukos.
A summary of the Yukos case as it pertains to Dutch company Yukos Finance B.V. and the Supreme Court’s judgment as provided by rechtspraak.nl, is posted below.
For more details on Russian Federation President Vladimir Putin’s campaign to expropriate the assets of Yukos Oil Company and to punish the company’s leadership, click here.
Case summary: sale of shares in Yukos Finance B.V.
In 2006, the Russian company OAO Yukos Oil Company (‘Yukos Oil’) was declared bankrupt by Moscow City Arbitrazh Court. At that time a liquidator was appointed. On 10 September 2007, following a public auction in Moscow, Yukos Oil’s shares in the Dutch company Yukos Finance B.V. were transferred to the Russian company Promneftstroy, which paid US$307 million for them. The central issue in the proceedings was whether the liquidator’s transfer of shares to Promneftstroy was legally valid and therefore whether Promneftstroy had become a shareholder in Yukos Finance.
Judgment of Amsterdam Court of Appeal: recognition contrary to public policy
On 9 May 2017 Amsterdam Court of Appeal held that the bankruptcy declaration would not be recognised in the Netherlands. This meant that the liquidator was not authorised to transfer shares in Yukos Finance to Promneftstroy. For this reason, Promneftstroy did not become the owner of the shares in question.
According to the appeal court, recognition of the bankruptcy was not warranted because the Russian authorities had purposely engineered the bankruptcy. In doing so, they violated fundamental legal principles. Extremely high, non-legitimate VAT levies with fines were imposed on Yukos Oil, which the company had to pay within a short time. In the ensuing tax proceedings, Yukos Oil was given no opportunity to present a proper defence. On various points, these proceedings did not meet the requirements of due process. Yukos Oil received no response to its requests for any kind of settlement arrangement. The auctioning of Yuganskneftegaz, a large oil-production business owned by Yukos Oil, was also not conducted properly. This led the appeal court to conclude that recognition of the Russian judgment declaring bankruptcy was contrary to Dutch public policy. Within the Dutch legal order, therefore, the bankruptcy judgment has no legal effect.
The Supreme Court’s judgment: Court of Appeal’s decision upheld
According to the Supreme Court, the Court of Appeal was aware that refusal to recognise a foreign judgment on the ground of incompatibility with Dutch public policy is an extreme measure. It was right to conclude that there had been a violation of principles and values that are fundamental to the Dutch legal order. That violation exceeded the boundaries within which the bankruptcy judgment can be given legal effect. The Supreme Court dismissed the challenges to the appeal court’s judgment that the Russian authorities had engineered the payment difficulties and ultimate bankruptcy of Yukos Oil.
The Supreme Court’s final judgment establishes that Promneftstroy did not become the owner of the shares in Yukos Finance.
Related Content
-
Sorensen/Maitland: It Is Incumbent on the US to Remember the Last Remaining Yukos Employee in Prison
Last week, as the Congress considered the new bill to rachet up sanctions in response to Russian meddling in the […]
-
Katrina Lantos Swett: Interpol and Pichugin, Unwilling Pawns in Putin’s Yukos Game
In 2014, the Russian government surprised the world by releasing two high-profile prisoners of conscience and former Yukos executives, Mikhail […]
