Paris, March 27, 2008—Yukos bankruptcy declared contrary to international public policy in the Netherlands and legitimate creditors’ rights enforced by Dutch courts.
On 14 March 2008, pursuant to a ruling of the Dutch courts of 6 March 2008, Moravel Investments Limited, a subsidiary of GML Limited, successfully enforced in the Netherlands a US$ 847,775,011 arbitral award rendered by a LCIA tribunal in London on 16 September 2005 against Yukos Oil Company.
The 16 September 2005 Award obtained by Moravel was for the payment of the amounts outstanding under a loan provided by Société Générale to Yukos Oil Company, and subsequently acquired by Moravel, plus accrued and default interest. Yukos Oil Company was also ordered to pay Moravel’s legal and other costs and the costs of the arbitration. The LCIA tribunal comprised of William Rowley QC, Chairman, Peter Leaver QC and Jonathan Hirst QC. Moravel sought to enforce the Award in Russia and against Yukos’ foreign assets in the Netherlands.
In Russia, unsurprisingly, Moravel’s efforts to enforce the Award were unsuccessful. As anticipated, in blatant disregard of the Russian Federation’s international obligations under the 1958 New York Convention, the Russian courts refused to recognise the Award, alleging an incompatibility with Russian public policy arising out of a supposed affiliation between Société Générale and Yukos Oil Company. Moravel’s efforts to be acknowledged as a Yukos creditor in the context of the Yukos bankruptcy proceedings were similarly refused. This stands in sharp contrast with the claims of the Russian Government, Rosneft and its entities against Yukos Oil Company, which, despite their obvious political nature, were readily acknowledged and paid in full in the bankruptcy proceedings in Russia.
In the Netherlands, on 24 November 2005, the Award was recognised and declared enforceable by the Dutch courts. On 31 October 2007, the District Court of Amsterdam held that the Yukos bankruptcy proceedings initiated by the Russian State were contrary to Dutch international public policy as they were based on tax judgments obtained “in violation of the fundamental principle of due process of law as generally accepted in the Netherlands and outlined in article 6 of the European Convention on Human Rights (ECHR) [‘Right to a fair trial’].” As a result, the Court did not recognise in the Netherlands the Russian bankruptcy and the authority of the Government-appointed bankruptcy receiver, Mr. Rebgun, to act on behalf of Yukos Oil Company. Against that background, on 6 March 2008, the Dutch Court held that Moravel was entitled to have its claim paid in full out of the proceeds from the sale of Yukos’ foreign assets. Payment was received by Moravel on 14 March 2008. At the same time, the Dutch Court lifted all executory attachments levied by Rosneft against these assets on the basis that Rosneft’s claims had already been paid in full in the Russian bankruptcy proceedings, irrespective of the legitimacy of such proceedings. “To maintain the writ of execution in spite of the complete payment constitutes [an] abuse of law,” declared the Dutch Court.
“The stark contrast in the treatment of the LCIA Award in Russia and in the Netherlands is yet another illustration of the complete lack of independence of the Russian judiciary with respect to the Yukos affair,” says Emmanuel Gaillard, Head of Shearman & Sterling LLP’s International Arbitration Group and Counsel to Moravel in the LCIA proceedings. According to Tim Osborne, a director of Moravel’s parent company, GML Limited, “the Dutch decisions show that, outside of Russia, no one believes that the forced bankruptcy of Yukos was anything other than a manipulated sham to steal the company’s assets.”