Dutch Supreme Court confirms Yukos bankruptcy cannot be recognised in the Netherlands

The Dutch Supreme Court has confirmed the decision of the Amsterdam Court of Appeal, which found that the bankruptcy of the Russian based oil company, Yukos, could not be recognised in the Netherlands because it violates Dutch public policy.

Concluding proceedings which have spanned longer than a decade, the Yukos proceedings began in 2003 when the main shareholder and CEO Mr Khodorkvsky was arrested at gunpoint in Siberia. Shortly after this the Russian authorities turned their attention to Mr Khodorkvky’s oil business Yukos Oil by arranging company-wide tax reassessments on their accounts whilst also freezing Yukos’ assets. Following the auction sale of Yukos Oil’s largest subsidiary in 2004 (which was allegedly rigged) Yukos Oil was forced into bankruptcy in 2006. On liquidation of the company a majority of the assets ended up in the possession of the rival Russian state oil company called Rosneft and the appointed Bankruptcy Trustee attempted to replace the directors of the Dutch subsidiary Yukos Finance.

The directors of Yukos Finance initiated court proceedings challenging the dismissal of the directors on the basis the Russian bankruptcy should not be recognised in the Netherlands as;

1) It did not fulfil the territoriality principle as required under Dutch bankruptcy law; and

2) It came about in a manner that violated Dutch public policy.

On the 31 October 2007 the Amsterdam District Court agreed with the Director’s submissions and found that the Russian Bankruptcy of Yukos Oil could not be recognised due to the violation of Yukos Oil’s rights of fair trial. This arose specifically as a result of the tax re-assessments which were deemed a direct cause of the bankruptcy.

In the following appeal, Yukos Finance’s investors joined the proceedings and the proceedings shifted the focus on the Trustee’s authority to sell and transfer the shares of Yukos Finance. In October 2010, the Amsterdam Court of Appeal declared the sale and transfer of the shares as invalid based solely on the territoriality principle, but this was later overturned by the Dutch Supreme Court.

In May 2017, the Amsterdam Court of Appeal confirmed the decision of the District Court and found the Bankruptcy could not be recognised in the Netherlands, and as a result the Trustee did not have the authority to remove directors from office or sell/transfer the shares.

In its final decision more than a decade later than the initial proceedings the Dutch Supreme Court has confirmed this decision and the principles of territoriality and fair process that the trustee had neither the power nor the applicable law to transfer the shares out of the company.

As a result the Dutch subsidiary of Yukos Oil owning a Slovak oil pipeline and a Lithuanian oil refinery has been the only part of the Yukos group which has survived the actions of the Trustee.

For more information contact Alan Bennett from the Restructuring & Insolvency Team.

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