The Dutch Supreme Court today confirmed the decision of the Amsterdam Court of Appeals which found that the bankruptcy of Russian oil company Yukos cannot be recognised in the Netherlands because it came about in a manner which violates Dutch public policy. Today's decision marks the end of a court battle that lasted more than a decade.
The Yukos case started in October 2003, when CEO and major shareholder Mikhail Khodorkovsky was arrested at gunpoint at a remote airport in Siberia. Following his arrest and detention, the Russian authorities turned their attention to Yukos Oil, at the time one of the largest and the most transparent companies in Russia. In April 2004, the Russian tax authorities levied huge tax reassessments on Yukos Oil, while simultaneously making it impossible to pay those assessments by freezing all of Yukos' assets. After an auction - internationally condemned as rigged - in December 2004 of Yukos Oil's largest subsidiary, the absence of further collection measures by the Russian tax authorities while retaining the freezing orders eventually forced Yukos Oil into bankruptcy in August 2006. The Russian court appointed bankruptcy trustee subsequently liquidated Yukos Oil, with most assets ending up in the possession of Russian state oil company Rosneft. Yukos Oil's foreign assets were held through a Dutch structure, which was sold by the Russian bankruptcy trustee to a group of international investors with close ties to Rosneft.
In September 2006, the Russian court appointed bankruptcy trustee attempted to replace the directors of Dutch subsidiary Yukos Finance. Yukos Finance and its directors, represented by NautaDutilh, initiated court proceedings challenging the dismissal of the directors on the basis of two arguments: first, that the Russian bankruptcy could not be recognized in the Netherlands on the basis of the territoriality principle under Dutch international bankruptcy law, and second because it had come about in a manner that was a violation of Dutch public policy. In a widely publicised decision of 31 October 2007, the Amsterdam District Court agreed with the plaintiff's arguments and found that the Russian bankruptcy of Yukos Oil could not be recognised in the Netherlands because of the violation of Yukos Oil's rights of fair trial in the proceedings concerning the tax re-assessments which assessments in turn were a direct cause of the bankruptcy.
In the subsequent appeal, the investors who had allegedly bought the Yukos Finance shares from the Russian bankruptcy trustee joined the proceedings, and the question shifted from the Russian bankruptcy trustee's authority to replace management of Yukos Finance, to his authority to sell and transfer the shares of Yukos Finance. In October 2010, the Amsterdam Court of Appeals found that the sale and transfer of the Yukos Finance shares by the Russian bankruptcy trustee was invalid based on the territoriality principle, but this decision was overturned by the Dutch Supreme Court in September 2013.
By decision of 9 May 2017, the Amsterdam Court of Appeals confirmed the decision of the District Court, finding that the Russian bankruptcy of Yukos Oil could not be recognised in the Netherlands, and that as a consequence the Russian bankruptcy trustee did not have the authority to replace management and/or sell and transfer the shares of Yukos Finance. In its decision of today, the Dutch Supreme Court has confirmed this decision, and has found that the Court of Appeals correctly applied the rules under Dutch law pertaining to the recognition of the Russian bankruptcy of Yukos Oil in the Netherlands.
As a consequence of this decision, the Dutch subsidiary of Yukos Oil, holding (the proceeds of) its valuable non-Russian assets including a Slovak oil pipeline and a Lithuanian oil refinery, has been the only part of the Yukos group protected from the attack by the Russian authorities on Yukos and its assets.