Court of Appeal: Russian justice in Yukos case improper

09 May 17

Renée Postma, Joep Dohmen NRC

Rule of law

The Amsterdam Court of Appeal holds the Yukos bankruptcy to be unlawful and thus in violation of Dutch public policy.

In a notable decision, the Amsterdam Court of Appeal has determined in appeal on Tuesday morning that the bankruptcy of the Russian oil company Yukos and the subsequent auction of the company divisions were “in violation of” Dutch public policy.

The court stated that the Russian government deliberately elicited the bankruptcy by imposing unlawful and unpayable tax assessments, and that the receiver was effectively not authorised to auction the company divisions. “The proceedings conducted did not meet the requirements of proper administration of justice on several points”. The judgment not only means that the appeal of Promneftstroy, one of the new owners, is rejected, but it can also have consequences for a series of other cases regarding the former Yukos group centred around the question of whether or not the notorious bankruptcy in 2006 was legitimate.

Role of the Netherlands

The Yukos case is the result of a power struggle between president Putin and the oligarch Mikhail Khodorkovsky. During the Russian privatisations of the nineties, he took possession of the Yukos oil company and rapidly modernised it. In doing so, he optimally used tax-free zones within Russia.

After Khodorkovsky had expressed political ambitions, he was arrested for tax evasion in 2003. After two notorious procedures, he was locked behind bars until 2012. Retrospective tax assessments for several tens of billions of euros were imposed on Yukos, which was declared bankrupt in 2006. During the subsequent auctions, the majority of Yukos was acquired by state oil company Rosneft, led by Igor Sechin, one of Putin’s confidants. Investor Richard Deitz managed to obtain one of Yukos’ two foreign branches, Yukos Finance, through Promneftstroy.

Those foreign interests had previously been placed behind a protective construction in the Netherlands with a Dutch foundation, which is why litigation has been ongoing in the Netherlands for over ten years. The Yukos foundation, which represents the interests of the former shareholders, responded by saying that the Court of Appeal’s judgment puts an end to the case “once and for all”. Deitz’ and Promneftstroy’s lawyers were still unable to respond on Tuesday morning. It is therefore unclear whether or not they will lodge an appeal in cassation.

Click here to read the original article in Dutch.

DISCLAIMER: The English version is a translation from the Dutch original NRC article and is for information purposes only. In case of a discrepancy, the Dutch original will prevail.