Vol 16 (2019) - Issue 4

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Insolvency of Yukos and Public Policy in International Insolvency Cases

Synopsis

On 18 January 2019, the Dutch Supreme Court decided on the question whether in the Netherlands the recognition of the insolvency proceedings of Yukos Oil, commenced by the Moscow City Commercial (Arbitrazh) Court (Russia), should be refused on the grounds of violation of Dutch public policy. The Supreme Court and other courts of first instances and Courts of Appeal in the Netherlands had previously ruled on other important aspects of this well-known insolvency case. The core question about recognition, however, had not been addressed yet.
The die is cast now: the Russian insolvency is not recognised in the Netherlands. In short, the Supreme Court decided that, in view of the history of the Russian insolvency (which was preceded by Russian tax recovery proceedings in which the European Court of Human Rights found defects), the judgment cannot be recognised due to violation of public policy. The court’s rationale here was that legal rules had been violated with the apparent intention of incapacitating and ultimately provoking Yukos Oil’s insolvency. The Supreme Court decided that the lower Dutch court was permitted to link the Russian insolvency order to violations of Russian legal rules in previous proceedings. As a result, a court’s public policy test does not solely relate to the (insolvency) judgment itself.
Additionally, the basis of the appeal by Promneftstroy OOO (the purchaser of shares in Yukos Oil’s Dutch subsidiary Yukos Finance B.V.) namely that the application of the public policy test only had limited effect (i.e. did not extend to the share-purchase transaction itself) was not successful. The fundamental nature of the public policy test encompassed the entire suite of legal effects applicable to any judgment that failed its scrutiny.