The embattled Russian oil company Yukos has filed for bankruptcy in the United States and is seeking a restraining order to try to prevent the Russian government from auctioning its core assets as planned on Sunday.
The Yukos oil company decided to file for bankruptcy in the United States, arguing that U.S. bankruptcy law has worldwide jurisdiction. The company is seeking an emergency hearing on a motion for a temporary restraining order and a preliminary injunction designed to prevent the Russian government from selling off the company's main production unit, which accounts for about 60 percent of its oil output.
Russian officials say Yukos owes $27 billion in unpaid taxes, and the scheduled auction of its main subsidiary, Yuganskneftegaz, will cover a part of that unpaid bill. Yukos meanwhile argues that the government crackdown against the company and its owners is politically motivated and part of Russian President Vladimir Putin's broader efforts to limit dissent in Russia.
Yukos made the filing in Houston, Texas on Tuesday, according to a statement posted on the company's web site. It says, "?if allowed, the sale of Yuganskneftegaz will cause the company to suffer immediate and irreparable harm." According to Yukos Chief Executive Steven Theede, the bankruptcy filing is a "last resort to preserve the rights" of the company's shareholders, employees and customers. The company chose to file suit in Houston because the city is a major international oil and gas center.
Ted Janger, professor of law at Brooklyn University in New York, and resident scholar at the American Bankruptcy Institute, says it is increasingly common for multinational enterprises to seek to reorganize under the U.S. bankruptcy laws.
"Big cross-border cases are increasingly more common," he said. "The thing that makes this a little unusual is the fact that it doesn't seem that very many of the assets or operations are actually in the United States."
Yukos says it has assets and business dealings in Houston, but the bulk of the firm's assets are in Russia.
Professor Janger says if Yukos files for bankruptcy protection in the United States, it is not clear whether Russia will recognize a U.S. court's ruling.
"While they can file in the United States and they may be able to accomplish a reorganization using United States bankruptcy procedures, ultimately they're going to have to seek recognition of the U.S. orders in Russia," he explained. "So, while there is legal jurisdiction over the case in the United States, to effectuate a reorganization as a practical matter will require some level of international cooperation."
The U.S. government has expressed concern that the Yukos case will discourage investment in Russia. But Russian officials insist they are committed to maintaining a market economy open to foreign investment.
The judge hearing the case in Texas has scheduled another hearing for Thursday morning.