Yukos bankruptcy move thrown out

A FEDERAL judge in Houston has thrown out the bid by Yukos to win bankruptcy protection in the US. The embattled Russian oil company had argued that, because it had a small presence in the US, it was entitled to protection under that country's laws. But the judge rejected this.

'The vast majority of the business and financial activities of Yukos continue to occur in Russia. Such activities require the continued participation of the Russian government,' bankruptcy judge Letitia Clark said.

Yukos first brought the case to court in December, in an attempt to stop the Russian government from auctioning off its key production asset, Yuganskneftegas.

Bankers advising the Kremlin on that sale opposed Yukos's claims.

Yukos assets were ordered frozen until the Houston court reviewed the case, but the auction went ahead anyway, with state-owned Russian oil company Rosneft taking control, effectively nationalising 11% of Russia's oil production.

Judge Clark tacitly acknowledged claims that Yukos's troubles stem from a grab by the Kremlin for control of the company. 'It appears likely that agencies of the Russian government have acted in a manner that would be considered confiscatory under United States law,' she said.

But she went on to say that the question she had to consider was not whether there had been any wrongdoing but whether the US court had any jurisdiction. She concluded that it did not.

Her decision will come as a relief to legal experts, who feared a ruling in Yukos's favour would open a can of worms with foreign companies able to set up small offices in the US to hide behind Chapter 11 bankruptcy protection.

But the Kremlin had made it clear from the start that it would not accept US jurisdiction in the case.

Lawyers for Germany's Deutsche Bank argued international banks had the most to lose because they would be banned from issuing loans to Russian businesses that had any connection to Yukos as long as the case was tied up in a US court.

Critics of Russian President Vladimir Putin say the attack on Yukos, including a $27.5bn (£14.4bn) backdated tax bill, is politically motivated.

The Kremlin has also charged the former head of the company, Mikhail Khodorkovsky, with fraud and tax evasion.