Follow-up on Yukos bankruptcy case

This is way over my head, and seems very strange to me. The outcome of the request to put a hold on the sale of a Russian oil company is that a Texas judge granted Yukos an injunction barring the Russian government from auctioning Yukos' Yuganskneftegaz unit. As you might imagine, the Russian government isn't exactly subjecting itself to Texas court rulings. Whatever eventually happens, the court ruling actually is creating a disturbance.

Many foreign companies wish they could flee to the US to escape their creditors. And more may try to do so after the Russian oil company Yukos stunned the legal world last week by successfully filing for bankruptcy protection in Texas.

Bankruptcy experts in the US said they were astonished at the ruling last Thursday by a federal bankruptcy judge in Texas, which claimed jurisdiction over the bankruptcy of Yukos based largely on the fact that the company paid a retainer to a US law firm to represent it in the proceedings.

Judge Clark said she took the action because "participants in international commerce, in Russia, in the United States, and elsewhere, need to have an expectation that when they invest in foreign enterprises they may do so without fear that their investments may be the subject of confiscatory action by agencies of the foreign government."

Legal experts said the ruling raised the prospect that any firm in financial distress, anywhere in the world, could open a small bank account in the US and use that to claim bankruptcy protection under US law.

"This is open sesame for foreign debtors," says Professor Jay Westbrook of the University of Texas law school. "This is not just a can of worms - it is a whole barrel of worms."

Financial Times article

Meanwhile, a consortium of Western banks -- including Deutsche Bank, ABN Amro, BNP Paribas, and Dresdner Kleinwort Wasserstein -- froze between $10 billion and $13 billion it had lent Gazprom for its bid, Russian and other news reports said.

Citing what it called high-ranking Western financial sources, the ITAR-Tass agency said the banking group had decided to freeze the deal at least until the U.S. court reaches a final decision.

With a big presence in the United States, the banks could face legal action if they violated the court order.

WaPo article

If Gazprom can't get the loans to buy out Yuganskneftegaz because of a Texas court ruling, then where does U.S. oil influence stop?

Representatives of Deutsche Bank, BNP Paribas and Dresdner Kleinwort Wasserstein declined comment Friday. ABN Amro representatives could not be reached for comment.

Alexander Stepanenko, a spokesman for the Gazprom oil unit, said the company was committed to bidding on Sunday and the company had received no notification from the western banks that they would be canceling their funding.

"We've made an application, made the deposit and received permission from the anti-monopoly service," he said.

Even Yukos's lawyers agreed that the auction will go ahead.

"We remain realistic about the ruling's immediate effect," the company said in a written statement.

Boy, I don't know......but hey, do what you want...you will anyway.