R ((1) YUKOS OIL COMPANY (2) STICHTING ADMINISTRATIEKANTOOR YUKOS INTERNATIONAL) v (1) FINANCIAL SERVICES AUTHORITY (2) LONDON STOCK EXCHANGE and (1) OJSC ROSNEFT (2) OJSC ROSNEFTEGAZ Interested Parties
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHARLES |
| Judgment Date | 18 July 2006 |
| Neutral Citation | [2006] EWHC 2044 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CO/5799/2006 |
| Date | 18 July 2006 |
[2006] EWHC 2044 (admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
The Strand
London WC2A 2LL
MR JUSTICE CHARLES
CO/5799/2006
The Queen On The Application Of
MS MONTGOMERY QC and MR HERBERG and MR GARDNER (instructed by Byrne and Partners) appeared on behalf of the Claimants.
MR BRINDLE QC and MR COLEMAN (instructed by Ashursts) appeared on behalf of the FSA.
MR GORDON QC and MR ADAM (instructed by Freshfields) appeared on behalf of the LSE.
MR HOWARD QC and MR CHAMBERLAIN and MR BIRT (instructed by Travers Smith) appeared on behalf of Rosneft.
Before I start to deliver this judgment I would like to make one or two preliminary comments. First I would like to record my gratitude for the assistance I have been given by all counsel for all of the parties.
Secondly, as will have been apparent during the course of the hearing, a number of issues have arisen and I record that certainly some of the submissions made today have caused me to re-think the positions I reached on a preliminary basis last night. That led me to consider whether or not it would be appropriate for me to attempt to give this judgment which is necessarily ex tempore. However, I have concluded that against the backdrop that exists in this case, which I am told includes the Court of Appeal sitting ready and waiting to deal with the matter, I should attempt to give my reasons now.
I record now what my decision is going to be. My decision is that I am going to refuse the application for permission for judicial review. Further, in the alternative, I will consider whether, if I have been persuaded that permission ought to be granted, I would have granted interlocutory relief. The answer to that question is: no, I would not have granted interlocutory relief.
The proceedings before me are a challenge by way of judicial review to decisions of the Financial Services Agency (the "FSA") and the London Stock Exchange ("LSE") relating to the proposed listing and offering for sale of ordinary shares in OJSCOC Rosneft in the form of global depository receipts, GDRs. The selling shareholder is OJSC Rosneftegaz. All of the shares in that company are owned by the Russian Federation. The claimants are Yukos Oil Company ("Yukos") and then, as I understand it, another company within the Yukos group. The relationship between those companies is set out in paragraph 2 of the Grounds of Claim.
In 2003, Yukos had a wholly owned subsidiary, referred to as YNG, which owned assets of considerable value. As has been well publicised in this country and in a number of other countries, the claimants maintain that dishonestly, unlawfully, and in a manner which constituted a fraud on the shareholders of Yukos, YNG was (a) expropriated from Yukos and (b) acquired by Rosneft. Rosneft dispute this. So YNG, and thus its assets, which were once owned by Yukos, now form a significant element of the value placed on Rosneft for the purposes of the proposed IPO. Unsurprisingly, in the context of these proceedings and more generally the events in Russia which resulted in YNG being acquired by Rosneft, are described differently by the claimants on the one hand, and Rosneft on the other.
In the skeleton argument put in on behalf of Rosneft, the claimants' assertions of dishonest expropriation are described as a conspiracy theory. The three main elements of the expropriation allegation or conspiracy theory are, in my view, accurately summarised in a very truncated form in paragraph 9 of the skeleton argument of Rosneft which reads as follows, with some omissions:
"There are three main elements. First, it is alleged that a series of arbitrary purported tax reassessments were issued against Yukos by the Russian tax authorities and that Yukos's assets were then frozen by the Russian court preventing it from paying those tax assessments. Secondly, complaint is made about the conduct of the bailiff appointed by the Russian court and of the court itself in enforcing the tax liabilities. Thirdly, Yukos complains about the auction of its shares in YNG in respect of which it alleges that there are reasonable grounds to suspect, if not more, that there was a concerted plan to deprive Yukos of its interest in YNG by unlawful means."
On the claimants' case that plan involved the participation of officers of the Russian state and of the Russian courts.
The allegations are, therefore, extremely serious ones and at their heart are allegations against various parts or emanations of the Russian Federation, including its courts.
In opening and in the documents, Yukos have made a number of points in support of the force of their claim, included within them was the point that a number of the tax assessments exceeded 100 per cent of the revenue of the company during the relevant year. Other allegations relate to the conduct of hearings in the Russian courts. There are more.
In the Russian court, Yukos's claims have thus far been unsuccessful at every level and on every occasion to-date, although its claims in respect of the third element relating to the auction are still pending. Yukos have also made a claim in the European Court of Human Rights. In that claim Yukos seek, amongst other things, an order for restitution of the YNG shareholding (and thus its assets) under Article 41 ECHR.
In the Grounds of Claim the claimants assert:
Such an order would establish a directly enforceable obligation, binding in Russian law, under Article 1 of the Federal Law of 30th March 1988 in 54/FZ on Ratification of the Convention for the Protection of Human Rights and Fundamental Freedoms and Associated Protocols.
In accordance with article 46 of the ECHR the Russian Federation should recognise ipso facto and without any special agreement the jurisdiction of the European Court of Human Rights to be binding in all matters concerning the interpretation and application of the ECHR and its associated protocols.
A finding of the European Court of Human Rights would provide grounds for the reopening of settled national proceedings by virtue of Article 311(7) of the Code of Arbitration Procedure of the Russian Federation, and that this provides that where the European Court of Human Rights has held that the judgment of a Russian arbitration court gave rise to a violation of the ECHR, it should be grounds for revision of the judgment of that court. The judgments at issue in the proceedings described are those of Russian arbitration courts to which the provision applies.
In the alternative, it is asserted that even if the European Court of Human Rights merely makes a declaratory finding that YNG shares had been expropriated from Yukos, this would provide statutory grounds to reopen the proceedings concerning the tax liabilities, the attachment of the YNG shareholding, the decision to sell the YNG Shareholding and the legality of the auction.
Then a passage from Article 311(7) of the Code of Arbitration Procedure is cited.
The grounds go on to assert that since the European Court would ex hypothesi have found a violation of Yukos's ECHR rights that finding would be binding on the arbitration courts when the matter was re-opened.
The present position of the proceedings in the European Court of Human Rights is that they have not yet been admitted but indications have been given that they are being given priority.
On 12th July of this year Yukos received notification that the European Court of Human Rights had asked a number of questions of the Russian Government. Those are set out in the Grounds of Claim, at paragraph 122:
"1. Was there an interference with the applicant company's rights under Article 1 of Protocol No 1 as a result of the Tax Assessments in respect of the years 2001, 2002, 2003 and 2004 and, if so, was it lawful and proportionate?
"2. Did the acts of which the applicant company was held responsible by the Tax Assessments in respect of the years 2001, 2002, 2003 and 2004 constitute a criminal offence under national law at the time when it was committed, as envisaged by Article 7 of the Convention? Was this law and its implementation sufficiently accessible and precise to enable the applicant company to know in advance whether its conduct was criminal?
"3. Was there an interference with the applicant company's rights under Article 1 of Protocol No 1 as a result of the enforcement proceedings against the applicant company and, if so, was it lawful and proportionate? The reference is being made, in particular, to the company's allegation that the requirement to pay the sums due and the simultaneous seizure of all of its assets was self-contradictory.
"4. Did the forced sale of OAO Yuganskneftgas constitute an interference with the company's rights under Article 1 of Protocol No 1? If so, was it lawful and proportionate? In particular, did the authorities make reasonable efforts to sell OAO Yuganskneftgas at a fair price? Also, did the authorities inform the company of the outcome of the auction and the effects of the forced sale on the company's tax debt? What is the applicable domestic law?
"5. Did the applicant company comply with the exhaustion criterion set out in Article 35 § 1 of the Convention in respect of the above complaints? Also, did the applicant company have an access to court in respect of these complaints, as required by Article 6 of the Convention?
"6. Have any similar tax...
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