Houston’s Southern District courthouse will this week place two markers on the face of the energy business, with key decisions expected in the controversial break-up of Yukos and the trial of Enron’s former top executives.
Judge Letitia Clark will decide whether the dismembered Russian oil group can continue its battle with the Russian government through the US court system, or force it to seek an alternative forum.
Judge Clark pledged last week to deliver a quick decision following a two-month court battle with opponents of Yukos’s US bankruptcy filing, and a ruling could come as soon as Tuesday.
Two days later, her colleague Judge Sim Lake will announce when Kenneth Lay, Jeffrey Skilling and Richard Causey will stand trial on charges of fraud and conspiracy related to the energy group’s implosion in 2001.
The decisions of both judges remain finely balanced, and the only certainty lies in the boosted coffers of the Texas legal community. The coincident venue in downtown Houston is also tinged with irony.
The three Enron defendants tried and failed to take their defences away from the company’s base, arguing they could not receive a fair trial in a city where their case has been so well-publicised.
The arrival of Yukos in Judge Clark’s court last December was more expected, and legal experts will closely watch what will be regarded as a landmark decision as to whether or not foreign companies can secure redress through the US court system.
Yukos, whose US-born chief financial officer decamped to Houston fearing arrest in Moscow, filed for US bankruptcy protection on December 14. It also secured an injunction from Judge Clark barring the auction of Yuganskneftegas, its main operating asset.
Yugansk was seized by Russian bailiffs and sold in defiance of the order, ostensibly to pay part of a disputed $27.5bn tax claim against Yukos.
Judge Clark wrote in December that Yukos’s treatment was “inconsistent with the regular application of Russian law within Russia”. She also found precedent that there was “virtually no formal barrier” to having US federal courts adjudicate foreign debtors’ bankruptcy proceedings.
The principal opposition to Yukos’s filing in the US has come from Gazpromneft, a former affiliate of Russian gas monopoly Gazprom that had been favourite to win the Yugansk auction.
But the first practical challenge was from Deutsche Bank, which led a group of lenders that had planned to fund its bid. Yugansk was eventually sold for $9.35bn half of what Yukos claims it was worth to Rosneft, the state-controlled Russian oil group being merged with Gazprom.
Judge Clark will rule on Deutsche’s claim for dismissal, with Gazpromneft’s challenge to come next month should she decide in favour of Yukos.