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Yukos Capital Sarl v. Samaraneftegaz

United States District Court, Second Circuit

January 9, 2014

YUKOS CAPITAL S.A.R.L. Petitioner,


PAUL A. CROTTY, District Judge.

Having prevailed in an arbitration proceeding before the International Court of Arbitration of the International Chamber of Commerce in New York ("ICC") under New York law, and thereafter having sought enforcement of the award in which the Court determined that it had in personam jurisdiction, [1] confirmed the award, [2] and entered final judgment in the amount of $185, 907, 785.41 (the "Judgment"), [3] Petitioner Yukos Capital S.A.R.L. ("Yukos Capital") seeks an order compelling Respondent OAO Samaraneftegaz ("Samaraneftegaz") to turnover assets to satisfy the judgment and to restrain the transfer of assets to its shareholder or corporate affiliates. The motion is GRANTED.


I. Facts

The Court assumes familiarity with the facts and the Court's prior decisions in this matter. For convenience, however, the relevant facts are set forth below.

Yukos Capital is a Luxembourg-based subsidiary of Yukos Oil Company ("Yukos Oil"). (Yukos Capital 56.1 ¶ 1, ECF No. 111.) From 2001 to May 2007, Samaraneftegaz was also a wholly-owned subsidiary of Yukos Oil. (Id. ¶ 5.) Samaraneftegaz is now a subsidiary of OJSC Oil Company Rosneft ("Rosneft"), a Russian state-controlled oil company, and LLC Neft-Aktiv ("Neft-Aktiv") is Samaraneftegaz's sole shareholder. (Id. ¶ 11.) Samaraneftegaz does not have assets or do business within the United States. (See Declaration of Robert L. Weigel, ECF No. 150 ("Weigel Decl."), Ex. C ¶ 2.) In July 2004, Samaraneftegaz and Yukos Capital executed two loan agreements in which Yukos Capital extended a total of RUR 2, 415, 890, 000 to Samaraneftegaz (the "Loan Agreements"). (Yukos Capital 56.1 ¶ 12, ECF No. 111.) The Loan Agreements provided for arbitration of disputes in Russia under Russian law. In November 2005, Addenda to the Loan Agreements were executed that instead provided for arbitration before the ICC in New York under New York law (the "Addenda"). (Id. 17.)

On January 12, 2006, Yukos Capital requested arbitration at the ICC in New York to resolve the dispute over the outstanding loans. (Id. ¶ 23.) Samaraneftegaz asserted that it had not agreed to ICC arbitration in the United States. (Id. ¶¶ 31, 38.) In its August 15, 2007 award, the tribunal ordered Samaraneftegaz to pay Yukos Capital the outstanding money due under the Loans, in addition to interest and Yukos Capital's fees and expenses (the "Award"). (Id. ¶ 58.) Yukos Capital sought enforcement of the Award in the Arbitrazh court in the Samara region of Russia on August 9, 2010. (Samaraneftegaz 56.1 ¶ 2, ECF No. 108.) In its ruling issued on February 22, 2011 (the "Russian Enforcement Decision"), the court refused to enforce the Award on the grounds that "Samaraneftegaz was not given notice of the important stages of the progress of the [arbitration]" and that doing so would violate Russian public policy. (Declaration of Catherine L. Carlisle, ECF No. 107 ("Carlisle Decl."), Ex. A at 5, 7.)

In a separate Russian proceeding, Neft-Aktiv sued Samaraneftegaz and Yukos Capital to invalidate the Loan Agreements. (Samaraneftegaz 56.1 ¶ 8, ECF No. 108.) Yukos Capital participated in the case. (Id. ¶ 9.) On February 8, 2012, the Russian court invalidated the Loan Agreements (the "Neft-Aktiv Decision"). (Id. ¶¶ 8, 10.) Specifically, the court determined that "the loans advanced by Yukos Capital S.a.r.l. were financed from funds taken away earlier from OJSC Samaraneftegaz in the course of implementation of transfer pricing mechanisms." (Id. ¶ 11(d).) Yukos Capital appealed this decision to the Russian appellate court, which affirmed the trial court's judgment on July 20, 2012. (Id. ¶ 12.)


Yukos Capital moves for an order that Samaraneftegaz (1) turnover assets to pay the full amount of the Judgment; and (2) be restrained from paying dividends, making loans, or otherwise making further payments to its shareholder or other corporate affiliates, until Samaraneftegaz either satisfies the Judgment or posts a bond pending appeal. (See Yukos Capital's Memorandum of Law in Support of Motion for Turnover, ECF No. 149 ("Yukon's Mot.") at 2). Samaraneftegaz argues that Yukos Capital is not entitled to either forms of relief and, in the alternative, the motion should be stayed until the appeal is decided. (See OAO Samaraneftegaz's Opposition to Yukos Capital's Motion for Turnover, ECF No. 154 ("Samaraneftegaz's Opp'n") at 1-3). The Court holds that Yukos Capital is entitled to a turnover order and a restraining order prohibiting Samaraneftegaz from transferring its assets to its shareholder or corporate affiliates.

I. Yukos Capital Is Entitled to a Turnover Order

New York law governs turnover proceedings, see Fed.R.Civ.P. 69(a)(1), and provides that "[u]pon motion of the judgment creditor, upon notice to the judgment debtor... the court shall order that the judgment debtor pay the money, or so much of it as is sufficient to satisfy the judgment." N.Y. C.P.L.R. 5225(a). Under Section 5225(a), "a New York court with personal jurisdiction over a defendant may order him to turn over out-of-state property." Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533, 541 (2009); see Gryphon Dom. VI, LLC v. APP Int'l Fin. Co., B.V., 836, N.Y.S.2d 4, 13 (1st Dep't 2007). Courts require defendants to turnover out-of-state assets even where personal jurisdiction was obtained only on the basis of an agreement to arbitrate in New York. See, e.g., CIMC Raffles Offshore (Sing.) Pte. Ltd. v. Schahin Holding S.A., No. 13 Civ. 52, 2013 WL 4082973, at *1 (S.D.N.Y. Aug. 6, 2013).

Here, this Court previously held that it had in personam jurisdiction over Samaraneftegaz pursuant to the valid arbitration agreement between the parties. See Yukos I, 2012 WL 3055863, at *9; see also Union Fire Ins. Co. v. Diaz Constr. Co., Inc., No. 12 Civ. 973, 2013 WL 1234840, at *2 (S.D.N.Y. March 25, 2013) (discussing the "long line of cases holding that agreement to arbitrate in New York constitutes consent to personal jurisdiction"). The Court then confirmed the Award, and entered judgment against Samaraneftegaz. See Yukos II, 2013 WL 4001584, at *9; Supplemental Final Judgment, ECF No. 144. Since Samaraneftegaz possesses no U.S. assets, (see Weigel Decl., Ex. C ¶ 2), Yukos ...

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