Chapter 15's First Major Case

Both sides have extended their litigation campaigns to the U.S. bankruptcy courts in an effort to gain strategic leverage. The first U.S. case involved the voluntary Chapter 11 petition filed by Yukos' management to prevent the Russian government's foreclosure sale of material Russian assets. That case was dismissed by the United States Bankruptcy Court for the Southern District of Texas in a decision that found Russia to be the appropriate forum for resolution of the parties' dispute. See In re Yukos Oil Co., 321 B.R. 396 (Bankr. S.D. Tex. 2005). Shortly thereafter, Yukos was placed into Russian bankruptcy proceedings by its banks, and in a classic 'turnabout is fair play' tactic, the Russian bankruptcy Receiver filed a Chapter 15 case to prevent Yukos' management from consummating their own material asset sales of the company's interests in a Lithuanian oil refinery company.

Like the Yukos Chapter 11 case, the Chapter 15 case represents an innovative effort to use U.S. bankruptcy law as a sword to enjoin the sale of non-U.S. assets by non-U.S. entities to non-U.S. acquirors. Indeed, the only readily apparent U.S. role was the fact that third parties with material roles in the targeted transaction were subject to the jurisdiction of U.S. bankruptcy courts and therefore refrained from taking (or facilitating) actions that would violate a U.S. injunction. This article discusses this creative use of U.S. bankruptcy law as an anti-takeover litigation strategy in the cross-border context.