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. Last Updated: 07/27/2016

U.S. Judge Asks Russia to Hold Back on Yukos

HOUSTON -- A federal judge in Houston said she would review whether U.S. courts have jurisdiction over Yukos' bankruptcy filing and asked for an "informal" one-week delay in the sale of any additional Yukos assets.

Yukos, which sought bankruptcy protection during a tax dispute with the Russian government, asked U.S. District Judge Nancy Atlas to temporarily block the sale of any of its assets while the company appeals a bankruptcy judge's decision to dismiss the case.

"What I want to make clear to the public is these are very substantial issues," Atlas told lawyers at a hearing Wednesday. "They deserve some careful consideration and analysis in writing."

While Atlas indicated that she wanted the Russian government to obey her request, the informal stay technically applies only to Deutsche Bank, which had previously arranged financing for a sale of Yukos' properties. The Russian government ignored a previous U.S. court order in the case after Yukos first sought bankruptcy protection in December.

Tax officials seized and sold the company's largest subsidiary in December in an effort to collect what they contended were almost $28 billion in overdue taxes. Yukos is trying to keep the rest of the company out of the government's hands. Atlas asked the parties to agree to the informal delay until March 18 while she prepared a ruling.

"Russia is not being harmed" by the stay, said Deutsche Bank lawyer Hugh Ray. "The ones who are being harmed are the Western banks because we've got to play by the rules."

U.S. Bankruptcy Judge Letitia Clark last month said U.S. courts lacked jurisdiction over the dispute.

Atlas said that as "a private citizen" she was concerned by the Russian government's seizure of Yukos assets and its arrest of the company's founder, Mikhail Khodorkovsky.

"I definitely do not want anything I say or do to be seen as condoning what is happening in Russia to Yukos or Mr. Khodorkovsky," Atlas said. "I am not the State Department. I am not the U.S. government."

Yukos sought Chapter 11 protection in U.S. Bankruptcy Court in Houston in December and won an emergency restraining order blocking the government's auction of Yuganskneftegaz, the company's Siberian oil production unit, which accounts for roughly 60 percent of Yukos assets.

"They just blew into town and filed Chapter 11," Ray said. "There are all these cases that say you can't do that."

As part of the bankruptcy case, Yukos sued Deutsche Bank, Gazprom and other Russian companies for $20 billion, claiming they "expropriated" Yugansk. The company also sued the Russian government.

The government's "expropriations had slowed down some since our filing in December. They have accelerated since our case was dismissed," Yukos lawyer Zack Clement told Atlas.