By Joanna Chung, Nikki Tait and Norma Cohen
Yukos, the troubled oil group, on Tuesday failed in its 11th hour bid to derail the London listing of Rosneft.
Official trading of shares in the Russian state-controlled company duly started on Wednesday. The stock was 0.5% lower early on at $7.37.
Yukos wanted a judicial review of the decision made by the UK market authorities – the Financial Services Authority and the London Stock Exchange – to permit the listing of Rosneft shares in London. Rosneft priced its shares on Friday at $7.55 each, raised $10.4bn. The flotation, done in London and Moscow, is the world's sixth biggest and Russia's largest.
Yukos claimed that the Rosneft flotation amounted to the sale of stolen property. Most of Rosneft's output comes from Yuganskneftegaz, which Rosneft bought in an opaque and forced auction by the Russian state two years ago.
On Tuesday, after almost two days of hearings, presiding judge Mr Justice Charles said he was refusing Yukos's application for a judicial review. He also did not grant an injunction on share trading. Rosneft yesterday welcomed the court decision. The decision means that Rosneft's shares will begin unconditional trading today, as scheduled, and settlement, in which securities are delivered and payment received, will also occur.
It also means that the $7.5bn of debt that Rosneftegaz, the state entity which owns Rosneft, raised last year to buy 10.7 per cent of Gazprom, can be paid back.
A spokesperson for Yukos said on Tuesday that the case was decided on a "technical point of law and expressly did not deal with the theft of our asset".
Yukos has argued that the FSA had erred in law when it decided that any potential problem which the Yuganskneftegaz acquisition presented under anti-money laundering rules – contained in the Proceeds of Crime Act – was over-ridden by the "act of state" doctrine. That doctrine effectively says that the English courts have no power to interfere in the actions of a friendly foreign state.
However, Mr Justice Charles rejected Yukos's argument, and endorsed the FSA's decision. He concluded that, on the law as it stands at present, the act of state doctrine did apply. The judge acknowledged that he had initially been sceptical that it would be possible to come to firm conclusion on this point in a relatively short hearings, dealing only with permission to seek a judicial review. Nevertheless, he said he had decided it was open to him to reach a conclusion, and "the answer is clear".
Yukos will continue to pursue its claim against Russia through the European Court of Human Rights, the spokesperson said. It could also attempt to appeal yesterday's decision, but no application was made to the Court of Appeal as of last night.
(FT.Com, 18/7/06)