Court Rejects ‘Russian|Conspiracy’ RICO Case

(CN) - The 2nd Circuit dismissed a Canadian organization's $1.5 billion claim of a vast conspiracy between Russian officials, British Petroleum and dozens of others. Norex Petroleum says the racketeering scheme caused it to lose majority ownership in a Russian oil company and millions in oil dividends from its Siberian wells.

In 2002, Norex Petroleum sued dozens of defendants that allegedly reduced it from a majority shareholder in Yugraneft "to a powerless minority shareholder."

The appeals court found that a recent Supreme Court decision limiting the international reach of federal statutes barred it from applying federal racketeering laws, even though Norex claimed some of the action happened within the United States.

Norex claimed Tyumen Oil used armed guards to seize control of Yugraneft's key oil-treatment facility, bribed Russian officials to recognize the hostile takeover and drained millions from the company's bank accounts.

A Manhattan federal judge granted the defendants' motion to dismiss in favor of continuing the case in the Russian courts.

On appeal, the 2nd Circuit vacated that judgment, finding that Russia could not provide an adequate forum.

Norex then filed an amended complaint that "somewhat in the manner of one of the great Russian novels of the 19th century ... is heavily laden with characters and incident," according to the ruling.

Norex appealed again in 2009 after the district court dismissed the case, finding that RICO did not apply because most of the saga had played out in Russia, the Caribbean and other locations outside the U.S.

While the 2nd Circuit deliberated, the Supreme Court issued its decision in Morrison v. Australian National Bank, limiting the extraterritorial reach of a federal statute to the scope explicitly described within the statute's text.

Since RICO laws are silent to any extraterritorial application, the appeals judges wrote in an unsigned ruling that they could not apply RICO abroad.

The judges added that Norex's claim that the defendants carried out part of the scheme within the United States a "slim" argument.

"The slim contacts with the United States alleged by Norex are insufficient to support extraterritorial application of the RICO statute," the judges concluded.

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