WASHINGTON (CN) – The U.S. law firm Baker Botts need not divulge communications about its longtime client, Rosneft, an oil giant run by the Russian government, a federal judge ruled.
Underpinning the case in Washington is the 2007 collapse of another Russian oil company, Yukos. When Yukos had merged four years earlier with a smaller rival, Sibneft, to produce the world's fourth largest oil company, shareholders said Russia torpedoed the deal by launching fraudulent tax-evasion proceedings.
Those claims won out initially at the International Permanent Court of Arbitration in The Hague, which found that Russia had violated the Energy Charter Treaty by bankrupting Yukos.
Accounting for the expropriation of Yukos’ assets by Rosneft and Gazprom, a gas company owned by the Russian state, between 2003 and 2007, the tribunal awarded Yukos shareholders more than $50 billion in damages.
Yukos shareholders never saw that pay day, however, after the District Court of The Hague found that the lower panel lacked jurisdiction because Russia had not agreed to apply the treaty's arbitration clause.
Banking on another reversal from the Court of Appeal of The Hague, the shareholders brought a federal petition this past June in Washington, applying to compel discovery from Baker Botts, which has represented Rosneft since 2006.
U.S. District Judge Beryl Howell called it a “bold move” but shot their petition down in August. In a ruling dated Dec. 9 that appeared on the court’s website two days later, Howell refused to reconsider.
Howell scoffed at the new claim by the shareholders that Baker Botts failed to assert privilege.
"This argument is almost farcical, given both the nature of the petitioners’ discovery demands, which plainly target privileged communications and documents between the respondents and its long-standing client, and the respondents’ declaration detailing the nature of their attorney-client relationship with Rosneft and the burdens subpoena compliance would engender," the 16-page opinion states.
When discovery requests demand attorney records involving representation of a client, Howell said "invocation of the protections of the attorney-client privilege and work-product doctrine may be effective without requiring a detailed privilege log.”
In addition to finding that it would pose an extraordinary burden on Baker Botts and the court to identify and resolve the privilege and work-product issues that would inevitably arise from the requests, Howell said the shareholders failed to show the relevance of the discovery.
Howell also indicated that ruling in favor of the shareholders “would encourage parties involved in ligation overseas to exploit the broad discovery regime available under the Federal Rules of Civil Procedure while simultaneously seeking to defeat fundamental protections for attorney-client privilege and work product guaranteed by the American legal system.”
Christopher Ryan, an attorney for Yukos Universal with the firm Shearman & Sterling, did not respond to an email and voice message seeking comment on the ruling. Yukos is listed as a co-petitioner along with Hulley Enterprises and Veteran Petroleum.
Howell noted in the new ruling that the petitioners seek the communications at issue to document attempts by the Russian Federation “to manipulate judges in the Armenian courts” at a time when “Rosneft, acting through counsel to the Russian Federation, arranged the outcome of several Yukos-related judicial decisions in Armenia,” with at least one decision influencing proceedings in the Netherlands.
Russia apparently argued before The Hague that Yukos has unclean hands, but the shareholders say disclosure of the real evidence would let “the Dutch Appellate Court ... fully and fairly assess the conduct of the Russian Federation in its dealings with foreign courts.”
Baker Botts meanwhile applauded Howell’s ruling. “We believed that the motion for reconsideration was without merit,” a representative for the company said in an email. “The court's decision was correct.”
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