Shares in Rosneft, the Russian state-controlled oil company, fell yesterday in their Moscow stock exchange debut as lawyers for Yukos sought permission in London's High Court to bring a legal challenge to the UK listing, currently set for tomorrow.
Lawyers for Yukos told Mr Justice Charles that advice given to the Financial Services Authority, the chief UK regulator, when it was considering whether to allow the flotation to go ahead had been "legally flawed".
Clare Montgomery counsel for Yukos, outlined the chain of events by which assets previously belonging to Yukos ended up in the control of Rosneft.
Yukos alleges these account for about 70 per cent of the $10.4 billion (€8.2 billion) price tag being put on Rosneft in the flotation, and claims that those events amounted to unlawful expropriation by the Russian state.
Ms Montgomery said legal advice given to the UK regulator had acknowledged that this sequence of events did present a potential problem under anti-money laundering rules contained in the Proceeds of Crime Act.
However, the advice then went on to suggest that those problems were over-ridden by the "act of state" doctrine - namely, that English courts have no power to interfere in the actions of a friendly foreign state.
It was on that basis, she disclosed, that the FSA and then the London Stock Exchange allowed Rosneft's prospectus and listing materials to be issued.
But, the barrister continued, the "act of state" doctrine was a "dense area of law".
She maintained that how and when it should be applied was uncertain - particularly in the case of an executive body, such as the FSA. "This is all to do with judicial restraint, not the action of the executive."
The hearing was adjourned until today. If Yukos succeeds the judge will be asked to consider interim relief.
Rosneft shares yesterday fell nearly 2 per cent to $7.42. The flotation is Russia's largest and the sixth-largest globally.
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