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Shearman flags potential conflict at White & Case as US rivals face off in $50bn Yukos arbitration

Shearman & Sterling has raised a potential conflict of interest issue at White & Case (W&C) in its representation of Russia’s bid to annul the $50bn arbitration award against it over the collapse of oil giant Yukos.

In a motion to recuse or disqualify a US district judge on 19 November before the district court of Columbia, Yukos shareholders Hulley Enterprises, Yukos Universal and Veteran Petroleum alerted the court that they were ‘investigating prior attorney-client relationships’ between them, their affiliates, and W&C.

‘The facts underlying the prior relationships (which date back to at least 1999 and appear to involve matters raised by W&C in this proceeding) are being investigated as quickly as possible, but due to the passage of time and the intervening confiscation of most of the relevant documents by agents of the Russian Federation, petitioners may not be in a position to make a final determination whether to seek disqualification of W&C for several weeks,’ the court filing said.

Russia was ordered to pay $50bn to the majority shareholders in Yukos Oil Company, once Russia’s largest oil producer, by an arbitral tribunal sitting in The Hague in 2014. It was the largest arbitration award in history and 20 times larger than the previous record. Recognition and enforcement of the award in the courts, however, is expected to take about a decade and will generate millions of dollars in legal fees. Proceedings are taking place across various jurisdictions, including Belgium and the US.

W&C was instructed by Russia to coordinate the country’s defence against enforcement and annulment proceedings across at least three jurisdictions on the case, while Cleary Gottlieb Steen & Hamilton and Baker Botts acted for Russia in the original tribunal where the award was made against it.

Shearman as well as local law firms assisting it in the recognition and enforcement of the award, are now investigating whether W&C has a conflict of interest in representing Russia. The firm is known to have represented Yukos around the time of the oil giant’s collapse a decade ago, with W&C chairman Hugh Verrier one of the company’s advisers.

W&C Washington DC-based arbitration partner Carolyn Lamm is leading Russia’s defence in the US, with David Goldberg leading proceedings in London and Markus Burianski heading the defence in Germany. Russia has also instructed Brussels-based Albert Jan van den Berg of Hanotiau & van den Berg in a bid to have the award set aside at the seat of arbitration, The Hague.

Shearman’s team in the US, led by veteran litigator Henry Weisburg and the firm’s deputy head of litigation Richard Schwed, already successfully petitioned district judge Amy Berman Jackson to recuse herself from hearing a request to enforce the Yukos award against Russia in Washington DC over ‘cumulative connections’ with Lamm, as the pair were mothers to children at the same school.

Shearman head of international arbitration, Paris-based Emmanuel Gaillard, who alongside public international law chief Yas Banifatemi is coordinating the enforcement after securing the $50bn award for the majority shareholders in Yukos Oil Company in July 2014, has instructed Stephenson Harwood to enforce the award in the English courts and Dutch firm De Brauw Blackstone Westbroek for proceedings in the Netherlands.

A spokesperson for Stephenson Harwood told Legal Business: ‘The issues with regards to the potential conflict of interest in relation to W&C are currently being investigated by the claimants.’

Stephenson Harwood’s head of commercial litigation, John Fordham, is leading proceedings to seize assets in the UK with support from litigator Ros Prince. Stephenson Harwood has instructed David Foxton QC and Paul McGrath QC of Essex Court Chambers as counsel.

W&C would not comment on the matter.