Moscow Court Rejects Sibneft's Appeal

MOSCOW, August 9 /PRNewswire/ -- The Moscow District Federal Arbitration Court today rejected Sibneft's appeal of an April ruling by a Moscow court of original jurisdiction that placed OAO Yugraneft under external administration in connection with the company's bankruptcy. The April ruling had already been upheld by an appeal court in June. The court today ruled in favor of Sibir Energy's [LSE: SBE] position that the introduction of external administration to Yugraneft is legal and that there is no basis for initiating liquidation proceedings against the company.

"This ruling is an important victory for Sibir Energy because it will allow us to keep the external administrator in place. Sibneft is trying to escape responsibility for its illegal dilution of Yugraneft's stake in Sibneft Yugra by liquidating the company instead of allowing an external administrator to return it to financial health," said Sibir Energy CEO Henry Cameron in a statement Tuesday.

Sibneft has repeatedly sought to use bankruptcy proceedings as a means of liquidating Yugraneft.

Sibir Energy's legal counsel, Dmitry Afanasiev of EPAM, commented: "No bona fide creditor would attempt to liquidate a company that has virtually no assets available to sell, particularly when that company is in the process of recovering assets that would allow it to return to financial solvency. We are pleased that the Russian courts agree with our position.

"Sibir Energy will continue to fight in Russian and international courts for the return of the Sibneft Yugra assets that were misappropriated by Sibneft," he added.

Sibir Energy has initiated court proceedings against Sibneft in Russia and the British Virgin Islands. The Eastern Caribbean Supreme Court has scheduled the next hearing in Sibir Energy's lawsuit against Sibneft for September 20, 2005.

Background to the case

In November 2000 Sibir Energy and Sibneft established a joint venture, Sibneft Yugra, to develop the South Priobskoye oilfields in western Siberia. Each party owned 50 percent, with Sibir Energy contributing the field licenses and Sibneft the financial means for development. In September 2002 and February 2003, Sibneft arranged shareholders meetings at which Sibir Energy's interest in Sibneft Yugra was diluted from 50 percent to 0.98 percent. Sibneft officially maintained its formal 50 percent, with the remainder being eventually transferred to three offshore companies which were later revealed to be controlled by Sibneft.