Kazakhstan Will Continue To Fight $500M Award, Court Told

Kazakhstan Will Continue To Fight $500M Award, Court Told

Kazakhstan has urged a D.C. federal court to hold off on resuming a suit filed by two Moldovan oil and gas investors who are trying to collect a $500 million arbitral award that was recently affirmed by a Swedish appeals court, saying it will try to overturn the appeals court’s decision, reports KazWorld.info with reference to the website The Law360.

The Republic of Kazakhstan had been ordered by a Stockholm tribunal to pay investors Anatole and Gabriel Stati more than $506 million for pressuring them into selling their investments in Kazakhstan’s natural hydrocarbon resources sector to the state-owned oil company KazMunaiGas for a song. The Statis are asking the D.C. court to confirm the award, but the proceedings were paused while the Svea Court of Appeal considered whether the award should be set aside.

In December, the Svea Court of Appeal denied the Central Asian nation’s challenges to the award. But on Friday, Kazakhstan told the D.C. court that it will seek to quash that decision due to a “grave procedural error” committed by the Swedish court. As a result, lifting the stay on the Statis’ enforcement suit would be premature, the country said.

“If the motion to quash is granted, Kazakhstan’s claims in support of setting aside the award will be retried in the Svea Court of Appeals,” the country said in a status report. “Accordingly, the basis for the court’s decision to enter the stay in the first instance — the pendency of the Swedish proceedings — still exists.”

The Statis and their companies, Ascom Group SA and Terra Raf Trans Traiding Ltd., countered that argument in the same status report, noting that the Svea court “expressly denied” Kazakhstan permission to appeal its decision to the Swedish Supreme Court.

The Statis’ attorney, King & Spalding LLP partner Reggie Smith, told Law360 on Tuesday that appeals such as the one Kazakhstan is seeking are granted only in rare circumstances.

“They can seek a petition for extraordinary review, which is essentially a mistrial standard. Those are rarely granted,” he said. “For all practical purposes, the appeal in Sweden is deemed final.”

The Statis urged the D.C. court in the status report to lift the stay and to promptly recognize the award.

In a Tuesday minute order, U.S. District Judge Amy Berman Jackson ordered the parties to inform her of the status of the Swedish proceedings by early February.

Attorneys for Kazakhstan didn’t immediately respond to a request for comment Tuesday.

Beginning in 1999, the Statis and their companies invested in Kazakhstan’s natural hydrocarbon resources sector by purchasing controlling shares in two Kazakh companies, Kazpolmunay LLP and Tolkynneftagaz LLP, which owned the rights to certain oil and gas fields.

But after the companies began generating significant returns, Kazakhstan began a campaign of intimidation and harassment apparently intended to pressure the Statis into selling their investments to KazMunaiGas at a substantially depreciated price, according to the Statis’ September 2014 petition to enforce the award.

The Statis initiated arbitration under the Energy Charter Treaty, and the tribunal concluded in December 2013 that Kazakhstan’s actions amounted to “coordinated harassment” that breached its obligations under the ECT to treat investors fairly.

Kazakhstan had sought to set aside the award in Sweden, arguing that the arbitration process had been unfair and didn’t address evidence that the Statis and their companies had inflated the value of their investments. The country also claimed that it was unfairly denied the opportunity to appoint an arbitrator.

The appeal was denied last month and the country was ordered to pay the Statis’ fees and costs, which amounted to more than $3 million.

The Statis and their companies are represented by Reggie Smith, Ken Fleuriet, Kevin Mohr, Amy Frey, Egishe Dzhazoyan, Heloise Herve, Alexandra Rotar and Valeriya Subocheva of King & Spalding LLP, and Bo G.H. Nillson, Therese Isaksson and Ginta Ahrel of Advokatfirman Lindahl KB.

Kazakhstan is represented by Matthew H. Kirkland, Kara L. Petteway and Benjamin Hayes of Norton Rose Fulbright, Pontus Ewerlöf of MAQS Advokatbyrå AB, Alexander Foerster and Ludwig Metz of Mannheimer Swartling Advokatbyrå AB, and Karl Guterstam of Frank Advokatbyrå.

The cases are Republic of Kazakhstan v. Ascom Group SA et al., case number T 2675-14, in the Svea Court of Appeal, and Anatoli Stati et al. v. Republic of Kazakhstan, case number 1:14-cv-01638, in the U.S. District Court for the District of Columbia.