Ruling Paves Way for Foreclosure of Kazakh State Assets in Belgium
NEW YORK, Dec. 24, 2019 /PRNewswire/ -- On December 20, 2019, the Brussels Court of First Instance handed down its judgment in The Republic of Kazakhstan v Ascom Group S.A. et al whereby it recognized and enforced a US$540 million arbitral award against the Republic of Kazakhstan on Belgian soil.
The Stati parties are seeking enforcement of the award in various jurisdictions as a result of Kazakhstan's continued refusal to honor its payment obligations under the award.
The Brussels Court, in a 34-page binding and enforceable judgment, rejected all of Kazakhstan's objections to the award and awarded Stati parties their legal costs in the sum of EUR 36,000. Among other things, the court dismissed Kazakhstan's allegations that the Award was procured by fraud in so far as it related to the construction costs of an LPG Plant – one of the expropriated assets with respect to which compensation was awarded to the Stati parties under the award.
Following two years of hotly contested proceedings, the Brussels court concluded that none of the objections raised by Kazakhstan led to a violation of the Belgian public order. As a result, the award may now be freely enforced in Belgium. This ruling comes a day after the Luxembourg Court of Appeal similarly dismissed all of Kazakhstan's objections to the award and allowed its enforcement in Luxembourg.
Anatolie Stati, CEO and sole shareholder of Ascom Group S.A., one of the claimants to the original action, said: "We respectfully welcome this ruling of the Brussels court, which confirms the pro-arbitration stance of Belgian courts and once again offers a useful reminder that foreign investors in Kazakhstan should take note of the country's repeated failure to honor the investment protections that it claims it provides to foreign investment."
As part of separate ongoing attachment proceedings in Belgium, the Stati parties have frozen cash funds of US$530 million owned by the Republic of Kazakhstan and held by BNY Mellon in its capacity as global custodian under a global custody agreement with the National Bank of Kazakhstan. These attachment proceedings are expected to conclude by the end of 2020.
In addition to the Belgian attachment, the Stati parties have successfully secured and maintain the benefit of various other attachments of Kazakh state property in the Netherlands, Luxembourg and Sweden, with the combined total value of all attachments worldwide exceeding US$6.25 billion.
The Belgian court ruling is the latest development in the Stati parties' long-running battle to enforce the award for Kazakhstan's violations of the investor protection provisions of the Energy Charter Treaty. In December 2013, a Sweden based arbitration tribunal found that Kazakhstan had violated international law by failing to treat the Stati parties' investments in Kazakhstan fairly and equitably, and awarded the Stati parties more than US$500 million in damages, legal costs, and interest. The award has since been fully upheld by two tiers of the Swedish judiciary, including the Swedish Supreme Court.
The claims originally arose out of Kazakhstan's seizure of the Stati parties' petroleum operations in 2010. The Stati parties acquired two companies in 1999 that held idle licenses in the Borankol and Tolkyn fields in Kazakhstan. They invested more than US$1 billion over the ensuing decade to turn the companies into successful exploration and production businesses. By late 2008, the businesses had become profitable and had yielded considerable revenues for the Kazakh state. Just as the Stati parties expected to start receiving dividends, more than half a dozen government agencies carried out multiple burdensome inspections and audits of the companies' businesses that resulted in false accusations of illegal conduct directed at the Stati parties and their Kazakh companies, including criminal prosecutions of their general managers on false pretenses. Kazakhstan's actions challenged the Stati parties' title to their investments, subjected them to hundreds of millions of dollars in unwarranted tax assessments and criminal penalties, and ultimately led to the seizure and nationalization of their investments by Kazakh authorities in July 2010.
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