אַן אַנפּרעסידענטיד קער פון געשעענישן: קאַזאַכסטאַן וועלקאַמז נייַ אַרביטריישאַן פאָדערן

Having received a Notice of Legal Dispute from Anatolie and Gabriel Stati, Kazakhstan requests to move forward with the arbitration in order to expose the Statis’ fraud, שרייבט לוי אוגע.

Last week, Kazakhstan’s Ministry of Justice sent out a letter calling for Moldovan businessmen Anatolie and Gabriel Stati to immediately submit their case against the Republic of Kazakhstan to an independent international arbitral tribunal for review.

The letter was written in response to a Notice of Legal Dispute, published by the Statis on 5 August, threatening to initiate arbitration against the Republic of Kazakhstan for allegedly flouting its legal obligations under the Energy Charter Treaty (ECT) to protect foreign investors.

In its response, Kazakhstan’s Ministry of Justice claims that there is no merit to the Statis’ assertions that it has violated any of its obligations under the ECT, and reminded the Statis that they currently owe the Republic of Kazakhstan several million dollars, which they have not yet paid.

The Ministry also called on the Statis to initiate arbitration immediately without waiting for the three-months “cooling-off period” otherwise required by the ECT, remarking that they welcomed the opportunity to have the undisputed evidence of the Statis’ alleged fraud, corruption and money laundering examined by an independent arbitral tribunal.

Background to the case

The Statis’ dispute with Kazakhstan stems back to an arbitration claim filed in 2010 and a subsequent International Arbitration award granted in 2013, which found that Kazakhstan violated its obligations with respect to the Statis’ investments in the country - a ruling Kazakhstan believes they now have sufficient evidence to overturn.

אַדווערטייזמאַנט

Anatolie Stati and his son Gabriel began investing in Kazakhstan in 1999 when they acquired two companies - Tolkynneftegaz (TNG) and Kazpolmunay (KPM) - which held idle licenses for Kazakh oilfields.

The father and son team claim to have invested more than USD 1 billion into the companies, which they say became profitable by 2008. But Kazakhstan tells a different story – one of illegal asset stripping, money laundering, and falsified financial statements.

Authorities ultimately terminated KPM and TNG’s licenses and placed their subsoil use assets into trust management to preserve them from decay. This provided the Statis cause to initiate arbitration against Kazakhstan in 2010 under the Energy Charter Treaty (ECT).

At the time, Kazakhstan did not have sufficient evidence to disprove all of the Statis’ representations, and the arbitral tribunal - formed under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce - ruled against the State in December 2013, awarding the Statis compensation of circa USD 500 million.

However, since 2015, new evidence has come to light, exposing the Statis’ fraudulent activities. The most salient example is the August 2019 decision of the Statis’ auditors, KMPG, to invalidate all of the audit reports they issued for the financial statements of the Statis’ companies in Kazakhstan. In total, KPMG cancelled 18 audit reports covering three years of financial statements issued to companies controlled by the Statis between 2007 and 2009. KPMG took this action after it reviewed sworn testimony which Kazakhstan obtained from the Statis’ former CFO confirming key elements of the fraud.

The 5 August 2021 Notice of Legal Dispute

In their Notice of Legal Dispute, Anatolie and Gabriel Stati accused Kazakhstan of employing an “international strategy of frivolous and abusive litigation in an effort to avoid enforcement and payment of the arbitration award”, arguing that Kazakhstan has no respect for the rights of international investors or the Rule of Law.

However, Kazakhstan’s Ministry of Justice highlighted the Notice’s many discrepancies and misrepresentations. For example, the Notice makes the false statement that courts in Luxembourg have “successfully recognised” the award when, in reality, the highest court in Luxembourg (the Court of Cassation) on 11 February 2021 quashed and invalidated such recognition.

The Ministry also pointed out that Kazakhstan’s track record of resolving International Arbitration investment disputes stands in stark contrast to the Statis’ accusation that the Republic has no respect for Rule of Law. Since gaining independence in 1991, only 19 cases have been brought and concluded against Kazakhstan, all of which it has either won or amicably settled except for one – the Stati case – which Kazakhstan argues should be challenged on the basis of the Stati’s criminal conduct before, during, and after the ECT Arbitration.

In addition, the Statis owe Kazakhstan several million dollars which they have failed to pay up. Kazakhstan has won several legal victories against the Statis in various jurisdictions, but the Statis have not paid out. This includes but is not limited to court decisions in England and Sweden, in which the courts have ordered the Statis to compensate Kazakhstan for millions of dollars worth of legal fees and expenses.

Frustrated by this legal dispute - which has now been ongoing for over ten years - the Ministry’s response to the Stati’s Notice of Legal Dispute called for them to proceed with arbitration forthwith, as the State is confident that it has enough evidence to prove all of its actions are lawful and that it is the Statis, not Kazakhstan, who have engaged in criminal conduct.

Despite this, Kazakhstan’s Ministry of Justice is not optimistic that the Statis will follow through with their threats of arbitration.

The Statis previously had the opportunity to dispute Kazakhstan’s allegations of fraud in front of the English high court but chose instead to withdraw their claim. Mr Justice Knowles, who presided over the case, ruled that the prima facie evidence, which was not available during the original 2013 arbitration, was sufficient to establish that the arbitral award was obtained by fraud. Instead of attempting to rebut these findings at trial in 2018, the Statis withdrew their claim, undertaking not to attempt to enforce the 2013 arbitration award again in the UK and accepting to pay Kazakhstan’s legal fees.

The Kazakhstan Ministry of Justice believes that this is proof that the Statis know the evidence of fraud mounting up against them is irrefutable and, therefore, will avoid going to new proceedings. The latest Notice of Legal Dispute is seen as simply an empty threat designed to intimidate and damage Kazakhstan’s reputation.

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