Dutch Supreme Court Refers US$5.2 Billion Asset Freeze To Lower Court For Re-examination In "Tristangate" Dispute

Kazakhstan con­tin­ues to frus­trate pay­ment of a Swedish arbi­tra­tion award for more than US$540 mil­lion over ille­gal nation­al­i­sa­tion, with American and inter­na­tion­al investors grow­ing wary of Kazakh invest­ment climate

Argentem Creek Partners , Dec 18, 2020, 12:09 ET

The Supreme Court ruled that the appel­late court’s assess­ment of immu­ni­ty was based on an incor­rect stan­dard. The Supreme Court has there­fore set aside the low­er court’s judg­ment and referred the case back to the Hague Court of Appeal for fur­ther consideration. 

In July 2010, the Government of Kazakhstan nation­alised assets asso­ci­at­ed with Tristan Oil, a com­pa­ny which had been set up pri­mar­i­ly to fund oil and gas projects in Kazakhstan. In December 2013, an arbi­tra­tion tri­bunal in Sweden found that the nation­al­i­sa­tion took place in vio­la­tion of inter­na­tion­al law and that the investors had suf­fered sig­nif­i­cant mon­e­tary loss­es fol­low­ing “a string of mea­sures of coor­di­nat­ed harass­ment by var­i­ous insti­tu­tions of Kazakhstan.” [1]

The arbi­tra­tion tri­bunal award­ed approx­i­mate­ly US$500 mil­lion to the own­ers of Tristan Oil under the aus­pices of the Energy Charter Treaty (ECT), which is designed to pro­tect for­eign investors in ener­gy sec­tors of sig­na­to­ry coun­tries includ­ing Kazakhstan. To date, no pay­ments have been made to dis­charge the award and more than US$540 mil­lion is now due. In 2017, the Supreme Court of Sweden upheld the award, mak­ing it final and non-appeal­able. The award has also been recog­nised in num­ber of juris­dic­tions, includ­ing the U.S., Luxembourg, Belgium, Sweden, Italy, France, and the Netherlands. Under a shar­ing arrange­ment with the own­ers of Tristan Oil, US and inter­na­tion­al bond­hold­ers are due to receive approx­i­mate­ly 70% of the award.

Since 2013, Kazakhstan has refused to pay the award in what has become known as the “Tristangate” dis­pute. This has led to the freez­ing of sov­er­eign Kazakhstani assets worth a total of US$6.27 bil­lion world­wide includ­ing the afore­men­tioned US$5.2 bil­lion Kashagan shares attachment.

A spokesper­son for Argentem Creek Partners, the largest bond­hold­er of Tristan Oil, said that: “Today’s deci­sion does not alter the fact that Kazakhstan is oblig­ed to pay the award. The Kashagan attach­ment also remains in place. The Swedish Supreme Court’s deci­sion uphold­ing the award is final and non-appeal­able. By con­tin­u­ing to invoke spu­ri­ous rea­sons for not pay­ing, the Kazakh author­i­ties are fight­ing a bat­tle they lost years ago.  We expect the Kazakh author­i­ties to pay the award as soon as pos­si­ble and stop the diver­sion­ary lit­i­ga­tion that dam­ages the image of Kazakhstan as an invest­ment des­ti­na­tion and in the process antag­o­nizes for­eign investors. As for­eign investors, we call on the lead­er­ship of Kazakhstan to inter­vene and resolve this dis­pute. We stand ready to work with them to do so.”

Argentem Creek Partners is an inde­pen­dent emerg­ing mar­ket cred­it spe­cial­ist man­ag­ing funds for insti­tu­tion­al investors. We are head­quar­tered in New York, with offices in Minneapolis and London. 

Argentem Creek Partners is a bond­hold­er in Tristan Oil bonds. 70% of the award is due to the bond­hold­ers. Because we owe a duty of care to our own Investors, which include large US pen­sion funds, we are and have been defend­ing our invest­ment and assert­ing our rights as bond­hold­ers.  We are deter­mined to see that the ful­ly adju­di­cat­ed award is paid.

Argentem Creek Partners believes that the coun­try offers great invest­ment oppor­tu­ni­ties, pro­vid­ed that it respects the rule of law. A res­o­lu­tion of the Tristan Oil dis­pute would send pos­i­tive mes­sage to all inter­na­tion­al investors and would cre­ate favourable con­di­tions for enhanced eco­nom­ic pros­per­i­ty for Kazakhstan.


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