Swedish Court Rejects Kazakhstan's Second Challenge To Arbitral Award, Blocks Further Appeal

Ruling Confirms US$541 Million Award as Final and Binding

NEW YORK, March 9, 2020 /PRNewswire/ — The Svea Court of Appeal in Stockholm hand­ed down its judg­ment in The Republic of Kazakhstan v Ascom Group S.A. et al dis­miss­ing with prej­u­dice Kazakhstan’s renewed chal­lenge to a US$541 mil­lion Swedish arbi­tral award issued in December 2013.

Kazakhstan had brought an unprece­dent­ed sec­ond chal­lenge to the award in November 2019, hav­ing lost the first chal­lenge in December 2016 after 3.5 years of pro­ceed­ings before the same Svea Court of Appeal.

In its rul­ing, hand­ed down March 9, 2020, the Swedish court found that the two chal­lenges were “iden­ti­cal,” which under Swedish law bars the new claim from being heard. The court also found Kazakhstan’s new claim to be “based on cir­cum­stances that could have been invoked in the pre­vi­ous case.” The Svea Court also refused to grant per­mis­sion to appeal this rul­ing to the Swedish Supreme Court, thus mak­ing it final and binding.

This rul­ing comes short­ly after a dif­fer­ent divi­sion of the same Svea Court of Appeal sim­i­lar­ly dis­missed Kazakhstan’s motion to intro­duce the new chal­lenge into the record of the par­al­lel Swedish attach­ment proceedings.

Anatolie Stati, CEO and sole share­hold­er of Ascom Group S.A., one of the defen­dants to the action, said: “We wel­come this rul­ing of the Swedish court, which pays due def­er­ence to the prin­ci­ple of final­i­ty of lit­i­ga­tion. The award cred­i­tors will con­tin­ue unabat­ed­ly with their efforts to col­lect any and all amounts due under the award and relat­ed legal costs in all avail­able juris­dic­tions. In the mean­time, 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 Sweden, the Stati par­ties have suc­cess­ful­ly frozen funds of approx­i­mate­ly US$85 mil­lion owned by the Republic of Kazakhstan and held by Skandinaviska Enskilda Banken in its capac­i­ty as sub-cus­to­di­an under a glob­al cus­tody agree­ment between the National Bank of Kazakhstan and BNY Mellon. These attach­ment pro­ceed­ings are expect­ed to con­clude by the fall of 2020.

In addi­tion to the Swedish attach­ment, the Stati par­ties have suc­cess­ful­ly secured and main­tain the ben­e­fit of var­i­ous oth­er attach­ments of Kazakh state prop­er­ty in the Netherlands, Luxembourg and Belgium, with the com­bined total val­ue of all attach­ments world­wide exceed­ing US$6.25 billion. 

The Swedish 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.

Kimberly Macleod
(917) 587‑0069

Chris Winans
(908) 309‑3959

SOURCE Ascom Group S.A.