Kazakhstan wins $530 mln case against Moldovan businessmen at Dutch court

ALMATY. Jan 10 (Interfax) - Kazakhstan won a key victory in its long-standing litigation with Moldovan businessmen Anatolie and Gabriel Stati when a court in the Netherlands denied the latter an arbitral award of $530 million.

The Amsterdam District Court denied a request by Anatolie and Gabriel Stati, Ascom Group S.A., and Terra Raf Trans Traiding LTD. for recognition and enforcement of the $530 million arbitral award, the Kazakh Justice Ministry said in a statement.

The ministry said the Dutch court had confirmed that Stati and the others committed material fraud in Kazakhstan.

Anatolie and Gabriel Stati filed a claim against Kazakhstan with the arbitration court of Sweden in 2010, seeking $4 billion from Kazakhstan but were awarded $500 million, $199 million of which was related to the alleged costs associated with the construction of the Borankol gas processing plant.

In June 2018 the English High Court considered the evidence and arrived at a conclusion that there was sufficient initial evidence that the award had been procured by fraud.

The Statis then began a campaign of enforcement in seven countries resulting in a freeze of over $22 billion of assets owned by Kazakhstan's National Bank and National Fund.

In May 2019 a court of first instance in Brussels ordered to lift the attachment of $21.5 billion of assets owned by the National Fund of Kazakhstan. The court said that the attachment of the other $530 million should be sought through English courts.

In August 2019, the English Court of Appeal handed down judgment in the Statis' case against Kazakhstan and brought enforcement proceedings to a conclusive end.

The construction of the Borankol gas processing plant began in 2005, and the project cost was estimated at $176.5 million. The investor of the project was Tristan Oil, owned by Anatolie Stati. A few years later the construction was suspended.

"Stati et al. committed material fraud by withdrawing large sums from KPM and TNG [Kazpolmunay and Tolkynneftegaz] when selling crude oil and using those sums for unusual and personal expenses through the company Hayden, controlled by Stati et al., extracting tens of millions of dollars from TNG in the construction of the LPG plant by means of improper transactions with the secretly controlled entity Perkwood, and disguising his extractions in his annual accounts as 'assets' and 'costs', as a result of which the annual accounts contained material misstatements," the Kazakh ministry said regarding the latest judgment by the Dutch court.

The Amsterdam District Court also concluded that the material fraud committed by Stati et al. in Kazakhstan was not part of the debate during the arbitration. It was established that the Statis have submitted false and incomplete information in the arbitration, knowingly made misleading statements and concealed relevant facts.

"The Statis' request for recognition of the arbitral award is refused on the ground that the Statis committed procedural fraud in the arbitration, which constitutes a violation of Dutch public policy," according to the statement.

The enforcement of the award was denied with costs to be paid by the Statis to the republic.

On December 24, 2021, the Supreme Court quashed an earlier decision of the Amsterdam Court of Appeal granting exequatur and referred the matter to the Amsterdam District Court. After an interim judgment from the Amsterdam District Court on May 3, 2022, the republic was given the opportunity to further substantiate its claim that the arbitral award had been procured by procedural fraud based on new evidence.

Kazakhstan was able to uncover the fraud by the Statis, inter alia by submitting correspondence between the Statis and their auditor KPMG that shows that the financial statements the Statis had relied on during the arbitration were materially misstated and that KPMG subsequently effectively withdrew the audit of those statements.

Moreover, Kazakhstan was able to uncover large unlawful extractions of funds by the Statis after obtaining and analyzing the bank statements of multiple entities covertly controlled by the Statis.

As reported previously, the Dutch court is not the first court to side with the republic and establish the Statis' fraud. On November 16, 2021, the Brussels Court of Appeal rejected the recognition and enforcement of the arbitral award in Belgium. In its judgment on November 16, 2021, the Brussels Court of Appeal ruled that the Statis committed fraud before, during, and after the arbitration. On December 2, 2021, the Luxembourg Court of Appeal stayed the exequatur proceedings until the completion of the criminal investigation of the Statis' conduct. In September and December last year, Anatolie and Gabriel Stati were indicted by the Luxembourg criminal judge on account of suspected fraud, forgery, and money laundering. On June 6, 2017, the High Court of Justice of England and Wales found sufficient prima facie evidence that the arbitral award was obtained by fraud by the Statis.

"The Netherlands is now the fourth jurisdiction, where the court of first instance refused to recognize and enforce the Stockholm arbitration award. The judgment of Amsterdam District Court further strengthens the republic's long-held conviction that the Statis' fraud infringed the republic's right to fair and equitable arbitration," the ministry said.