Already in April 2017, the KazMunayGaz analysts acknowledged the risks that the International Tribunal’ decision made in December 2013 under the guise of the Arbitrage Institute of the Stockholm Chamber of Commerce on the dispute between Moldovan businessman Anatol Stati and Kazakhstan poses for the national company and the entire country.
In particular, we are talking about the fact that, to comply with this decision, Kazakhstan perhaps will have to sell the 50% Samruk-Kazyna National Welfare Fund’s share in KMG Kashagan B.
This fact was first elicited in the Base Prospect of the U.S.$10,500,000,000 Global Medium Term Note Programme published at the beginning of Alril 2017 by JSC NC KazMunayGaz (a joint-stock company incorporated in the Republic of Kazakhstan) and KazMunaiGaz Finance Sub B.V. (a limited liability company incorporated in the Netherlands unconditionally and irrevocably guaranteed by the JSC NC KazMunayGaz).
This document that we have already started reviewing in the articles KMG: What Will Happen if Nazarbayev Leaves, KMG: On the Managers’ Compensation Packages, and KMG: How They Saved Halyk and Kazkom is of a special interest because it allows us to look at many Kazakhstan’s topical issues from a different perspective, that of a large national company.
As for Anatol and Gabriel Statis’ claim against Kazakhstan, we have a whole series of the publications on the subject: they are listed at the foot of this article. We are not going to talk about them in detail here, except to remind our reader that the aforementioned decision of the International Tribunal was supported by the Stockholm Appellate Court and the Amsterdam District Court.
It was the latter that, on September 8, 2017, made a decision in favor of Ascom-Grup and sanctioned the arrest of Kazakhstan’s share in the Dutch KMG Kashagan BV that amounts to $5.2 bln. Moreover, this decision has recently been supported by the US Columbia District Court (see details in our article Stati Sets the Score).
The Kazakhstan Ministry of Justice and its head Marat Beketayev’s reaction to the events was a rather optimistic one: apparently, they do not see any risks of losing the state property, are certain that the Kazakhstan side is right and will make any endeavor to prove their case.
However, the risks that Kazakhstan will be forced to pay about $504 mln plus interest to Anatol and Gabriel Statis and their companies Ascom Group S.A. and Terra Raf Trans Trading Ltd. for violating the Energy Charter Agreement due to the investment losses in the Kazpolmunay and Tolkynneftegaz companies in the Mangistau region still exist. Even if the 50% Samruk-Kazyna’s share in KMG Kashagan B.V will not be forcibly sold, it will be “frozen” for at least several years. Which means, among other things, that KazMunayGaz JSC NC will not be able to exercise its option to buy out the KMG Kashagan B.V share.
We cannot assess how this will affect Akorda’s plans of the national company privatization. However, the fact that Kazakhstan will suffer losses regardless whether it will be though Samruk-Kazyna National Welfare Fund or KazMunayGaz JSC NC is indisputable.
To support our concerns, we will quote the Base Prospect of the U.S.$10,500,000,000 Global Medium Term Note Programme (Enforcement of Civil Liabilities secton, text in bold – Kazakhstan 2.0)
On one hand, “The Company is a joint stock company organised under the laws of Kazakhstan and all of its officers and certain of its directors and other persons referred to in this Base Prospectus are residents of Kazakhstan. All or a substantial portion of the assets of the Company and most of such persons are located in Kazakhstan. As a result, it may not be possible (i) to effect service of process upon the Company or any such person outside Kazakhstan, (ii) to enforce against any of them, in courts of jurisdictions other than Kazakhstan, judgments obtained in such courts that are predicated upon the laws of such other jurisdictions or (iii) to enforce against any of them, in Kazakhstan courts, judgments obtained in jurisdictions other than Kazakhstan, including judgments obtained in respect of the Notes or the Trust Deed in the courts of England and judgments obtained in the United States predicated upon the civil liability provisions of the federal securities laws of the United States”.
On the other hand, “KMG Finance is incorporated under the laws of the Netherlands and its managing directors are residents of the Netherlands and Kazakhstan. A substantial portion of the assets of KMG Finance and of its managing directors are located in the Netherlands and Kazakhstan. As a result, it may not be possible (i) to effect service of process upon KMG Finance or any such person outside the Netherlands or Kazakhstan, as the case may be, (ii) to enforce against any of them, in courts of jurisdictions other than the Netherlands or Kazakhstan, as the case may be, judgments obtained in such courts that are predicated upon the laws of such other jurisdictions or (iii) to enforce against any of them, in the courts of the Netherlands or Kazakhstan, as the case may be, judgments obtained in jurisdictions other than the Netherlands or Kazakhstan, respectively, including judgments obtained in the United States predicated upon the civil liability provisions of the federal securities laws of the United States. KMG Finance has been advised by its legal counsel in the Netherlands, DLA Piper Nederland N.V., that the Netherlands does not currently have a treaty with the United States providing for reciprocal recognition and enforcement of judgments (other than arbitral awards) in civil and commercial matters”.
Therefore, since the decision of the International Tribunal under the guise of the Arbitrage Institute of the Stockholm Chamber of Commerce on the dispute between Moldovan businessman Anatol Stati and Kazakhstan was supported by the Amsterdam District Court (the Netherlands) on September 8, 2017, there is a rather high probability that Anatol and Gabriel Statis will eventually be able to receive about $520 mln (perhaps more) from Kazakhstan.