The Civil Division of the Court of Appeal of England has rejected a petition from Moldovan businessman Anatol Stati for permission to appeal a June 2017 decision of the High Court of England in favour of the Republic of Kazakhstan.

Under a 2013 decision by the Energy Charter Treaty (ECT) tribunal, Kazakhstan is required to pay $500mn to Stati’s company Ascom for unlawful nationalisation. Ascom successfully took steps to enforce the ruling in Swedish and Dutch jurisdictions, where assets of the Kazakh state have been appropriated. However, Kazakhstan is seeking to reverse the ECT’s ruling in the UK and the US.

On June 6, 2017, the High Court of England upheld Kazakhstan, ruling that the December 2013 tribunal decision was based on fraud and its execution would be contrary to the public order of England. 

Later that month, the High Court also denied Stati the possibility of lodging an appeal against the decision. The Civil Division of the Court of Appeal then also turned down Stati’s request to appeal on January 11, Kazakhstan’s ministry of justice has announced.

“The Republic of Kazakhstan will continue to prove the facts of fraud on the part of the plaintiffs and will present relevant evidence at the hearings tentatively scheduled for October 2018,” the latest ministry statement added. The Kazakh government is represented by law firm Herbert Smith Freehills. 

Stati is trying to recover money he invested in two companies holding operating licenses for natural gas fields Borankol and Tolkyn in Kazakhstan, and in developing a liquefied petroleum gas (LPG) plant. He has claimed his firms in Kazakhstan were nationalised with incomplete compensation and that he, his son and other businessmen were subjected to substantial harassment from the Kazakh state, with the ultimate aim of forcing them to sell their investments cheaply.

In 2010, Stati asked for supplementary compensation under the ECT, an organisation Kazakhstan has been a member of since 1998. The ECT’s arbitral tribunal issued its final decision in December 2013. 

However, the Kazakh authorities have denied the allegations and refused to pay supplementary compensation.

Instead, the Kazakh justice ministry alleges that the Stati parties fraudulently inflated the construction costs of an LPG plant in Kazakhstan through a series of undisclosed related party transactions, and prepared falsified financial statements. The Stati parties then allegedly used these falsified costs and financial statements to illicitly obtain a bid for the LPG plant from the Kazakh state oil and gas company, a Kazakh government statement said in October. 

It claimed that the Stati parties later used the fraudulently obtained bid, and their falsified costs and falsified financial statements, as evidence of the LPG plant’s value in the international arbitration. The allegedly fraudulent scheme affected the arbitral tribunal’s determinations on jurisdiction, liability and damages, according to the Kazakh justice ministry’s statement.

This has led to a complex legal battle in numerous international jurisdictions. 

The Swedish Supreme Court on October 24 issued a final ruling in favour of Ascom in its $500mn dispute with Kazakhstan. In principle, the Swedish Supreme Court’s decision should pave the way for the sale of part of the assets held by the Kazakh state and attached by courts in Sweden, the Netherlands and Belgium at the request of Ascom. Overall, $5.6bn has been attached, Ascom claims.

On January 5, the Amsterdam District Court issued a judgment on upholding an earlier ex parte attachment granted by the court in September to Anatol Stati, his son Gabriel Stati, and two of their companies — Ascom and Terra Raf Trans Traiding. In September, the same court had authorised the attachment of Kazakhstan's property in the form of shares of the Samruk-Kazyna Fund, with a nominal value of about $5.2bn in the Dutch company KMG Kashagan BV, through which Kazakhstan participates in the international consortium to development its largest offshore oil and gas field Kashagan.

Meanwhile, the Kazakhstani justice ministry is fighting back in the US, where it has filed a civil racketeering complaint in the US District Court in Washington against Stati, his son, Ascom and Terra Raf Trans Traiding Ltd based on the controversial Racketeer Influenced and Corrupt Organisations Act (RICO) law.