New Fraud Evidence to be Examined by Belgian Court

On 17 November 2020, the Court of Appeal of Brussels in Belgium (the “Belgian Appeal Court”) granted permission to the Republic of Kazakhstan to advance in full the case relating to the fraud committed by Moldovan nationals Anatolie Stati and Gabriel Stati, and their companies, Ascom Group S.A. and Terra Raf Trans Traiding Ltd (“Statis”). The fraud affects the investment that the Statis are alleged to have made in Kazakhstan, and vitiates the arbitral award that the Statis have obtained against the Republic of Kazakhstan in 2013 (the “Award”).

The Statis failed in their attempt to prevent a full court scrutiny of the entirety of the available evidence establishing the fraud, including the recently uncovered critical evidence originating from the Statis’ own auditing firm, KPMG Audit LLC (“KPMG”).

As previously reported, in a letter dated 21 August 2019, KPMG declared that it had no choice but to invalidate all the audit reports relating of the Statis’ financial statements relating to their alleged investment in Kazakhstan (“KPMG Correspondence”). This invalidation affects, in total, eighteen audit reports covering three years of financial statement prepared by KPMG. KPMG took this exceptionally serious and rare step of invalidating its own audit reports after having independently reviewed written proof that the Statis had intentionally misled KPMG with respect to various sham contracts fabricated by the Statis.

Conscious of the ramifications of KPMG’s decision, the Statis attempted to conceal this new evidence with the view to shield it from any substantive scrutiny from the courts. As a result of this systematic campaign of concealment, to date no court in Belgium or abroad has been able to substantively examine the KPMG Correspondence and its consequences for the invalidity of the Award.

By the recent judgment of 17 November 2020, the Belgian Appeal Court rejected the Statis’ request to close the proceedings. The Court ruled that the Republic of Kazakhstan is entitled to proceed with the full case on the fraud, and to develop all of the grounds available to contest the enforcement of the Award, including on the basis of the KPMG Correspondence. This judgment follows an earlier order from the same Appeal Court that had already held that the KPMG Correspondence contains new and relevant evidence that relate to the “quality of the title”, namely to the validity of the Award.

The Belgian Appeal Court has now fixed a procedural timetable allowing the Republic of Kazakhstan to file new evidence, without any restriction, with respect to the Statis’ fraud. The Court has also fixed three days of hearings to hear the case in its entirety.

It will be the first time that a Court will examine the full evidence available so far on the fraud since the English High Court had found in June 2017 that there was a prima facie case of fraud. Following this preliminary decision, the Statis had abandoned the English proceedings to avoid a full trial of the fraud. Finally, the Statis will face a day of reckoning in October 2021 when the Belgian Appeal Court will scrutinize the Statis’ fraudulent actions based on all the evidence available, including the KPMG Correspondence.

In December 2020 the Dutch Supreme Court is expected to render a preliminary decision on interim measures related to the attachment obtained by the Statis, on shares in KMG Kashagan B.V. that are owned by Samruk-Kazyna. This decision is preliminary in nature while the main issues are before a three-judge panel of the Amsterdam District Court.