The Ministry of Justice of Kazakhstan and Samruk Kazyna JSC have succeeded in the court proceedings against Anatolie Stati, Gabriel Stati, Ascom S.A., and Terra Raf Trans Traiding Ltd. ("Stati Parties") before the Supreme Court of the Netherlands.
On 18 December 2020, the Dutch Supreme Court nullified the judgment of the Amsterdam Court of Appeal of 7 May 2019 in the summary proceedings regarding the conservatory attachment of Samruk-Kazyna JSC's shares in KMG Kashagan B.V. in the dispute between the Stati Parties and the Republic of Kazakhstan.
The Dutch Supreme Court based its decision on Article 19(c) of the United Nations Convention on Jurisdictional Immunities of States and Their Property, finding that the provision reflects customary international law. Thus, the Supreme Court has referred the case to the Court of Appeal of the Hague. As a result, the validity of the attachment on Samruk-Kazyna JSC's shares in KMG Kashagan B.V. will be reassessed by the Court of Appeal of The Hague. The Republic of Kazakhstan is confident that the Court of Appeal of The Hague will consider the attachment to be unlawful and will consequently lift the attachment.
The Republic of Kazakhstan is determined to protect its investment climate and its many legitimate investors. It is also determined to fight fraud, money laundering and corruption. This is why the Republic is not shying away from its responsibility under the principle of rule of law to expose, assess and take legal action in the face of a systematic abuse of its investment system by the Stati Parties hiding behind the shield of investment protection.
In the last years, evidence of the Stati Parties’ true actions and intentions in Kazakhstan gradually came to light and was assessed by a number of reputable and independent experts. The experts exposed a systematic violation of law by the Statis, whereby they created the appearance of being legitimate investors but in reality used the Kazakh system to create fraudulent operations through the use of sham companies. One of the worldwide leading accounting firms Pricewaterhouse Coopers (“Pwc”) concluded that the Stati Parties had diverted more than half a billion of US dollars from Kazakhstan to offshore accounts and into their own pockets. The Stati Parties thereby systematically and fraudulently emptied their Kazakh operative companies for their own benefit. At the same time they presented them as profitable to the outside world, including through false representations to their own auditors KPMG thereby obtaining falsified financial statements. The Stati Parties used these false financials in their activities, including when raising funds from investors. They used the fraudulently falsified financials also to obtain a USD 497 million award (the "Award") on the basis of fraudulent representations regarding Kazakhstan’s liability and the actual amounts that they had invested in Kazakhstan.
The evidence of the fraud and money laundering started to come out only after the Award was issued. In April 2019, the Stati Parties’ former CFO, Artur Lungu, admitted in a US deposition under oath that Stati made material misrepresentations to the Stati Parties’ auditors KPMG. As a consequence, on 21 August 2019 KPMG withdrew all audits on the Stati Parties’ financial statements relating to their alleged investment in Kazakhstan. This withdrawal affects, in total, eighteen audit opinions covering three years of financial statements prepared by KPMG. KPMG took this exceptional step after having independently reviewed written evidence that the Stati Parties had intentionally misled KPMG with respect to the costs of their investments in Kazakhstan.
Independent and worldwide leading experts, including Deloitte, PwC, Professor George Bermann, and Prof Christoph Schreuer have assessed the situation and come to the conclusion that the Stati Parties had been engaged in systematic fraud and that the Award was obtained by fraud. Mr Stefan Casella, until recently Deputy Chief of the U.S. Justice Department’s Asset Forfeiture and Money Laundering Section and one of the leading experts on money laundering concluded that the Statis “could be prosecuted criminally for money laundering offenses” at least in two jurisdictions, the U.S. and Latvia. Criminal investigation of the Stati Parties’ fraud and money laundering schemes is ongoing in Luxembourg.
The Stati Parties continued their deceptive actions before the courts in an attempt to enforce an Award they know they obtained by fraud after already having profited for years from their fraudulent activities in Kazakhstan shielding behind the appearance of a legitimate investor. The Stati Parties and their lawyers engaged in an enforcement campaign where they systematically make misrepresentations and false statements to courts with the purpose to avoid that the courts become fully aware of the new evidence of fraud and money laundering. None of this was available to the tribunal issuing the Award but that would have massively impacted its decision. Prof Christoph Schreuer, one of the world’s most reputable experts in investment protection, confirms: "The evidence that has now become available, including the KPMG Correspondence and the false Financial Statements, clearly demonstrates the Stati Parties’ illicit conduct and bad faith. The availability of this evidence to the Arbitral Tribunal would have been critical for the determination of its jurisdiction, the admissibility of the Stati Parties’ claims and the liability of Kazakhstan." PwC, in turn, provides that the falsified financial statements “have been relied upon by the Stati Parties in the ECT Arbitration, their witnesses, their experts, and their counsel, as well as the Arbitral Tribunal, and they continue to be part of the court records in the court proceedings following the Award.”
The new evidence was not known to the Swedish Court of Appeal when it decided not to set aside the Award and the Stati Parties have since then prevented the Swedish courts to assess the situation on the basis of a truthful and complete record. As Patrik Schöldström, now a judge at the Svea Court states: "As I have established above, I believe that there exists credible evidence that the Stati Parties in the ECT Arbitration intentionally misled the Tribunal concerning the value of the LPG Plant. The consequence must, in my opinion, be that they also intentionally submitted incorrect information or withheld relevant information on this issue during the Swedish Annulment Proceedings. Such action and omission could qualify as “regular” criminal fraud under Swedish law."
In 2017 the High Court of Justice in London held that there was a sufficient prima facie case that the Stati Parties had obtained the ECT Award by fraud. The Stati Parties reacted by abandoning these proceedings with the financial assistance of Dan Chapman. They instead initiated proceedings in other courts where they expected a lesser level of scrutiny. In each court, the Stati Parties and their lawyers falsely pretended that other courts had assessed the facts even though both the Stati Parties and their lawyers are fully aware that none of the courts decided on the basis of a truthful and complete record. Proceedings are ongoing in a number of jurisdictions. On 17 November 2020, the Court of Appeal of Brussels in Belgium granted permission to the Republic of Kazakhstan to advance in full the case relating to the fraud committed by the Stati Parties. The Dutch Supreme Court is currently hearing a Supreme Court appeal in relation to the fraud.
The facts underlying the Republic’s case of the Stati Parties’ money laundering has been presented to the Gibraltar Supreme Court by the bankruptcy manager of Tolkynneftegaz LLP and the court has preliminary concluded that there is "a serious issue to be tried" with “real prospects of success.”
It might be because of the irrefutable proof of the Stati Parties’ crimes that the Statis themselves are no longer actively participating in attempts to enforce the fraudulent ECT Award. It has been established now that a group of hedge funds that specialise in distressed assets and hopeless bonds led by Mr Dan Chapman (“Chapman Parties”) have bought bonds of the Stati’s company Tristan Oil Ltd and through an agreement entered with the Stati Parties procured a large interest in the ECT Award at heavy discounts. Now the Chapman Parties pretend to portray themselves as acting “on behalf of American and other international investors” who somehow invested into Kazakhstan. However, the Chapman Parties do not disclose that all reputable investment banks who used to have dealings with the Stati Parties have ended their relationship with the Stati and Chapman Parties after the English court decision in June 2017, which held that “there is a sufficient prima facie case that the Award was obtained by fraud”.
The Chapman Parties are now the actual force and funders of the campaign of enforcement of the fraudulent award, the shares in which they bought “for pennies”, against Kazakhstan in a number of jurisdictions. In the United Kingdom, the Chapman Parties decided not to continue the proceedings against Kazakhstan and caused the discontinuance of the fraud trial with an objective of avoiding a final decision to the detriment of the validity of the ECT Award. It is the Republic of Kazakhstan’s case that in doing so, the Chapman Parties are assisting in defrauding the various courts and Kazakhstan, which is why the Ministry of Justice has initiated court proceedings against Mr Dan Chapman and his companies in the United States.
The Republic of Kazakhstan is confident that justice will ultimately prevail in all proceedings pending in the courts of the Netherlands and elsewhere, and shall continue to vigorously defend its legal interests in all jurisdictions in which the Stati Parties or the Chapman Parties seek to recognize and enforce the fraudulent ECT Award.