Luxembourg court refuses to confirm attachments obtained by the Statis until full investigation by criminal authorities
The Ministry of Justice of Kazakhstan secured an important victory in the court proceedings against Anatolie Stati, Gabriel Stati, Ascom S.A., and Terra Raf Trans Traiding Ltd. ("Stati Parties").
On 8 January 2021, the District Court of Luxembourg stayed the Statis’ request to validate the attachments obtained in 2017. The court followed Kazakhstan’s petition and decided to stay the proceedings until the full examination of the fraud has been carried out by the Luxembourg investigative authorities. Criminal investigations have been initiated and are currently ongoing in Luxembourg. After reviewing the evidence of the Statis’ fraud, including the various expert opinions submitted by Kazakhstan, the court found that “it cannot be excluded that the alleged fraud could have an influence on the damages that have been allocated for the LPG plant”. It has also decided that there is a sufficient nexus between Kazakhstan’s fraud case and the Stati Parties’ purported civil claims under the arbitral award against Kazakhstan to stay the civil proceedings until the criminal procedure has been finalised.
The court explicitly mentions the expert opinions of Patrik Schöldström, a judge at the Svea Court of Appeal, of Prof Christoph Schreuer, of Prof George Bermann, of PwC and of Stefan Cassella, a former US prosecutor. All experts reach the conclusions that the Statis engaged in systematic fraud in obtaining the Award and continue do to so by attempting to enforce it. In particular in relation to the courts of Sweden, on which the Statis rely forcefully, the Swedish judge and expert Schöldström reached the conclusion that “..there is credible evidence that the Stati Parties procured the Award by actions and omissions under Swedish law that amount to criminal fraud.”
It is reminded that in March 2020 The Ministry of Justice of Kazakhstan disclosed information that in May 2019 RoK filed a criminal complaint in Luxembourg, a key jurisdiction in which the Stati Parties have sought to enforce the arbitral award. This complaint centres upon several charges linked to the fraudulently inflated construction costs, and to the use of forged documentation. The criminal complaint argues that the Statis’ attempts to enforce the Award amounted to fraud due to the Statis having:
(i) engaged in forgery, attempted forgery and attempted use of forgery (in violation of Sections 196 and 197 of the Criminal Code of Luxembourg);
(ii) obtained or attempted to obtain a judgment by fraud (in violation of Section 496 of the Criminal Code of Luxembourg); and
(iii) engaged in money-laundering or attempted money-laundering (in violation of Section 506 of the Criminal Code of Luxembourg).
The Stati Parties are seeking to enforce the arbitral award in Luxembourg since 2017, where they initiated proceedings after abandoning their English proceedings in reaction to the English High Court finding prima facie that the award was obtained by fraud. In August 2017 Stati received a court order by which the arbitral award was declared enforceable in the Grand Duchy of Luxembourg. This order was confirmed by the decision of the Court of Appeal of Luxembourg dated 19 December 2019. Kazakhstan filed a recourseat the Luxembourg Court of Cassation whose decision is expected in February.
Regardless of the outcome in the Court of Cassation, the judgment of 8 January 2021, of the District Court of Luxembourg means that the Stati parties cannot enforce the award against any assets of RoK in Luxembourg until the final outcome of the criminal proceeding.