Kazakhstan sues Moldovan investor in US after losing appeals in Sweden

Kazakhstan sues Moldovan investor in US after losing appeals in Sweden
By Iulian Ernst in Bucharest October 30, 2017

Kazakhstan is trying to stop the sale of its assets already attached in West European countries by suing the owners of Moldovan company Ascom —which has so far been successful in its attempts to recover money invested in Kazakhstan before 2010 from the Kazakh state — in the US based on the controversial RICO law.

The Swedish Supreme Court issued on October 24 the final ruling in favour of Ascom in its $500mn dispute with the State of Kazakhstan, according to a press release from Ascom.

Ahead of the ruling, Kazakhstan’s justice ministry said it had filed a civil racketeering complaint in the US District Court in Washington, DC, against Moldovan businessman Anatol Stati, his son Gabriel Stati, and two of their companies – Ascom Group, S.A. and Terra Raf Trans Traiding Ltd.

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.

Kazakhstan had asked the Supreme Court to check alleged irregularities committed by Svea Court in Stockholm, which confirmed last December that Ascom is entitled to the $500mn award ruled by Stockholm Chamber of Commerce in 2013 in an Energy Charter Treaty (ECT) tribunal.

After the Swedish ruling was announced Astana reminded once again of the US case based on the Racketeer Influenced and Corrupt Organisations Act (RICO). 

“The lawsuit seeks to recover compensatory and punitive damages arising from a sophisticated and wide-ranging illegal pattern of racketeering undertaken by the Stati Parties through an enterprise of individuals and corporate entities. The lawsuit also seeks injunctive relief,” according to the Kazakh ministry of justice. RICO is a law passed in 1970 to prosecute those who instigated crimes, while not being directly involved in criminal activities. 

Stati is trying to recover the money he invested in two companies holding operating licenses for natural gas fields Borankol and Tolkyn in Kazakhstan, and in developing an LPG plant. 

The Moldovan businessman claimed his firms in Kazakhstan were nationalised with incomplete compensation and asked for supplementary compensation in 2010 under the Energy Charter Treaty (ECT), an organisation whose member Kazakhstan has been since 1998. The ECT’s Arbitral tribunal issued its final decision in 2013, ruling that Stati was entitled to $500mn worth of compensation.

However, Kazakhstan has constantly rejected the accusations and refused to pay supplementary compensation.

The Kazakh justice ministry alleges that the Stati parties fraudulently inflated the construction costs of a liquefied petroleum gas (LPG) plant in Kazakhstan through a series of undisclosed related party transactions, and prepared falsified financial statements. The Stati parties then used these falsified costs and financial statements to fraudulently obtain a bid for the LPG plant from the Kazakh state oil and gas company, the Kazakh statement said. 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 alleged fraudulent scheme affected the arbitral tribunal’s determinations on jurisdiction, liability and damages, according to the justice ministry’s statement.