Republic of Kazakhstan defeats Statis again – Dutch Court denies recognition and enforcement of USD 530 million arbitral award finding it was based on fraud, DKNews.kz reports.
The Republic of Kazakhstan respectfully welcomes today's decision of the Amsterdam District Court denying the request by Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding LTD. The "Statis" for exequatur of an arbitral award that was procured by procedural fraud committed by the Statis, constituting a violation of Dutch public policy.
On 24 December 2021, the Supreme Court quashed an earlier decision of the Amsterdam Court of Appeal granting exequatur and referred the matter to the Amsterdam District Court. After an interim judgment from the Amsterdam District Court on 3 May 2022, the Republic was given the opportunity to further substantiate its claim that the arbitral award had been procured by procedural fraud based on new evidence.
The Republic was able to uncover the fraud by the Statis, inter alia by submitting correspondence between the Statis and their auditor KPMG that shows that the financial statements the Statis had relied on during the arbitration were materially misstated and that KPMG subsequently effectively withdrew the audit of those statements. Moreover, the Republic was able to uncover large unlawful extractions of funds by the Statis after obtaining and analysing the bank statements of multiple entities covertly controlled by the Statis. After being presented with the full scope of the fraud, the Amsterdam District Court today ruled that the Statis indeed procured the arbitral award by procedural fraud and denied the request for exequatur on that basis.
The Amsterdam District Court came to its well-reasoned judgment on the basis of an independent assessment of the new evidence.
As reported previously, the Dutch court is not the first court to side with the Republic and find for the Statis' fraud. On 16 November 2021 the Brussels Court of Appeal rejected recognition and enforcement of the arbitral award in Belgium. In its judgement on 16 November 2021 the Brussels Court of Appeal ruled that the Statis committed fraud before, during and after the arbitration. On 2 December 2021 the Luxembourg Court of Appeal stayed the exequatur proceedings until completion of the criminal investigation of the Statis' conduct. In September and December last year Messrs. Anatolie Stati and Gabriel Stati were indicted by the Luxembourg criminal judge on account of suspected fraud, forgery and money laundering. On 6 June 2017 the High Court of Justice of England and Wales found sufficient prima facie evidence that the arbitral award was obtained by fraud by the Statis.
The Netherlands is now the fourth jurisdiction, where the court of first instance refused to recognize and enforce the Stockholm arbitration award. The judgment of Amsterdam District Court further strengthens the Republic's long-held conviction that the Statis' fraud infringed the Republic's right to a fair and equitable arbitration.
Kazakhstan’s Minister of Justice Azamat Yeskaraev commented as follows:
"Again, a ground-breaking victory has been achieved by the Republic of Kazakhstan in its long-running efforts to bring to justice in proceedings against the Moldovan oligarchs Anatolie Stati and Gabriel Stati. It is the second time that a court has considered the Republic’s full fraud case and has confirmed that the Statis committed fraud on our nation, their auditors (KPMG), the arbitral tribunal and the Swedish annulment courts."
Specific findings of the Amsterdam District Court
The Amsterdam District Court confirmed that Stati et al. committed material (accounting) fraud in Kazakhstan by concluding that:
"Stati et al. committed material fraud by (1) withdrawing large sums from KPM and TNG when selling crude oil and using those sums for unusual and personal expenses through Stati et al.'s controlled company Hayden, (2) extracting tens of millions of dollars from TNG in the construction of the LPG plant by means of improper transactions with the secretly controlled entity Perkwood, and (3) disguising his extractions in his annual accounts as 'assets' and 'costs', as a result of which the annual accounts contained material misstatements."
The Amsterdam District Court also concluded that the material fraud committed by Stati et al. in Kazakhstan was not part of the debate during the Arbitration.
It was established that the Statis have submitted false and incomplete information in the arbitration, knowingly made misleading statements, and concealed relevant facts. The Amsterdam District Court therefore concluded that:
"The Statis request for recognition of the arbitral award is refused on the ground that the Statis committed procedural fraud in the arbitration, which constitutes a violation of Dutch public policy."
The enforcement of the Award was denied with costs to be paid by the Statis to the Republic.
Conclusion
The well-reasoned decision of the Amsterdam District Court based on substantial new evidence confirms that the Statis obtained the arbitral award by means of procedural fraud and that their actions in Kazakhstan amount to a serious accounting fraud. The Republic of Kazakhstan feels strengthened in continuing its long-held efforts to resist the Statis' attempts to enforce the fraudulently obtained arbitral award in other jurisdictions. This recent decision by the Amsterdam District Court provides solid ground for the Republic's perseverance in the protection of its right to fair and equitable arbitration in other jurisdictions.
