SOURCE: King & Spalding

King & Spalding

January 08, 2014 13:00 ET

King & Spalding Wins $506 Million Arbitration Award Against Kazakhstan; Largest Award Ever Under the Energy Charter Treaty

STOCKHOLM, SWEDEN--(Marketwired - Jan 8, 2014) -  King & Spalding secured an arbitration award of $506 million, plus interest, against the Republic of Kazakhstan on behalf of Moldovan investors Anatolie and Gabriel Stati and their companies, Ascom SA and Terra Raf Trans Traiding Ltd. The award is the largest award under the Energy Charter Treaty and the third-largest treaty arbitration award in history.

The award was issued for violations of the investor protection provisions of the Energy Charter Treaty on December 19, 2013, after more than three years of arbitration proceedings. A tribunal constituted under the auspices of the Stockholm Chamber of Commerce found that Kazakhstan violated its international obligation to treat the claimants' investments fairly and equitably. It also vindicated the claimants and their general manager of any wrongdoing while operating in Kazakhstan, and it ordered Kazakhstan to pay for the value of the investments it seized, which were substantial. The tribunal consisted of chair Karl-Heinz Bockstiegel and arbitrators David Haigh and Sergey Lebedev.

The claims arose out of Kazakhstan's seizure of the claimants' petroleum operations in 2010. The claimants acquired two companies in 1999 that held idle licenses in the Borankol and Tolkyn fields in Kazakhstan. They invested hundreds of millions of dollars over the ensuing decade to turn the companies into successful exploration and production businesses. In late 2008, after the businesses had become profitable, more than half a dozen government agencies carried out a number of burdensome inspections and audits of the companies' businesses that resulted in false accusations of illegal conduct directed at the claimants and their Kazakh companies, including a criminal prosecution of their general manager on false pretenses. Kazakhstan's actions challenged the claimants' title to their investments, subjected them to millions of dollars in unwarranted tax assessments and criminal penalties and ultimately led to the seizure of their investments by Kazakh authorities in 2010.

The King & Spalding cross-office team handling the arbitration consisted of international arbitration partners Reggie Smith (Houston), Ken Fleuriet (Paris) and Kevin Mohr (Houston); counsel Ric Toher (Houston); senior lawyer Heloise Herve and senior associate Amy Frey (Paris); and associates Alexandra Rotar and Valeriya Subocheva (Moscow).

The $506 million award against Kazakhstan was rendered a mere eight days after another investment treaty tribunal awarded $245 million in damages and interest to other clients of King & Spalding in a high-profile arbitration against Romania. King & Spalding arbitration partners Reggie Smith (Houston) and Ken Fleuriet (Paris) also led that engagement, along with New York-based partner Eric Schwartz. The Romania award is among the ten largest treaty arbitration awards on record. 

Taken together, the clients in King & Spalding's cases against Kazakhstan and Romania were awarded over $750 million in damages and interest. 

About King & Spalding
Celebrating more than 125 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune Global 100, with 800 lawyers in 17 offices in the United States, Europe, the Middle East and Asia. The firm has handled matters in over 160 countries on six continents and is consistently recognized for the results it obtains, uncompromising commitment to quality and dedication to understanding the business and culture of its clients. More information is available at www.kslaw.com.

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