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Commercial Court orders a trial to determine whether USD 500m+ arbitral award was procured by fraud

On 6 June 2017, judgment was handed down in Stati v. The Republic of Kazakhstan [2017] EWHC 1348 (Comm)Ali Malek QC, Christopher Harris, and Paul Choon Kiat Wee, instructed by Herbert Smith Freehills (Patricia Nacimiento and Philip Carrington), acted for the Republic of Kazakhstan. 

These proceedings concern the USD 500m arbitral award dated 12 December 2013 in Anatolie Stati, Gabriel Stati, Ascom Group SA and Terra Raf Trans Traiding Ltd v. The Republic of Kazakhstan, SCC Case No.V (116/2010). The arbitral proceedings were seated in Sweden, governed by the SCC (Stockholm Chamber of Commerce) Rules of Arbitration, and instituted pursuant to the Energy Charter Treaty.  The award has resulted in set-aside proceedings in Sweden, together with enforcement proceedings in the United States and in England and Wales.  In the course of these proceedings, new evidence has come to light which Kazakhstan contends shows that the award was procured by fraud. 

Kazakhstan’s attempt to have the award set aside in Sweden (including on the basis that, in the light of the new evidence, it was procured by fraud) was unsuccessful, with the Svea Court of Appeal dismissing Kazakhstan’s claim on 9 December 2016. 

The Commercial Court (Knowles J) has now held that the decision of the Swedish court does not create an issue estoppel, that Kazakhstan is entitled to rely on the new evidence discovered since the award, and that Kazakhstan has established a prima facie case that the award was obtained by fraud.  The issue of whether the award was procured by fraud, and whether it should therefore be refused recognition and enforcement pursuant to s.103(3) of the Arbitration Act 1996 on the basis of English public policy, will now proceed to a full trial in the Commercial Court. 

This is an important decision that illustrates the complexities of multi-jurisdictional award-related proceedings, including limitations on the cross-jurisdictional impact of decisions of national courts, and differing approaches taken by national courts to concepts including public policy and fraud.

3 Verulam Buildings has considerable expertise in arbitration and arbitration-related court proceedings.  In particular, Members of Chambers have appeared in many of the leading cases in relation to the enforcement of arbitration awards:  Yukos v. Dardana (Ali Malek QC), AIG v. Kazakhstan (Ali Malek QC, Richard Salter QC, David Quest QC), ISTIL v. Kazakhstan (Ali Malek QC, Matthew Parker), Heinz v. EFL (Ewan McQuater QC, Jonathan Nash QC, John Odgers QC, William Edwards), Yukos v. Rosneft (Jonathan Nash QC), Malicorp v. Egypt (Ali Malek QC, Richard Brent QC), Gold Reserve v. Venezuela (Christopher Harris), Ruby Roz Agricol v. Kazakhstan (James Evans), IPCO v. NNPC (Jonathan Nash QC), Yukos v. The Russian Federation (Christopher Harris, Paul Choon Kiat Wee).

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