Dutch Supreme Court refers US$5.2 billion asset freeze to lower court for re-examination in “Tristangate” dispute

18 December 2020 – The Dutch Supreme Court today set aside the Amsterdam Court of Appeal’s decision related to an attachment of Kazakhstan’s stake in the international consortium developing the Kashagan oil field. This attachment, valued at US$5.2 billion, remains fully in place as security for the award of more than US$540 million, payable to the owners and bondholders of Tristan Oil. The stake in question represents shares in Dutch entity KMG Kashagan B.V. and is held by Kazakhstan via its sovereign wealth fund JSC Samruk-Kazyna.

The Supreme Court ruled that the appellate court’s assessment of immunity was based on an incorrect standard. The Supreme Court has therefore set aside the lower court’s judgment and referred the case back to the Hague Court of Appeal for further consideration.

In July 2010, the Government of Kazakhstan nationalised assets associated with Tristan Oil, a company which had been set up primarily to fund oil and gas projects in Kazakhstan.  In December 2013, an arbitration tribunal in Sweden found that the nationalisation took place in violation of international law and that the investors had suffered significant monetary losses following a “a string of measures of coordinated harassment by various institutions of Kazakhstan”.

The arbitration tribunal awarded approximately US$500 million to the owners of Tristan Oil under the auspices of the Energy Charter Treaty (ECT), which is designed to protect foreign investors in energy sectors of signatory countries including Kazakhstan. To date, no payments have been made to discharge the award and more than US$540 million is now due. In 2017, the Supreme Court of Sweden upheld the award, making it final and non-appealable. The award has also been recognised in number of jurisdictions, including the U.S., Luxembourg, Belgium, Sweden, Italy, France, and the Netherlands. Under a sharing arrangement with the owners of Tristan Oil, US and international bondholders are due to receive approximately 70% of the award.

Since 2013, Kazakhstan has refused to pay the award in what has become known as the “Tristangate” dispute. This has led to the freezing of sovereign Kazakhstani assets worth a total of US$6.27 billion worldwide including the aforementioned US$5.2 billion Kashagan shares attachment.

A spokesperson for Argentem Creek Partners, the largest bondholder of Tristan Oil, said that: “Today’s decision does not alter the fact that Kazakhstan is obliged to pay the award. The Kashagan attachment also remains in place. The Swedish Supreme Court’s decision upholding the award is final and non-appealable. By continuing to invoke spurious reasons for not paying, the Kazakh authorities are fighting a battle they lost years ago.  We expect the Kazakh authorities to pay the award as soon as possible and stop the diversionary litigation that damages the image of Kazakhstan as an investment destination and in the process antagonizes foreign investors. As foreign investors, we call on the leadership of Kazakhstan to intervene and resolve this dispute. We stand ready to work with them to do so.”

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