STATI AND OTHERS V THE REPUBLIC OF KAZAKHSTAN

[2017] EWHC 1348 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Knowles, 6 June 2017

Arbitration - Enforcement of awards - Public policy - Allegation of fraud in the arbitration - Effect of ruling of curial court upholding award - Effect of dismissal of defence by another enforcing court - Issue estoppel - Arbitration Act 1996, section 103(3)

The claimants controlled TNG, which operated a joint venture with the State of Kazakhstan in respect of the exploration and extraction of hydrocarbons. Disputes arose between the parties, and they were referred to an arbitral tribunal. The seat of the arbitration was Sweden. One issue in the arbitration was the value of the plant. The claimants gave evidence that they had invested more than US$245 million in the plant. The tribunal rejected that evidence but found that the plant was worth US$199 million based on an indicative bid from a third party, KMG. The award made on 19 December 2013 was in total in excess of US$500 million. The claimants obtained permission to enforce the award in England in February 2014, and also sought enforcement in the US in September 2014. By an order of the US court the State obtained documents purporting to show that a company connected to the claimants, Perkwood Investment Ltd, had sold equipment to TNG for US$93 million when its true value was US$31 million, and that in 2008 Perkwood was paid a further US$31 million for the same equipment as well as a management fee of US$44 million. Thus Perkwood had received US$168 million for equipment worth US$31 million. The material relating to Perkwood had not been disclosed in the arbitration despite a disclosure order, and it had not been revealed that Perkwood had connections with the claimants. The State sought to set aside the permission to enforce the award, alleging that enforcement would be contrary to public policy under section 103(3) of the Arbitration Act 1996 by reason of fraud in the arbitration. On 11 May 2016 the US court refused an application by the State to amend its application by adding fraud. On 9 December 2016 the Swedish court dismissed the State's application to set aside the award.