Anatolie Stati v The Republic of Kazakhstan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Robin Knowles |
| Judgment Date | 11 May 2018 |
| Neutral Citation | [2018] EWHC 1130 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2014-000070 |
| Date | 11 May 2018 |
Neutral Citation Number: [2018] EWHC 1130 (Comm)
IN THE HIGH COURT OF JUSTICE
THE BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Robin Knowles CBE
Case No: CL-2014-000070
Thomas K Sprange QC and Kabir Bhalla (of King & Spalding International LLP) for the Claimants
Ali Malek QC, Christopher Harris, Paul Choon Kiat WeeandDominic Kennelly (instructed by Herbert Smith Freehills LLP) for the Defendant
Hearing dates: 26 March 2018
Judgment Approved
Introduction
In this judgment I will refer to Mr Anatolie Stati, Mr Gabriel Stati, Ascom Group SA and Terra Raf Trans Traiding Ltd as “the Statis” and to the Republic of Kazakhstan as “the State”.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”) was adopted by the United Nations Conference on International Commercial Arbitration on 10 June 1958. In England and Wales sections 100 to 103 of the Arbitration Act 1996 (“the 1996 Act”) concern recognition and enforcement in this jurisdiction of arbitration awards made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention.
Sweden is a party to the New York Convention. An arbitration award dated 19 December 2013 (“the Award”) was made in favour of the Statis and against the State in an international investment arbitration seated in Sweden. The amount of the Award is of the order of US$500 million.
By arbitration claim form dated 24 February 2014 the Statis invoked the jurisdiction of the Courts of England and Wales under section 101 of the 1996 Act. They applied for permission under section 101(2) to enforce the Award against the State in the same manner as a judgment or order to the same effect. Under section 101(3) they asked for permission to enter judgment in England and Wales in the terms of the Award.
Adopting the standard procedure for this type of application, the Statis made the application without notice to the State. On 28 February 2014 the Statis were granted permission to enforce the Award by order of Burton J.
Again adopting the standard procedure, Burton J ordered that the State might apply within 21 days of service to set aside his order and that the Award was not to be enforced until the end of that period or until an application made by the State within that period had been finally disposed of.
Exercising its entitlement, the State applied to set the order aside. In amended form the application by the State to set aside the order of Burton J alleged that the Award had been obtained by fraud. I directed on 27 June 2017 that the State's claim that (in summary) the Award was obtained by fraud should proceed to trial as if commenced under Part 7 of the Civil Procedure Rules (the “CPR”).
I did so for reasons given in a judgment dated 6 June 2017 [2017] EWHC (Comm) 1348; [2017] 2 Lloyd's Rep 201, after two days of argument. I had found that there was prima facie evidence of fraud (as there described), and of fraud (again as there described) by the Statis on the arbitral tribunal, and that there was the necessary strength of prima facie case that the alleged fraud would have made a difference to the tribunal. I was also satisfied that the State did not have access before the Award to the evidence of the alleged fraud on which it now sought to rely, and that the evidence of the alleged fraud could not with reasonable diligence have been discovered before the Award. I held that the interests of justice required the examination that a trial will allow.
In circumstances that I will examine in this judgment, the Statis no longer wish to proceed to a final determination. They have used the procedure under the CPR for discontinuing a claim, serving a notice of discontinuance.
The State on the other hand wishes to proceed to a final determination on the merits. The State contends that matters have reached the stage where it has its own claim for declarations. Alternatively the State contends that the Court's power to set aside the notice of discontinuance should be used so that the question of enforceability in this jurisdiction is heard and decided on the Statis' claim for permission to enforce the Award and to enter judgment.
Proceedings to challenge the Award in Sweden, the court of the seat, have recently been concluded at the highest level in favour of the Statis. Assets of the State have been attached in Sweden to the value of around US$100 million in total.
There are now enforcement proceedings in various parts of the world. I understand them all to be contested. It is said that US$28 billion of assets are currently subject to attachments.
The dispute between the parties has been hard fought at every stage, and the current proceedings are no exception. While the State accuses the Statis of fraud in obtaining the Award, the Statis say they are victims of a longstanding unlawful campaign by the State.
The proceedings in this jurisdiction
For the English Court to permit a party to pursue, to a trial of the issues, an allegation that a New York Convention award was obtained by fraud, normally two conditions will require to be fulfilled: Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd [2000] QB 288 (CA) at 309F per Waller LJ (dissenting in the result).
The first condition is “that the evidence to establish the fraud was not available to the party alleging the fraud at the time of the hearing before the arbitrators”: Westacre, above, at 309F, but noting the qualification at G-H. The second condition is that “there is a prima facie case of fraud which is sufficient to overcome the extreme caution of the Court when invited to set aside an award on the grounds of public policy”: IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2015] EWCA Civ 1144; [2016] 1 Lloyd's Rep 5 at [191] per Christopher Clarke LJ.
I concluded on 6 June 2017 that these conditions were met. I also had to reach conclusions on what had and had not been decided by Courts of the United States and of Sweden. As regards the Swedish Court, as the court of the seat of the arbitration, in my judgment of 6 June 2017 I explained what I understood had and had not been addressed and decided by the Swedish Court and why, as I respectfully saw the position, the State's fraud claim (as described and examined in my judgment) had not been concluded by what had been decided by the Swedish Court. That remains the case notwithstanding that matters have since been considered at a higher level in Sweden.
Pursuant to directions for trial in the order dated 27 June 2017, the State and the Statis exchanged statements of case. The trial was fixed to commence on 31 October 2018 (and that time remains held in the Court's diary). Disclosure of documents was due to take place on 22 February 2018 but on that day the Statis sought an extension of time to 1 March 2018 for disclosure of documents. The State agreed the extension.
The notice of discontinuance and the reasons for it
The Statis never gave disclosure of documents because the next thing, without warning and unaccompanied by any explanation, was the notice of discontinuance from the Statis.
This is an extraordinary development. The Statis have not conceded that the State was correct about the Award. Indeed the Statis wish to continue enforcement efforts in other countries. And in their written argument for this hearing they say they “would relish the opportunity to proceed to trial with respect to the fraud allegations”, and that apart from two reasons given they have an “otherwise strong desire to proceed to trial and defeat the fraud claims”.
The Statis volunteer two reasons or explanations. The first is that they do not have the resources to continue to a trial here. The second is that they have secured attachment orders in other countries sufficient for there to be no longer a practical need to pursue enforcement here.
The State, by Mr Ali Malek QC, says that the first explanation is false and the second is not the real reason. The real reason, says the State, is that the Statis have no answer to the question that was directed to be tried here.
The explanations offered by the Statis are not explanations that I accept on the material available.
As to the first, the Statis say that litigation funders have “carved out” the English proceedings from funding arrangements, and that the Statis do not have the resources themselves. Yet I find no documents to support this, and no details of their own resources, or of the exchanges with third party funders. The explanation moreover does not sit credibly with the timing of the service of the notice of discontinuance, which was after rather than before time and money would have been spent preparing to give disclosure of documents.
Similarly the suggestion that the notice of discontinuance was given because the Statis have secured attachment orders in other countries sufficient for there to be no longer a practical need to pursue enforcement here does not sit credibly with the timing of those attachments. The notice of discontinuance did not come just as attachments were achieved overseas; it came just as disclosure of documents was about to take place here. The Statis had not said to the State or to this Court that they might wish to discontinue if they achieved attachments elsewhere. Indeed, in an action consistent with an intention to continue despite the attachments elsewhere, just before the notice of discontinuance the Statis requested a short...
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