Yermek Alimov v Abdumalik Mirakhmedov

Hearing dates: 15 and 16 October 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 20 December 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Simon Birt KC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT

Simon Birt KC:

Introduction

The dispute between the parties in this litigation relates to a bitcoin mining business which is operated in Kazakhstan. These applications constitute the jurisdiction battle between the parties. In short, the Claimant contends the dispute should be heard in England; the Defendants contend it should be heard in Kazakhstan.

Factual background to the dispute

The Claimant, Mr Alimov, and the three individual Defendants are all businessmen with substantial links to Kazakhstan.

The Claimant contends that (until he moved to England, which he says was in August 2018) he was a leading specialist in the energy sector in Kazakhstan, and the former head of (a) AstanaEnergoServis JSC (the public holding company which owned all the power companies in Astana), and (b) Karaganda EnergoTsentr LLP (a private energy company which owned the Karagandinskaya TETs 3 power station and provided energy to the city of Karaganda).

The three individual defendants are also businessmen of Kazakhstani origin (albeit the First Defendant (“D1”) was born in Uzbekistan), although they do not currently live there. The Second Defendant (“D2”) was resident in Kazakhstan until 2020 and now lives in the UAE (though still also retains a residence in Kazakhstan). The Third Defendant (“D3”) has been resident in the UAE since 2012, but until 2020 spent most of his time in Kazakhstan (where his family and business activities were based) and still manages the office of D1-D3 in Kazakhstan. D1 lives in the UAE and/or the UK (this is a contentious issue which I deal with below). All three continue to have substantial business interests in Kazakhstan.

The Fourth Defendant (“D4”) is a company incorporated in Cyprus which the Claimant describes as “ one of the world's largest bitcoin-mining companies and operates (through its subsidiaries) from facilities in Kazakhstan and elsewhere.” At one time, between them, the 3 individual defendants owned 50% of the shares in D4.

The factual background is highly contentious between the parties, with numerous issues of fact between them, and allegations on both sides that the other is not giving an accurate or truthful account. There are also allegations of attempts to distort or manufacture the evidential picture. There is little that is common ground between the parties.

I summarise below the Claimant's case on the background and the facts, taken from his Particulars of Claim and evidence filed for these applications, but noting that much of it is controversial between the parties, and also that the Defendants emphasised that parts of this case were different from the case presented on the Claimant's behalf in his detailed letter before action.

In summary, the Claimant says that:

i) In around April 2017, there was an agreement between a cryptocurrency and cloud mining company called Genesis Mining Limited (“GM”) and D1-D3 by way of a joint venture to develop bitcoin mining in Kazakhstan, with the aim of GM owning 50% and D1-D3 owning 50% of the ultimate business (the Claimant referred to this as the “GM JV”). D1-D3 were to find a cheap source of energy, find and acquire land and buildings near the energy source, and prepare that land and buildings for bitcoin mining on a turn-key basis (specifically, arranging for full repair and completion of all necessary infrastructure including an internet connection). GM was to install bitcoin mining machines, cooling machines, internal power transformers and other necessary technological equipment for bitcoin mining, and incorporate the new bitcoin mining factories in Kazakhstan into its existing bitcoin mining infrastructure in Europe.

ii) In seeking to find a cheap source of energy, in around May 2017 D2 and D3 contacted the Claimant. This contact was made on the recommendation of Mr Kairat Satybaldy, who the Claimant described as one of the most influential businessmen in Kazakhstan at the time, who had substantial influence over the then Kazakh government and who could provide “ krysha” (protection). The Claimant said that both he and D2 had long-standing connections with Mr Satybaldy.

iii) In May 2017, there were a series of meetings in Kazakhstan, largely it appears at the Radisson hotel in Astana, between the Claimant and D1-D3 at which D1-D3 explained what they wanted and the Claimant said he would help them. The Claimant said he owned some assets which might be suitable, namely (a) the Stal electrical sub-station 110/10 (“Stal”) in the city of Karaganda, and (b) a factory near Stal (the “Vtorprom Factory”) and a group of surrounding buildings (the “ABK Buildings”) together with further land. He said these assets were owned by a Kazakh limited liability partnership called KKS Karagandy LLP (“KKS Karagandy”) which in turn was owned by a BVI company called KPC System Solutions Limited.

iv) On 10 June 2017, the Claimant met D1 in London, and (the Claimant alleges) reached the oral agreement on which his claim is (largely) based. The circumstances of the meeting are heavily disputed. I will deal with it in greater detail later in this judgment. Suffice to say for now that the meeting took place at a house at 27 Ingram Avenue, London (a house at which the Claimant contends D1 was residing with his family) on an occasion at which the Claimant and his family had been invited to share an Iftar meal with D1 and his family ( Iftar is the meal eaten after sunset, during the religious festival of Ramadan to break the fast that is kept during the hours of sunlight). The Claimant contends that he and D1 reached an agreement (which he pleads as the “London Agreement”) in the following detailed terms (which I take from paragraphs 27–28 of the Particulars of Claim, in which he used the abbreviation “MMK” to refer collectively to D1-D3):

“27. At the Ingram Avenue Meeting, Mr Alimov [the Claimant] and Mr Mirakhmedov [D1] (acting on behalf of MMK) reached the following agreement orally (the “London Agreement”):

(a) Mr Alimov would ensure that:

(i) MMK obtained a source of energy of up to 100 Megawatts for the GM JV; and

(ii) the electricity would be generated from that power station at a price of not more than US$0.04 per kWh.

(b) Mr Alimov would ensure that MMK obtained the energy source (as pleaded in sub-paragraph (a)(i) above) by:

(i) finding suitable power stations in Kazakhstan for MMK to purchase, of which there were three available options at the time (the Ridderskaya, KarGRES 1 and Sogrinskaya power stations), arranging for expert assessments of their suitability, and introducing MMK to their owners to negotiate their purchase; or

(ii) alternatively, if those negotiations to purchase those power stations failed, MMK would notify Mr Alimov of the same and, at that point, Mr Alimov would be obliged to, and would, procure that KKS Karagandy make available Stal, and such of the Vtorprom Factory, the ABK Buildings and adjacent land as might be required, for use by the GM JV and, in due course, transfer those assets to the corporate vehicle which would be used for the operation of the GM JV and the ownership of its assets. (In so doing Mr Alimov would also procure that KKS Karagandy cancel the sale to Hua Tun of Stal and any other relevant buildings.)

(c) Mr Alimov would ensure that MMK obtained electricity at a cheap rate of US$0.04 per kWh or less (as pleaded in sub-paragraph (a)(ii) above) by:

(i) arranging for the necessary technical works so that any power station which MMK obtained would be connected directly to the energy source provider, thereby avoiding the three other levels of energy power supply in Kazakhstan and avoiding the increased price associated with supply through each level (as set out in paragraph 24(a) above).

(ii) alternatively, if he was obliged to procure the transfer of Stal for use in the GM JV (as set out in sub-paragraph (b)(ii) above), Stal was already connected directly to the energy source provider and so obtained electricity at a cheap rate (as set out in paragraph 24(a) above).

(d) In consideration for Mr Alimov's said obligations in sub-paragraphs (a)-(c) above, MMK would give to Mr Alimov and/or procure that he received:

(i) 35% of the shares received by MMK collectively in the corporate vehicle which was to be established pursuant to the GM JV ultimately (directly or indirectly) to operate the GM JV and own its assets, and thus be the way in which MMK and GM were directly to participate in and receive the full economic benefit of the GM JV (including by receipt of dividends and/or profit from the GM JV and bitcoin mined by the GM JV). Mr Alimov would become entitled to those shares upon (or within a reasonable time of) the establishment of such corporate vehicle, and in any event no later than the...