Kazakh Row Over $530M BNY Funds Faces Virtual Trial

By Paige Long
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Law360, London (March 19, 2020, 8:03 PM GMT) -- A London judge urged lawyers representing Kazakhstan, BNY Mellon and two Moldovan investors on Thursday to work on a contingency plan for a virtual trial over $530 million held by the bank in the event that court access is restricted due to the coronavirus pandemic.

A trial was scheduled to begin at the High Court on Monday over the ownership of funds currently held by BNY Mellon under a freezing order obtained by oil and gas investor Anatolie Stati, his son Gabriel and two of their companies. The Republic of Kazakhstan is seeking a court declaration that the funds are actually owned by its central bank and so should not be released to the Statis.

Judge Nigel Teare said Thursday the parties' lawyers must work together to ensure that the trial still goes ahead with a two-day adjournment until Wednesday. He ordered them to come up with a workable plan for the use of technology such as video conferencing software if either a few participants are unable to come to court or — in the event the building is closed as part of the government's efforts to slow down the spread of COVID-19 — the entire trial needs to be carried out virtually.

"The court has to be optimistic rather than hesitant. It is a duty of all the parties to seek to cooperate, to ensure that a remote hearing is possible," the judge said.

He also referenced the latest guidance from the lord chief justice of England and Wales, which urged judges to step up the use of technology instead of defaulting to postponing proceedings.

"The courts exist to resolve disputes and as I have noted, the guidance given by the lord chief justice is very clear. The default position now in all jurisdictions is that hearings must be conducted with one, more than one, or all parties attending remotely," the judge said.

The seven-day trial will involve live testimony from expert witnesses in Kazakhstan, Belgium and the U.S., who all face travel restrictions, the court was told.

The proceedings are part of a long-running wider dispute about the enforcement of a $506.7 million arbitration award made by a Swedish tribunal to the Statis and their companies in December 2013. The Statis alleged that Kazakhstan carried out a campaign of harassment aimed at pressuring them into selling their investments to the state-owned oil company KazMunaiGas for a song.

Kazakhstan has since fought back in several jurisdictions, claiming the Statis fraudulently inflated some of the figures that the tribunal relied upon when calculating the damages allegedly owed.

Earlier this month, the country lost an appeal in Sweden attempting to invalidate the award. It was also unable in February to convince the D.C. Circuit to revive a lawsuit accusing the Statis of violating U.S. racketeering law by fraudulently obtaining and trying to enforce the award.

The length of the London trial over the BNY Mellon assets could also be shortened, the court heard Thursday, as Kazakhstan may refine its case to make clear it is not making any criticisms or alleging any fault on the part of BNY Mellon. Doing so would mean the bank would not need as much time to make submissions at trial, or drop out entirely.

The Republic of Kazakhstan is seeking to prove that the $530 million currently held by BNY Mellon does not match the subject matter, or criteria, set out in the Statis' award and so it should be released to its central bank, which the country argues was the bank's customer.

Thomas Sprange QC, counsel for the Statis, had tried to convince the judge earlier Thursday that more time was needed before the trial begins for the parties to ascertain which video conferencing system would be most appropriate and to test it.

Sprange suggested a 14-day adjournment, arguing that if the parties rushed, it could be an "unmitigated disaster" with significant technical issues. But the judge rejected the proposal.

"The trouble with 14 days is that other cases are due to be tried in that time," Judge Teare said. "I accept that for various reasons, in particular the geographical location of expert witnesses, that this exercise will have particular challenges. But it seems to me, having regard to the need to keep the service of public resolution of disputes going, it is incumbent on the parties to seek to arrange a remote hearing at all possible by Wednesday of next week."

National Bank of Kazakhstan and the Republic of Kazakhstan are represented by Ali Malek QC and Williams Edwards of 3 Verulam Buildings, instructed by Stewarts Law LLP.

The Statis, Ascom Group and Terra Raf are represented by Thomas Sprange QC, instructed by King & Spalding LLP.

BNY Mellon is represented by Richard Handyside of Fountain Court Chambers, instructed by Linklaters LLP.

The case is National Bank of Kazakhstan and another v. The Bank of New York Mellon SA/NV, London Branch and others, case number FL-2018-000007, in the Commercial Court, Queen's Bench Division of the High Court of Justice of England and Wales.

--Additional reporting by Richard Crump and Caroline Simson. Editing by Janice Carter Brown.

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