England and Wales Court of Appeal, 10 August 2018, Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding Limited v. The Republic of Kazakhstan, [2018] EWCA Civ 1896

On 19 December 2013, an SCC arbitral tribunal issued an award in favour of Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding Limited (“Appellants”). By this award, a violation by the Republic of Kazakhstan (“Defendant”) of the fair and equitable treatment standard set up in the European Charter Treaty was characterized. Appellants commenced proceedings to enforce the award in numerous jurisdictions, including the United States, Belgium, the Netherlands, Luxembourg, Italy and Sweden.

Appellants also requested permission to enforce the award pursuant to section 101 of the Arbitration Act 1996 (“the 1996 Act”) before the Commercial Court in England. Defendant filed a motion to set aside the enforcement order. Later, it was authorised to amend its application. Invoking the public policy grounds under section 103(3), Defendant alleged that the award had been obtained by fraud insofar as it relates to the liquefied petroleum gas plant. The English enforcement proceedings were stayed, pending determination of Defendant’s application to set aside the award in Sweden, where Defendant invoked the same argument. On 26 February 2018, the Appellants served notice of discontinuance of the enforcement proceedings in England. In response, Defendant issued an application arguing that its claim of fraud is independent of the notice of discontinuance or, alternatively, that the notice of discontinuance was to be set aside. On 21 May 2018, the judge considered the State’s application as one to set the notice of discontinuance aside and set the trial date. Appellants appealed.

The Court of Appeal upholds the appeal. It partially concurs with the judge’s reasoning in the challenged order by holding that the fraud claim is not an independent claim and that a claimant is entitled to serve a notice of discontinuance, which will have the effect of discontinuing a claim without any order unless a defendant applies to set the notice aside. In the latter case, the burden lies on the defendant to satisfy the court that it should be set aside. It however reverses the previous judge’s decision on the existence of the legitimate interest of the State to continue the proceedings. This case, as explains the Court of Appeal, differs from those where a finding of fraud would create an issue estoppel in any other country.

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