Tristan Oil Announces $506 Million Arbitration Award
Against Republic of Kazakhstan.
CHISINAU, Moldova -- Tristan Oil Ltd. (Tristan) announced today that parties associated with Tristan, including its shareholder Anatolie Stati, along with Gabriel Stati, Ascom Group S.A., and Terra Raf Trans Traiding Ltd. (the Claimant Parties), secured an award of $506 million, plus interest (the Arbitration Award), in their arbitration against the Republic of Kazakhstan for breach of the Energy Charter Treaty (the Arbitration). The Arbitration arose following Kazakhstan’s seizure of the Claimant Parties’ investments in Kazpolmunay LLP and Tolkynneftegaz LLP, which are Guarantors under Tristan’s Senior Secured Notes due 2016 (the Modified Tristan Notes).
The Claimant Parties brought their Energy Charter Treaty claim after Kazakhstan seized their oil and gas exploration and production businesses and took over their operations in 2010. In fact, the Claimant Parties’ problems with Kazakhstan had begun in late 2008 when more than half a dozen different government agencies carried out a number of burdensome inspections and audits of the companies’ businesses. Those inspections resulted in false accusations of illegal conduct directed at the Claimant Parties and their Kazakh companies, including a criminal prosecution of Kazpolmunay’s general manager, and criminal charges against three other executives of Kazpolmunay and Tolkynneftegaz, on false pretenses. Kazakhstan’s actions challenged the Claimant Parties’ title to their investments, subjected them to hundreds of millions of dollars in unwarranted tax assessments and criminal
The Arbitration Award, issued by a tribunal constituted under the auspices of the Stockholm Chamber of Commerce, finds that Kazakhstan violated its international obligation to treat claimants’ investments fairly and equitably. It also vindicates the Claimant Parties and the directors of Kazpolmunay and Tolkynneftegaz of any wrong-doing while operating in Kazakhstan, and it orders Kazakhstan to pay for the value of the investments it seized, which were substantial. In addition to the award of more than $506 million, the award also includes interest on the sum of $497.7 million from 30 April 2009 at the rate of 6-month U.S. treasury bills (compounded semiannually).
In accordance with the previously announced Sharing Agreement and the terms of the Modified Notes, any proceeds collected as a result of the Arbitration Award from the Republic of Kazakhstan will be paid into a dedicated account in New York, to be shared between the Claimant Parties and the holders of the Tristan Modified Notes; once certain costs have been paid, the holders of the Modified Notes will receive 70% of any such proceeds until principal and interest on their Modified Notes have been repaid in full. There can be no assurance as to the amounts, if any, which will actually be collected and become available to holders of the Modified Notes.