Judgment in the Svea Court of Appeal, 9 December 2016. Case No. T 2675-14

Summary:

Two Moldovan investors acquired all shares in two Kazakh companies that held extraction rights to oil and gas fields in Kazakhstan. Following Kazakhstan’s termination of extraction rights, the investors requested arbitration stating that Kazakhstan had breached the investor protection provisions of the Energy Charter Treaty (the “ECT”). The arbitral tribunal rejected certain jurisdictional objections raised by Kazakhstan, held that Kazakhstan had breached the fair and equitable treatment obligations of the ECT, and found that Kazakhstan was liable to pay damages.

Kazakhstan challenged the arbitral award, requesting that it either be declared invalid or set aside. As grounds for its invalidity claim, Kazakhstan asserted, inter alia, that the arbitral award was clearly incompatible with the basic principles of the Swedish legal system (ordre public) because the investors knowingly misled the arbitral tribunal, withheld relevant information, and presented false evidence and misleading information. As grounds for its request for the award to be set aside, Kazakhstan asserted, inter alia, that the arbitral award was not covered by a valid arbitration agreement, that the arbitral tribunal was appointed in violation of the SCC Rules, and that the tribunal’s appointment was subject to a procedural error which likely affected the outcome of the case.

The Court of Appeal dismissed Kazakhstan’s action in its entirety. The Court held that the award was not clearly incompatible with Swedish ordre public, and that the tribunal did not exceed its mandate or commit a procedural error which likely affected the outcome of the case. The Court concluded that the arbitration agreement was valid and that the arbitral tribunal was duly appointed.