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Global Arbitration Review reports on the trio of UNCITRAL arbitration cases against Kyrgyzstan re nationalisation of AsiaUniversalBank

Kyrgyzstan wins costs over withdrawn banking claim
Leo Szolnoki Tuesday, 14 January 2014

A US investor that withdrew an UNCITRAL claim against Kyrgyzstan over the nationalisation of the state’s largest commercial bank has been ordered to pay costs – weeks after a case brought by different investors in the same bank reached a similar outcome. On 19 December, a tribunal chaired by Canadian arbitrator Andrew Newcombe and also featuring Richard DeWitt of the US and Samuel Wordsworth QC of the UK made a US$404,000 costs award against US national IlyaLevitis, an investor in Asia Universal Bank.
Counsel to Kyrgyzstan, Winston & Strawn, announced the outcome in a press release. The award remains confidential.

As previously reported by GAR, Levitis lodged his claims in 2012 under the US-Kyrgyzstan bilateral investment treaty and a Kyrgyz law on foreign investment. But he withdrew the claims in June last year, asserting that it was no longer economically viable for him to continue with the case.

It marks the second time Kyrgyzstan has won costs following the withdrawal of a claim concerning the same nationalisation. In October last year, an UNCITRAL panel chaired by Irish arbitrator Klaus Reichert SC issued a US$280,000 costs award against Russian national Mikhail Nadel – the bank's former chairman and purported majority shareholder – and US entity Ithaca Holdings, which was founded by several US nationals who claim to be the bank’s minority shareholders.

In September 2012, Nadel and Ithaca Holdings withdrew their US$400 million claim after Kyrgyzstan objected that it had not agreed to the consolidation of the claimants’ claims in the same proceedings. Immediately after the withdrawal of that claim, Nadel initiated another UNCITRAL case as sole claimant under the Kyrgyz investment law. Proceedings in that case were suspended at Nadel’s request but are due to resume this month. It is understood that Nadel has yet to file a statement of claim in that case.

In all three arbitrations, the investors instructed New York-based practitioner Edward Miller, with Miami’s Cueto Law Group also acting as co-counsel in the IlyaLevitisclaim. However, GAR understands that Miller has since been replaced by Canadian practitioner Todd Weileras counsel to Nadel in the remaining UNCITRAL claim. Miller and Weiler declined to confirm the change of counsel. Winston & Strawn acted for Kyrgyzstan in the three cases, with the team led by partner Andrei Yakovlevin Moscow and counsel Matthew Page in London. Kyrgyzstan also retained local counsel, Satarov Askarov & Partners.

Kyrgyzstan maintains that no compensation is owed to the bank’s shareholders because, at the time of the nationalisation in 2010, the bank’s liabilities outweighed its assets, its capital was negative, it was insolvent and its shares were worthless as a result of long-running accounting fraud and money laundering. Nadel was tried in his absence before the Kyrgyz courts for his role in the alleged fraud and received a 16-year prison sentence in 2011. He denies any wrongdoing.

IlyaLevitis v Kyrgyzstan

  • Tribunal
    Andrew Newcombe (Canada) (President)
    Richard Dewitt (US)
    QC (UK)

  • Counsel to IlyaLevitis
    in New York
    Cuetos Law Group
    Partner Santiago Cuetos in Coral Gables, Florida

  • Counsel to Kyrgyzstan
    Winston & Strawn
    Partners Andrei Yakovlev in Moscow and London, of counsel Matthew Page and associate Daniel Meagher and Sarah Sutton in London
    Satarov Askarov & Partners
    Anvar Askarov and Ulan Satarov in Bishkek
    Mikhael Nadel and Ithaca Holdings v Kyrgyzstan

  • Tribunal
    Klaus Reichart(Ireland) (President)
    Richard Dewitt (US)
    Brigitte Stern (France)

  • Counsel to MikhaelNadel and Ithaca Holdings
    Edward Miller in New York

  • Counsel to Kyrgyzstan
    Winston & Strawn
    Partners Andrei Yakovlev in Moscow and London, of counsel Matthew Page and associates Daniel Meagher and Sarah Sutton in London
    MikhaelNadel v Kyrgyzstan

  • Tribunal
    VVVeeder (UK) (President)
    Arthur Rovine (US)
    Brigitte Stern (France)

  • Counsel to MikhaelNadel
    Edward Miller in New York

  • Counsel to Kyrgyzstan

Winston & Strawn
Partners Andrei Yakovlev in Moscow and London, of counsel Matthew Page and associate Daniel Meagher and Sarah Sutton in London