Kyrgyzstan Must Repay Latvian Businessman for Expropriated Bank, UN Tribunal Says
By Dylan Tokar | November 30, 2021 12:59 pm

A Latvian businessman with ties to the son of Kyrgyzstan’s former president has won a United Nations arbitration ruling in a dispute with the troubled Central Asian republic.

In a decision on Oct. 24, a tribunal of the U.N. Commission on International Trade Law awarded Valeri Belokon $16.5 million in compensation for a bank seized by Kyrgyz Republic in 2010. The decision is not public but was made available to Main Justice for review.

Belokon acquired the Kyrgyz bank Insan in 2007, which he renamed Manas Bank. But the bank was expropriated by the government during widespread protests that resulted in the death and displacement of thousands Kyrgyzstani citizens and the resignation of then-president Kurmanbek Bakiyev.

Belokon’s friendship with the son of the ousted president, Maxim Bakiyev, became the center of criminal charges against Manas Bank in Kyrgyzstan. The younger Bakiyev, who was widely seen as a corrupt figure during the 2010 revolution, has been accused of stealing millions of dollars of public funds.

The political upheaval in Kyrgyzstan eventually led to the establishment of a parliamentary republic, but the country has continued to be riven by political instability and corruption. The Paris Tribunal’s decision is now one among a series of international arbitration resolutions requiring the Kyrgyz Republic to pay millions in compensation to foreign companies.

Belokon told Main Justice in an interview that he tried to resolve the dispute with the new Kyrgyz government both before and during the arbitration process. ”For me personally, the most important aspect of this decision is that it vindicates my good name and reputation,” he said.

The Kyrgyz Republic justified the seizure by claiming that Manas Bank had engaged in money laundering and other criminal activities. The government also alleged that Belokon had acquired the bank through a bid rigging scheme. Kyrgyz prosecutors brought criminal charges against Manas Bank in 2011.

But the tribunal found insufficient evidence of the government’s claims, noting in its decision that routine audits conducted prior to the seizure noted no signs of the alleged criminal activity. It described Belokon’s relationship with Maxim Bakiyev as superficial based on the evidence presented.

The arbitration panel also denied early requests by the Kyrgyz Republic for a stay of proceedings due to the criminal investigation against Belokon in Kyrgyzstan and a criminal securities fraud case involving Maxim Bakiyev in New York that was later dropped without explanation.

According to a report by international anti-corruption watchdog Global Witness, Belokon and Maxim Bakiyev were one-time business partners and joint owners of a Latvian company. But in an interview with Global Witness, Belokon denied any interference by Maxim Bakiyev in Manas Bank.

“[M]y friendship with Maxim Bakiyev did not facilitate the foundation process of Manas Bank as well as my other activities of Manas Bank,” he told Global Witness.

Criminal investigations in Kyrgyzstan are ongoing, and the Kyrgyz courts have yet to render a verdict or resume a hearing, according to the U.N. tribunal.

“I hope that the [Kyrgyz Republic] will take stock of the [tribunal’s] decision and realize that it might not be the right thing to continue to pursue unwarranted proceedings against Mr. Belokon that they haven’t been able to progress substantively over several years,” Audley Sheppard, an attorney for Belokon at Clifford Chance in London, said in an interview with Main Justice.

According to the tribunal, Manas Bank operated successfully until April 8, 2010, when the Kyrgyz Republic suspended its board and management team. It extended temporary administration beyond the six months legally allowed and then later imposed a ”sequestration regime.” The bank remains currently under public administration.

Belokon’s claim was filed under a Promotion and Protection of Investments Agreement signed by Latvia and Kyrgyz Republic in 2008. A former Manas Bank staffer told EurasiaNet.org on the condition of anonymity that Belokon had hoped to leverage the arbitration proceedings in an effort to halt the criminal charges in Kyrgyzstan.

The Kyrgyz Republic can appeal in French courts to have the Paris-based tribunal’s award annulled. No notice has yet been given, said Sheppard.

According to Allen B. Green, a partner at McKenna Long & Aldridge LLP with extensive experience in international commercial arbitration, an appeal to arbitral awards must be based on a review of court procedures, and cannot challenge the merits of the case.

“The whole notion is… arbitral awards should be final and binding and not subject to appeal,” Green said. “You should in all normal circumstance be able to enforce [an] international arbitration award.”

Nevertheless, Green noted that an appeal for annulment is often instigated “to buy time, if nothing else.”

Sheppard said that Belokon would consider enforcement options if the Kyrgyz Republic refused to honor the Paris tribunal’s award. Under U.N. treaty, Belokon can use the resolution to bring enforcement actions against Kyrgyz assets in any signatory country—including Kyrgyzstan.

For his part, Belokon called the arbitration process a “detailed audit” of Manas Bank.

“Of course it is not a very pleasant experience for any business,” he said. “But in this case… it was very pleasant to understand based on the decision [that Manas Bank] has done everything according to the highest business principles.”

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