Baltic States – CIS, Banks, Direct Speech, Financial Services, Good for Business, Investments, Latvia

BC: Are you satisfied with the arbitration tribunal’s award?

A.M.: Very much so. I would like to emphasize that for Mr Belokon the most important was that the award of the International Arbitrational Tribunal completely vindicated his good name. The Tribunal’s award clearly states: "The award in favour of Mr Belokon itself restores the reputational harm suffered by him".

The Tribunal also ordered the payment of compensation in the amount of the value of the bank at the end of 2009 - $13.24 million, as well as interest for the period from 2010 until the award in the amount of $1.78 million. Furthermore, the Tribunal ordered the Kyrgyz government to pay Mr. Belokon $311,000 in compensation for tribunal’s arbitration fees and $1.22 million for legal expenses. The total amount of compensation comes to $16.5 million.

Also important was that as part of the arbitration proceedings a detailed review was conducted of the documents submitted by the Kyrgyz government which supposedly showed illegal activities by Manas Bank. The Tribunal characterized the information submitted by Kyrgyzstan as anecdotal and concluded there was no evidence supporting the Kyrgyz case.

Before its expropriation, Manas Bank had worked successfully and profitably for more than three years in Kyrgyzstan. The compensation of $16.5 million awarded by the Tribunal will fully return the funds we invested.

BC: How do you characterize the attitude of the Kyrgyz government towards foreign investors in general and Mr. Belokon in particular?

A.M.: Seven years ago businessman and banker Valeri Belokon opened a bank in Kyrgyzstan with 100% Latvian capital. Latvia's then Prime Minister Aigars Kalvitis participated in the ceremonial opening of the bank. During his visit Kalvitis had a meeting with his Kyrgyz counterpart Almazbek Atambayev, who is now the President of Kyrgyzstan. At the meeting verbal assurances were given about a friendly attitude towards foreign investors. Also during the visit an agreement was signed about economic, industrial, scientific and technical cooperation between the two countries. Not long thereafter Latvia and Kyrgyzstan signed a treaty on the mutual protection of investments. It was thanks to this treaty that Mr. Belokon had the possibility of recovering the funds he invested.

I would also point out that when we started working in Kyrgyzstan it was stable with a growing economy and an elected government that was recognized internationally. Kyrgyzstan hosted a US military base and the government supported the war on terrorism. By the way, the US military base is no longer in Kyrgyzstan.

Following the 2010 coup the new Kyrgyz government stripped Mr Belokon of his bank. Afterward the Kyrgyz government justified its move by making various accusations against him. Of course that considerably damaged Mr. Belokon's reputation. After reviewing the documents submitted by Kyrgyzstan to substantiate its accusations the Tribunal stated that it received neither evidence nor a comprehensible explanation.

Therefore it was logical that the Tribunal concluded the bank was taken from Mr Belokon completely illegally and he is entitled to compensation (in the total amount of $16.5 million).

Now that the Tribunal has ordered compensation for Mr Belokon, according to its international obligations Kyrgyzstan is required to swiftly (within 60 days) comply with the award.

Unfortunately, at this moment another unpleasant development has occurred -- Kyrgyz officials have begun to publicly spread lies. Deputy Prime Minister Taiyrbek Sarpashev has stated that Kyrgyzstan will appeal the award of the International Arbitration Tribunal although it cannot be appealed. This glaringly demonstrates the attitude of the current Kyrgyz leadership towards foreign investors and international legal norms.

By such behavior the Kyrgyz government shows not only its attitude towards investors, but it brazenly deceives its own people and instills opposition to democratic values.

BC: After such an experience are you ready to take the risk of investing in counties with unstable political regimes?

A.M.: The banking sector in Kyrgyzstan both then and now is underdeveloped. Thus the growth potential is huge.

In any case, Mr Belokon's guiding principle is to work honestly in every country and follow the highest standards. This principle always pays off and achieves results. In the case with Kyrgyzstan, thanks to the bank's respectable business practices, as well as the bilateral treaty on investment protection, we were able to recover our investment. Yes, we had to struggle for it, but we won a complete victory.

BC: Why did you choose to defend your interests in the International Arbitrational Tribunal?

A.M.: To our knowledge ours is the first case in which a Latvian businessman has won in an international arbitration against a country. International arbitration is neither simple nor cheap, but we were confident in our case. The case was judged by professional, independent arbitrators with irreproachable reputations.

Furthermore we were represented by one of the leading global law firms -- Clifford Chance LLP.

The award by such an arbitration tribunal carries a lot of weight. It is binding on all parties, is final and cannot be appealed. Many countries have signed up to the so-called New York Convention on the enforcement of arbitration court rulings that guarantees the enforcement of the award.

BC: Did you receive support from the Latvian government in the case?

A.M.: Yes, we received diplomatically circumspect, but nevertheless very considerable support from the Ministry of Foreign Affairs of Latvia, which is responsible for such issues arising from investments by our citizens abroad. In particular, we are grateful to former Foreign Minister Maris Riekstins, Ambassador Igor Apokin, as well as the employees of the foreign ministry department that handles the region. We turned to the foreign ministry on more than one occasion, and the ministry in turn forcefully raised our issue in meetings with Kyrgyz officials.

BC: Did we understand correctly that the award by the International Arbitrational Tribunal is final.

A.M.: Yes, that is correct. The verdict is final and cannot be appealed.