Baltic States – CIS, Banks, Financial Services, Latvia, Legislation

Businessman Valerijs Belokons turned to the Canadian court after the Kyrgyz government failed to honor its obligations pursuant to a Parisian court ruling of October 24, 2014, which obliged the Kyrgyz government to pay Belokons USD 16.5 million (EUR 14.745 million).

Once Belokons receives the USD 16.5 million due to him according to the International Court of Arbitration ruling, he will pay capital gains tax on this amount in Latvia. The approximate amount that will therefore be paid into the budget of Latvia is USD 750,000 (EUR 670,241).

The United Nations' Convention on the Recognition and Enforcement of Foreign Arbitral Awards stipulates that arbitration awards may be enforced in any of the countries that have signed the convention. Usually such rulings are followed by freezing of the given country's assets.

The Canadian court will decide how the arbitral award is to be enforced in Canada.

As reported, Kyrgyzstan's interim government took control of Manas Bank in the spring of 2010. Media reports at the time pointed out that the government took over the bank because it was suspected that large sums of money could have been withdrawn from the bank by persons close to overthrown Kyrgyz President Kurmanbek Bakiyev.

Management of Baltic International Bank, a Latvian bank that belongs to Belokons, said that Manas Bank was in fact expropriated from Belokons based on controversial decrees from Kyrgyzstan's national bank. Therefore, based on 2008 Latvian-Kyrgyz bilateral agreement on the protection of investments, Belokons turned to Kyrgyz authorities claiming compensation for the expropriated property and the ensuing losses, including for defamation of character.

In October 2014, the Paris Arbitration Tribunal ordered the government of Kyrgyzstan reimburse Belokons USD 16.5 million. The ruling has come into force, is final, and cannot be appealed.