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 Court rules Kyrgyzstan to pay $16.5 million to Latvian businessman

BISHKEK (TCA) - On October 24, the Arbitration Tribunal in Paris ordered that the Government of Kyrgyzstan has to pay Valeri Belokon $16.5 million, the Baltic Course news agency reported. The award has come into force, it is final and binding and may not be challenged, said Belokon Holdings.

Valeri Belokon, a Latvian businessman and banker, lodged a claim in the international arbitration against Kyrgyz Government concerning the expropriation of Kyrgyzstan-based Manas Bank owned by him. In April 2010, after the political upheaval in Kyrgyzstan, "the representatives of the new political power expropriated Manas Bank owned by Belokon."

According to the Baltic Course, the claim was considered by Arbitration Tribunal established in accordance with the Agreement between the Government of the Republic of Latvia and the Government of the Kyrgyz Republic for the Promotion and Protection of Investments. Belokon did not submit claims for compensation of unearned income and damage to reputation as it is difficult to appraise and prove these claims.

A $16.5 million claim is very large amount for Kyrgyzstan, whose state budget for 2013 was about $2 billion. Recently, the Kyrgyz Government had to pay from the state budget $11.4 million on the claim of Sistem Muhendislik Insaat Sanayive Ticaret AS (Ak-Keme, or Pinara, hotel) and may have to pay $118 million to Canadian company Stans Energy.

Kyrgyz Minister of Justice Almambet Shykmamatov considers the decision of the International Arbitration to be wrong, said Radio Liberty. According to Shykmamatov, in 2010, the Interim Government did not violate the law. "Everyone knows that Manas Bank belonged to Maxim Bakiyev and Valeri Belokon, but only Belokon applied to the court. Of course, he has the right to apply to the court, but we believe that the court's decision is wrong," he said.

The Latvian banker admits that he maintained business contacts with Maxim Bakiyev (son of ex-president Kurmanbek Bakiyev), but he denies the criminal charges against him. They are both partners in Maval Aktivi AS holding located in Latvia. Belokon also owns nearly 70 percent of the Baltic International Bank, as well as stakes in several other Latvian companies. In 2008, he entered the banking sector in Kyrgyzstan having founded Manas Bank. He is also the co-owner of the famous Blackpool football club in the UK.
In late 2011, media reported that Belokon filed a lawsuit in international arbitration, demanding to oblige the Kyrgyz Government to compensate his losses in Kyrgyzstan in the amount of $100 million - among other things, and for the introduction of the conservation regime in his bank. But as a result, there is a claim for only $16.5 million, less than one fifth of the initial claim. Therefore, the claim has been satisfied in part, said local experts, praising the good job of Lorenz law firm which protected the interests of Kyrgyzstan in the courts. 

After the revolution of 2010, the General Prosecutor's Office accused Belokon together with Maxim Bakiyev of organizing a criminal group in Kyrgyzstan, saying that through commercial Manas Bank they laundered "dirty" money from 2006 to 2010. The National Bank of the Kyrgyz Republic (NBKR) announced a conservation regime in several commercial banks including the Manas Bank. According to NBKR, this regime was introduced in the interests of creditors and depositors of the banks in order to save their assets and documentation.

Manas Bank was conserved for non-compliance of national legislation in lending, providing false information, and conducting suspicious transactions. The then sole owner of the bank, Belokon was charged in absentia with the creation of a criminal community which according to investigators was engaged in laundering of funds obtained by criminal means. His accomplices were found Maxim Bakiyev; Michael Nadel, the chairman of AUB (the bank nationalized after the 2010 revolution); and former NBKR Chairman Marat Alapaev. All of them were charged in absentia.

The conservation regime does not mean stopping of the commercial bank activity. A Conservator (interim director), appointed by NBKR, shall take all necessary measures to restore the solvency of financial institutions. When this happens, the conservation regime should be removed, experts said.

However, the conservation of a bank does not automatically change its owner. According to the National Bank, in March 2013 the bank was owned by Belokon, and all balance sheet reports of the bank went to NBKR and to Riga, to the bank owner Belokon. However, the owner could not manage the bank. The conservator performed the duties of the board of directors and the shareholders' meeting. Manas Bank was operating but with some restrictions. For example, it was forbidden to accept deposits from the population and open accounts to non-citizens of Kyrgyzstan, and loan more than a certain amount and not longer than for a certain period of time.

Belokon proposed to solve the case in the pretrial order, and called for negotiations. He wanted to manage the bank but Kyrgyzstan ignored his offer. So, the Kyrgyz government had to provide evidence of the guilt of the businessman and that his bank was involved in money laundering, but it is very difficult to do. 

In August 2011 in Riga, talks were held between Belokon and representatives of the Lorenz law firm authorized by Kyrgyz Government to represent the country at the trial. According to the Latvian businessman, he had not received responses to his proposals to resolve the conflict on the illegal seizure of Manas Bank mutually and legally. Oral proposal to freeze the international arbitration process and seek ways to resolve the issue out of the international litigation was unacceptable for him, he said. At the same time, the Latvian party emphasizes that in parallel to the international arbitration process, an amicable agreement was possible, which could then be approved by international arbitrators, reported the Latvian media Criminal Focus. Belokon said that this conflict can be resolved only with the involvement of international arbitration, and no backroom decisions are acceptable.