Plant in Kazakhstan: Swiss Investor Purchased, Legal Battle Follows

A legal battle over property sold to a Swiss company has come to the fore in the Turkestan region. The company acquired a small-capacity oil refinery two years ago and invested significant funds in it. Orda.kz has looked into the situation.

This all began in 2021. In the Turkestan region, the oil refinery STRATUS-Oil was declared bankrupt due to insolvency to employees, the bank, and the state. To pay off its debts, the plant was put up for auction nine times, but the bankruptcy manager could not sell it.

In 2022, a Swiss investor showed interest. Joint-stock company KAZKOM SA, a major investor and owner of the oil refinery LLP "Mangystau Oil Refining" in the Mangystau region, decided to participate in the bidding.

In July 2022, the plant was put up for sale via an electronic auction. Two companies participated. The winner was Mangystau Oil Refining LLP. However, the former owner of the plant, who brought it to bankruptcy, disagreed with the outcome. 

In August 2022, the former owner initiated legal proceedings, demanding that the protocol of the electronic auction result be declared invalid, citing the underestimated value.

In October 2022, the specialized inter-district economic court of the Turkestan region rejected the former owner's claim, indicating the legality of the auction. In January 2023, the Turkestan Regional Court upheld the decision of the first instance. In April 2023, after the court decision entered into force, a purchase and sale agreement for the plant was concluded between the bankruptcy manager of STRATUS-Oil LLP and Mangystau Oil Refining LLP.

The investor began reviving the plant. They hired over 50 workers, paid wage arrears, conducted trial runs, and sent documents to the Ministry of Energy for a production certificate. Full-scale preparatory work for the plant's launch began.

However, in December 2023, the Supreme Court of the Republic of Kazakhstan overturned the decisions of the specialized inter-district economic court of the Turkestan region and the Turkestan regional court, indicating the disputed price of the plant at the auction. The case was sent for a new trial.

The Turkestan Regional Court later appointed a comprehensive forensic and construction commodity examination to determine the plant's actual market value. The examination was entrusted to the Institute of Forensic Expertise in Shymkent.

In May 2024, information surfaced that they could not conduct an examination; it was impossible to determine the plant's cost when it was auctioned. Despite this, on May 28, 2024, the Turkestan Regional Court satisfied the claim of the plant's former owner and declared the electronic auction protocol invalid.

 

In June 2024, the plant's former owner filed a claim to invalidate the purchase and sale agreement for the plant.

We asked Farid Aliyev, Chairperson of the Council of the Association of Chambers of Legal Consultants "Kazakhstan Zan-Kenes," to comment.

He explained that according to Article 235 of the Civil Code of the Republic of Kazakhstan, the right to ownership of property can be acquired through a purchase and sale agreement or another transaction. Article 26 of the Constitution of the Republic of Kazakhstan states that property is guaranteed by law and protected by the state.

The invalidation of the electronic auction result protocol should not automatically lead to the invalidation of the sale and purchase agreement concluded between the bankruptcy manager and the auction winner. Exceptions may be cases where the transaction does not comply with the requirements of the law or was made for a purpose that is contrary to the principles of legal order. It is important to find out whether the parties had the goal of violating the principles of legal order when making the transaction,  Farid Aliyev concluded.

The investor can only guess how the case will be resolved in the Turkestan region's specialized inter-district economic court. We have reached out to the Prosecutor General's Office, where, on the head of state's instructions, an investment headquarters was created to protect the rights and interests of investors and improve the investment climate in the country.

Original Author: Damira Augambaeva

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. Please refer to the original piece in Russian for accuracy.