Big Sky Energy Corporation v. Republic of Kazakhstan
ICSID · Investment (ICSID and treaty) · Kazakhstan · 24 Nov 2021
Why it matters
This award is significant for its detailed analysis of the denial of benefits clause under the US-Kazakhstan BIT, particularly the distinction between control-in-law and control-in-fact. The Tribunal also addressed the standard for judicial expropriation and denial of justice, finding that the Kazakh court proceedings did not rise to the level of a BIT violation. The case illustrates the high threshold for establishing state responsibility for judicial conduct.
Summary
Big Sky Energy Corporation, a US company, invested in Kazakhstan's oil sector through a Kazakh subsidiary, BSEK, which held a 10% interest in KoZhaN LLP. Disputes arose from share purchase agreements and subsequent court proceedings in Kazakhstan. Big Sky alleged that the Kazakh courts engaged in a denial of justice, judicial expropriation, and violated the BIT's fair and equitable treatment, effective means, full protection and security, and arbitrary measures provisions. The Tribunal first addressed Kazakhstan's objection to jurisdiction based on the BIT's denial of benefits clause, arguing that Big Sky was controlled by nationals of a third country (Canada) and lacked substantial business activities in the US. The Tribunal rejected this objection, finding that Big Sky was controlled by US nationals and had substantial activities in the US. On the merits, the Tribunal examined numerous alleged deficiencies in the Kazakh court proceedings, including prejudgment, failure to consider evidence, and improper set-off. The Tribunal concluded that none of these allegations met the high threshold for a denial of justice or other BIT violations. The Tribunal found that the courts acted within their discretion and that the outcomes were not manifestly unjust. Consequently, the Tribunal dismissed all claims and ordered Big Sky to bear the costs of the arbitration, while each party bore its own legal fees.
The detail
Parties: Big Sky Energy Corporation v. Republic of Kazakhstan
Case number: ICSID Case No. ARB/17/22
Outcome: The Tribunal upheld jurisdiction but denied all of Claimant's claims on the merits. Claimant ordered to pay Respondent USD 575,821.71 for advances plus interest.
Applicable law: Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Encouragement and Reciprocal Protection of Investment (1994); ICSID Convention
Issues in play: The case involved denial of benefits under the BIT (control by third-country nationals and substantial business activities) and substantive protections including expropriation, fair and equitable treatment, effective means, full protection and security, and arbitrary measures.
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