Caratube International Oil Company LLP v. Republic of Kazakhstan: American investor sues Kazakhstan over oil-field dispute

By Damon Vis-Dunbar
26 September 2008

A US citizen, Devincci Salah Hourani, has launched a lawsuit against the government of Kazakhstan over a failed contract to explore and exploit oil in the country.

Mr. Hourani, who holds a 92% stake in the Kazakh firm Caratube International Oil Company (CIOC), has alleged breaches of the United States-Kazakhstan bilateral investment treaty in a claim registered with ICSID in August.

Few specific about the case have emerged, so far. According to the law firm Allen & Overy, who act as counsel for the claimant, “the dispute concerns Kazakhstan’s arbitrary, discriminatory and unlawful expropriation of CIOC’s long term rights under a contract for the exploration and development of hydrocarbons in the Aktobe Oblast region of Kazakhstan.” The claimant is also alleging that Kazakhstan authorities harassed Mr. Hourani, his family and employees.

The alleged damages are “very substantial”, given the production stage of the contract was expected to yield at least US$ 2 billion, said lawyers with Allen & Overy.

Kazakhstan is defending itself in one other arbitration at the ICSID facility – Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan. In this case, Liman Caspian Oil, a Dutch subsidiary of the Canadian company Aurado Energy Inc., is alleging breaches of the fair and equitable treatment and expropriation provisions of the Energy Charter Treaty (ECT) – a multilateral agreement that governs investments in the energy sector.

Liman argues that it obtained the license to extract oil and gas in 2002 from its original holder, Aral, but that Kazakhstan courts annulled the transfer on wholly specious grounds,” according to a statement provided by counsel for Liman.