The Civil Appeals Panel of the Astana Court has completed its review of the appeal by Bank CenterCredit JSC against the decision of the specialised inter-district economic court of Astana regarding the claim by the Chinese company China Xinxing Corporation.
To recall, in December 2023, the specialised inter-district economic court of Astana ordered Bank CenterCredit to pay China Xinxing Corporation the guarantee amount of 27.4 billion tenge and legal representation fees totalling 1.267 billion tenge.
The case stems from 2016, when the national company KazAvtoZhol entered into a contract with the Chinese company China Xinxing Corporation for the repair of Kazakhstani roads. The Chinese corporation, in turn, hired subcontractors by entering into a consortium agreement with SP KazGerStroy LLP.
After the Partnership failed to meet the deadlines stipulated in the contract, China Xinxing Corporation demanded that Bank CenterCredit JSC pay the bank guarantee which the bank had issued to the company SP KazGerStroy. However, Bank CenterCredit was in no hurry to make the payment, leading to legal proceedings.
China Xinxing Corporation entered into an agreement with a certain Freelancer-Partners LLP for the provision of legal services in the civil case concerning the recovery of the bank guarantee from Bank CenterCredit. The agreement stipulated a staggering remuneration amount of 1.267 billion tenge, which the Chinese company paid to the lawyers as an advance.
In court, the representative of Bank CenterCredit, Kairat Beketov, stated that the Kazakhstani company's obligations under the contract amounted to only 10%, with the remainder being the obligations of China Xinxing Corporation. Therefore, he argued that the work was not completed solely due to the fault of SP KazGerStroy.
"It should be noted that SP KazGerStroy LLP was unilaterally excluded from the consortium. When the guarantee was issued, the collateral pool included not only real estate assets but also guarantees from the founders and funds coming in under the contract. The company's withdrawal from the contract reduced the collateral pool. Among the guarantees was a personal guarantee from the former head of KazAvtoZhol. Unfortunately, this situation involving the legal dispute between Bank CenterCredit JSC and China Xinxing Corporation was provoked by the actions and negligence of KazAvtoZhol. This is confirmed by the responses from state bodies," said the bank's representative.
It is worth noting that at the end of October 2023, while the court hearings were ongoing, the Chairman of the Management Board of KazAvtoZhol, Meirkhat Kassymbayev, left his post, citing "voluntary resignation." Meanwhile, in 2017–2019 (before joining KazAvtoZhol), Kassymbayev was a founder of SP KazGerStroy through Bereke Astana Group LLP.
Journalists report that Kassymbayev initiated the termination of contracts with Kazakhstani participants while simultaneously undertaking to assist the Chinese contractors. According to them, he also initiated an increase in the contract values and failed to apply sanctions against the Chinese contractors for delays in road construction timelines.
In turn, the representative of SP KazGerStroy, Semyon Yeresov, emphasised that KazAvtoZhol had made no claims whatsoever against the Export-Import Bank of China, which had issued the bank guarantee to China Xinxing Corporation.
"Those participating in the process – the representatives of the Chinese company and SP KazGerStroy LLP – are merely members of the consortium. It should also be noted that the procedure for making claims has been violated. The consortium entered into the main contract agreement with KazAvtoZhol. According to the Civil Code, the consortium bears joint and several liability and only acquires the right of recourse against the other participants after fulfilling its obligations. For some reason, this issue was not addressed during the hearing of the case. No recovery has been made against the Chinese company, meaning China Xinxing Corporation has not made any compensation, nor have the bank guarantees been paid," stated Semyon Yeresov.
Furthermore, he noted that the exact amount of compensation for the bank guarantee has still not been established. Yeresov claims the amount should only be determined in the Stockholm Chamber of Commerce as part of arbitration proceedings between the consortium members. The judicial panel, having heard the parties, announced its decision.
"The decision of the court of first instance in this case is to remain unchanged. The claim to recover from Bank CenterCredit JSC in favour of China Xinxing Corporation the legal representation fees amounting to 1.267 billion tenge is dismissed. The respondent's appeal is partially granted. The ruling takes effect from the date of its pronouncement," the ruling states.
Despite the fact that the 1.267 billion tenge in representation fees will not be recovered, Freelancer-Partners LLP may, through court bailiffs, seize the bank's assets amounting to 27.4 billion tenge.