King & Spalding Advises On Major International Transaction; Wins Arbitration Award For Foreign Investors In Kazakhstan

Friday, January 24, 2014 - 12:09

King & Spalding advised Varel International Energy Services, Inc., on its sale to Sandvik AB, a Swedish high-technology engineering group publicly traded on the Stockholm Stock Exchange. The transaction, which is valued at approximately $740 million, was announced earlier today.

The deal represents Sandvik’s first major entry into the upstream oil and gas industry and is expected to close within the first six months of 2014. Varel provides products, solutions, and services to major oil & gas drillers and operators, surface mining operations, and industrial drilling businesses,operating around the world.

The cross-office King & Spalding team advising Varel on the transaction was led by Atlanta corporate partner Ray E. Baltz, with associates Spencer A. Stockdale and Andrew M. Flippo. Other members of the deal team included the following: Antitrust: Jeffrey S. Spigel (partner, Washington), Brian R. Meiners (counsel, Washington) and Kathryn E. Kuhn (associate, Washington); Employee Benefits: Kenneth A. Raskin (partner, New York) and Mark Kelly (counsel, Atlanta); Environmental: Joëlle Herschtel (partner, Paris) and Les Oakes (partner, Atlanta); Finance: Andrew M. Metcalf (partner, New York) and Mahynoor El Tahry (associate, New York); Intellectual Property: Jill A. McWhirter (partner, Houston) and Rajesh D. Patel (counsel, Houston); and Tax: L. Wayne Pressgrove (partner; Atlanta) and Robert Andrew Beard (associate; Atlanta).

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King & Spalding relocated one of its two California offices to Palo Alto from Redwood Shores, in a move to better serve its Silicon Valley clientele. The relocation was completed on December 23.

The new office is located at 601 South California Avenue. It contains 25,700 square feet of space and will allow for expansion beyond the 21 lawyers and consultants, including eight partners, working at this location.

King & Spalding's original Silicon Valley office was founded in 2008, with a focus on life science and technology clients, which continue as mainstays of the office’s business. The practice areas in the Silicon Valley office include corporate and emerging-growth transactions, intellectual property, life sciences and litigation. The firm’s San Francisco office was opened in 2008.

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King & Spalding secured an arbitration award of $506 million, plus interest, against the Republic of Kazakhstan on behalf of Moldovan investors Anatolie and Gabriel Stati and their companies, Ascom SA and Terra Raf Trans Trading Ltd. The award is the largest award under the Energy Charter Treaty and the third-largest treaty arbitration award in history.

The award was issued for violations of the investor protection provisions of the Energy Charter Treaty on December 19, 2013, after more than three years of arbitration proceedings. A tribunal constituted under the auspices of the Stockholm Chamber of Commerce found that Kazakhstan violated its international obligation to treat the claimants’ investments fairly and equitably. It also vindicated the claimants and their general manager of any wrongdoing while operating in Kazakhstan, and it ordered Kazakhstan to pay for the value of the investments it seized, which were substantial. The tribunal consisted of chair Karl-Heinz Bockstiegel and arbitrators David Haigh and Sergey Lebedev.

The claims arose out of Kazakhstan’s seizure of the claimants’ petroleum operations in 2010. The claimants acquired two companies in 1999 that held idle licenses in the Borankol and Tolkyn fields in Kazakhstan. They invested hundreds of millions of dollars over the ensuing decade to turn the companies into successful exploration and production businesses. In late 2008, after the businesses had become profitable, more than half a dozen government agencies carried out a number of burdensome inspections and audits of the companies’ businesses that resulted in false accusations of illegal conduct directed at the claimants and their Kazakh companies, including a criminal prosecution of their general manager on false pretenses.  Kazakhstan’s actions challenged the claimants’ title to their investments, subjected them to millions of dollars in unwarranted tax assessments and criminal penalties and ultimately led to the seizure of their investments by Kazakh authorities in 2010.

The King & Spalding cross-office team handling the arbitration consisted of international arbitration partners Reggie Smith (Houston), Ken Fleuriet (Paris) and Kevin Mohr (Houston); counsel Ric Toher (Houston); senior lawyer Heloise Herve and senior associate Amy Frey (Paris); and associates Alexandra Rotar and Valeriya Subocheva (Moscow).

The $506 million award against Kazakhstan was rendered a mere eight days after another investment treaty tribunal awarded $245 million in damages and interest to other clients of King & Spalding in a high-profile arbitration against Romania.  King & Spalding arbitration partners Reggie Smith (Houston) and Ken Fleuriet (Paris) also led that engagement, along with New York-based partner Eric Schwartz.  The Romania award is among the ten largest treaty arbitration awards on record. 

Taken together, the clients in King & Spalding’s cases against Kazakhstan and Romania were awarded over $750 million in damages and interest.