Kazakhstan starts forced collection of $5B fine from Kashagan operator
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Kazakhstan's Justice Ministry initiated enforcement proceedings on Tuesday against the operator of the Kashagan field, North Caspian Operating Company (NCOC), to collect a 2.3 trillion tenge ($5 billion) environmental fine. The move follows NCOC's failure to voluntarily pay the penalty by a July 20 deadline, escalating a dispute that has already triggered international arbitration.
The Enforcement Action
The Justice Ministry's territorial department in Atyrau region opened enforcement proceedings based on a writ from the regional ecology department. State bailiff Gulbanu Amanova is handling the case. Deputy Justice Minister Daniel Vaisov had warned on July 14 that forced collection would follow if NCOC did not pay by July 20.
The Arbitration Dispute
NCOC announced that an UNCITRAL arbitration tribunal issued an interim order prohibiting Kazakhstan from enforcing the fine until the arbitration concludes. However, the Justice Ministry argued that the order does not block enforcement of a final Kazakh court ruling, noting that commercial arbitration cannot limit sovereign powers under environmental law. The dispute is also being heard at the International Centre for Settlement of Investment Disputes (ICSID) in Washington, where arbitrator selection is expected by end-July.
Origin of the Fine
The fine stems from a 2022 environmental inspection that found NCOC had exceeded sulfur storage limits by over 1.2 million tons, discharged insufficiently treated wastewater, and flared gas without permits. NCOC lost all appeals in Kazakh courts, including the Supreme Court, before its contractors initiated international arbitration.
What's Next
The ICSID tribunal is expected to finalize its panel by the end of July. It remains unclear whether the UNCITRAL interim order will be recognized by Kazakh courts or if forced collection will proceed despite the arbitration.
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Kazakhstan starts forced collection of $5B fine from Kashagan operator
