A ruling against the Russian energy behemoth Gazprom issued by a special court in the Kazakh capital Astana will not be enforced by the government, Kazakhstan’s justice minister has stated. The comments call into question the Astana International Financial Center’s (AIFC) independence from government interference and are likely to sow doubts among foreign investors that they can obtain a fair hearing in case of financial disputes involving state-connected entities.The AIFC is set up as a special economic zone to attract foreign investors and has its own court, which is supposed to operate apart from Kazakhstan’s justice system using English Common Law. In mid-May, the court issued a ruling upholding the decision made in an arbitration case in which Gazprom was ordered to pay the Ukrainian gas entity Naftogaz $1.4 billion relating to an energy transit dispute.The nominal lack of jurisdiction over the AIFC court did not stop Kazakh Justice Minister Yerlan Sarsembayev from weighing in, effectively overruling the ruling. He justified his decision, claiming the AIFC had no standing to consider the arbitration case, which was originally handled by the Paris-based ICC International Court of Arbitration. Gazprom ignored the ICC court’s decision.“The Republic of Kazakhstan will not serve as a transit venue for the enforcement of decisions that lack a legal nexus with the country,” the Zakon.kz news outlet quoted Sarsembayev as saying. “Specifically, the Republic’s legal mechanisms do not provide for the adjudication of disputes unrelated to its jurisdiction.”In its ruling, the AIFC court included a lengthy explanation of its ability to consider the Naftogaz-Gazprom case. Gazprom refused to participate in the AIFC’s judicial process.The AIFC’s ruling put the Kazakh government in a no-win position, confronted with the impossible task of striking a balance between Russia, Kazakhstan’s economically stressed and vengeful neighbor to the north, and international businesses seeking protection from political risks to their investments. It seems Kazakhstan is opting to appease Russia, which retains considerable economic leverage over Astana, especially over oil exports that generate a large share of government revenue, while hoping foreign investors discount the fact that the AIFC’s supposed extraterritorial status within Kazakhstan has been exposed as a sham.A Kremlin-friendly, Russian-language media outlet empathized with the Kazakh government’s Scylla-and-Charybdis dilemma, indicating the AIFC’s credibility has been seriously damaged.“It is Kazakhstan that has suffered the most as a result,” stated a commentary published by RTVi. “The AIFC’s greatest attraction—conceived primarily to appeal to investors from post-Soviet and Asian nations—was not even the preferential tax regime afforded to the Center’s residents, but rather the opportunity, figuratively speaking, to access the ‘High Court of London.’”“The underlying concept was to create a safe haven where businesses from the post-Soviet space could operate without fear of political risks,” the commentary continued. It was “a formula that had worked successfully until this very moment.”Vladimir Vodolatsky, deputy chair of the Russian Duma’s Foreign Affairs Committee, lauded the Kazakh government’s decision to negate the AIFC ruling, reasoning that since the old international order has completely broken down, international law is largely meaningless.By EurasianetMore Top Reads From Oilprice.comOil Prices Jump After Fresh U.S. Strikes on IranUS Crude, Gasoline Inventories Continue to SinkU.S.-Iran Deal Delayed as Trump Refuses to “Rush” Agreement