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Note: In an arbitration, Sistem Mühendislik Insaat Sanayi Ve Ticaret Anonim Sirketi (Creditor) was awarded USD 8,500,000, plus costs and interest for the illegal expropriation of a hotel by the Kyrgyz Republic (Debtor). When Debtor, a sovereign state, refused to pay the award, Creditor applied for and was granted a 10-day Mareva injunction in Ontario, Canada, freezing the assets of Kyrgyzaltyn JSC (Subsidiary), a company wholly owned by Debtor. Creditor moved for the order to be extended by 90 days. The Ontario Superior Court of Justice, Newbould, J., granted the motion under the belief that "[Debtor] has made it clear that it will do everything in its power to avoid paying [Creditor] the amount of the Award".

The Judge noted the following: Subsidiary held sufficient shares of stock to pay the award. Language in a purchase agreement described the shares as held by Subsidiary on behalf of Debtor. In another section of the same agreement, Subsidiary and Debtor are referred to as a single unit. In press releases, Debtor described the shares as their own. Though the Judge agreed that property of a subsidiary is not necessarily an asset of the parent, he found there to be sufficient evidence that in this case the stock owned by Subsidiary was indeed the property of Debtor.

Subsidiary had requested that Creditor be required to post a standby to protect against possible damages resulting from freezing the shares. Since Subsidiary stated it had no intent to sell the shares, the Judge determined that freezing the shares was not likely to cause damages and that a standby was not required.

[JEB/mlm]

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