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Lawyers, other representatives, expert(s), tribunal’s secretary

Award

LIST OF DEFINED TERMS

Ak-Tilek Ak-Tilek Investment LLC.
Alternative Composite Index Alternative index of Stans Energy's main traded comparable companies prepared by Mr. Ziff taking into account the companies proposed by Mr. Dellepiane for the purpose of his analysis in his third expert report.
Applications to Order Production The Parties' respective applications to the Tribunal with the document production requests that they maintained despite the other side's objections, submitted on 17 August 2017.
AsiaRud Asiarudproject Mining Planning-Production Company CJSC.
AsiaRud 2011 Report AsiaRud's report issued in July 2011 regarding a technical economic assessment for Kutessay II.
AsiaRud 2013 Report AsiaRud's report issued in July 2013.
AUB AsiaUniversalBank, a Kyrgyz bank incorporated in August 1997.
Award on Jurisdiction Award Regarding Bifurcated Objections to Jurisdiction issued by the present Tribunal on 25 January 2017.
Baotou Baotou Hongbo Technology LLC, a Chinese REEs company.
CAMG Central Asia Metals Group LLC.
CASE Central Asian Stock Exchange.
CIMVal Civil Standard Guidelines for Valuation of Mineral Properties – Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties.
Claimants Stans Energy Corp and Kutisay Mining LLC.
Claimants' Rejoinder on Jurisdiction in Bifurcated Proceedings Rejoinder on Jurisdiction in Bifurcated Proceedings submitted by the Claimants on 29 July 2016.
Claimants' Response Response submitted by the Claimants to the Kyrgyz Republic's Request for Bifurcation dated 28 February 2016.
Claimants' Submission on Jurisdiction Submission on Jurisdiction by the Claimants on 10 June 2016.
DCF Discounted Cash Flow.
December 2014 Statements Consolidated financial Statements of Stans Energy for the period ending in December 2014.
Decree No 93 Resolution No 93 to repeal Kyrgyz Republic Government Resolution No 374 issued on 13 June 2009 "On changing the Boundaries of Chon Kemin State National Park".
Development Fund Kyrgyz Republic's Development Fund.
Draft Timetable Draft Timetable for the Proceedings on the Merits and Any Remaining Objections to Jurisdiction circulated by the Tribunal on 25 January 2017.
FET Fair and equitable treatment.
Financial Statements Consolidated Financial Statements of Stans Energy submitted into the record of this arbitration.
Funding Agreement Litigation Funding Agreement between the Claimants and Calunius Capital LLP.
GPO Kyrgyz Republic's General Prosecutor's Office.
GPO Claim Claim filed by the GPO against the SAGMR (defendant) and Kutisay Mining OJSC (third party) before the Inter-District Court of Bishkek, requesting that the court invalidate the 21 December 2009 minutes (No 736-N-09).
Gremar Gremar Assets SA, a Panama-registered company.
Hearing Hearing on the Merits and Any Remaining Objections to Jurisdiction held in Paris on 9-13 April 2018.
HREEs Heavy rare-earth elements.
Information Reports Together, the 2010 Information Report and the 2012 Information Report (Exhibits C-214 and C-234)
Joint Proposal for a Procedural Timetable Agreement reached by the Parties concerning the Draft Timetable on 10 February 2017.
Kalesay Kalesay beryllium deposit.
Kalesay License License No 2489 ME issued to Kutisay Mining OJSC for Kalesay dated 21 December 2009.
Kalesay License Agreement No. 1 License Agreement No 1 entered into by the State Agency of Geology and Mineral Resources and Kutisay Mining OJSC for Kalesay dated 21 December 2009.
Kalesay License Agreement No. 2 License Agreement No 2 entered into by the Ministry of Natural Resources and Kutisay Mining LLC for Kalesay dated 20 September 2010.
KCMP Kyrgyz Chemical and Metallurgical Plant.
KRP Kasha REE Plant, new name given by Stans Energy to the KCMP processing plant.
Kutessay II Kutessay II rare earth deposit.
Kutessay II License License No 2488 ME issued to Kutisay Mining OJSC for Kutessay II dated 21 December 2009.
Kutessay II License Agreement No. 1 License Agreement No 1 entered into by the State Agency of Geology and Mineral Resources and Kutisay Mining OJSC for Kutessay II dated 21 December 2009.
Kutessay II License Agreement No. 2 License Agreement No 2 entered into by the Ministry of Natural Resources and Kutisay Mining LLC for Kutessay II dated 20 September 2010.
Kutessay II License Agreement No. 3 License Agreement No 3 entered into by the State Agency of Geology and Mineral Resources and Kutisay Mining LLC for Kutessay II dated 15 June 2012.
Kutisay Mining LLC Kutisay Mining Limited Liability Company, a company incorporated in the Kyrgyz Republic and, together with Stans Energy, one of the Claimants in the present arbitration.
Kutisay Mining OJSC Kutisay Mining Open Joint Stock Company. This company was later re-organized as a limited liability company and became Kutisay Mining LLC, one of the Claimants.
Law on Normative Legal Acts Law of the Kyrgyz Republic No 241 "On Normative Legal Acts of the Kyrgyz Republic" dated 20 July 2009.
License Agreements No. 1 Kutessay II License Agreement No. 1 and Kalesay License Agreement No. 1.
License Agreements No. 2 Kutessay II License Agreement No. 2 and Kalesay License Agreement No. 2.
Licenses Kutessay II License and Kalesay License.
LREEs Light rare-earth elements.
Main Composite Index Index of Stans Energy's main traded comparable companies prepared by Mr. Ziff for the purpose of his analysis in his third expert report
MCCI Moscow Chamber of Commerce and Industry.
MCCI Arbitration International arbitration initiated on 30 October 2013 by Stans Energy and Kutisay Mining LLC before the Moscow Chamber of Commerce and Industry against the Kyrgyz Republic pursuant to the Moscow Convention.
Merida Convention 2003 United Nations Convention against Corruption.
Minister of Economy Order Minister of Economy and Antimonopoly Police.
Moscow Convention Convention for the Protection of the Rights of Investors, signed in Moscow on 28 March 1997.
National Park Chon Kemin State Natural National Park.
NI 43-101 National Instrument 43-101: Standards of Disclosure for Mineral Projects (24 June 2011) (2011) 34 OSCB 7043.
Notice of Arbitration Notice of Arbitration submitted by the Claimants on 13 May 2015.
OECD Convention OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
Parties The Claimants and the Respondent.
Procedural Timetable Procedural Timetable as reproduced in the attachment to the Tribunal's letter dated 1 June 2017.
REEs Rare earth elements.
Rejoinder onJurisdiction Rejoinder on Jurisdiction submitted by the Claimants on 26 February 2018.
Rejoinder on the Merits and Reply on Jurisdiction Rejoinder on the Merits and Reply on Jurisdiction submitted by the Respondent on 29 January 2018.
Reply to the Statement of Defence on the Merits and Counter-Memorial on Jurisdiction Reply to the Statement of Defence on the Merits and Counter- Memorial on Jurisdiction submitted by the Claimants on 9 November 2017.
Republic/Kyrgyzstan Kyrgyz Republic.
Request to Produce The Parties' respective requests for document production.
Resolution No 725 Resolution No 725 of 1 December 2009 on the Development of Competitive Procedures for Granting Subsoil Use Rights.
Resolution No 736 Resolution No 736 of 30 December 2008 on Measures for Implementing Requirements of the Tax Code of the Kyrgyz Republic, as amended by Resolution 410 of 25 June 2009.
Respondent Kyrgyz Republic.
Respondent's Application for Security Application for Security for Costs and Disclosure of the Claimants' Litigation Funding Agreement submitted by the Respondent on 25 April 2016.
Respondent's Application for Stay of Arbitral Proceedings Respondent's Application for Stay of the present arbitral proceedings pending the outcome of the Set-Aside Claim submitted on 9 March 2017.
Respondent's Reply on Jurisdiction Reply on Jurisdiction in Bifurcated Proceedings submitted by the Respondent on 5 July 2016.
Respondent's Request for Bifurcation Request for Bifurcation of Jurisdiction and Merits submitted by the Respondent on 13 February 2016.
Respondent'sSubmission on Jurisdiction Statement of Defence on Jurisdiction in Bifurcated Proceedings submitted by the Respondent on 13 May 2016.
Response Response to the Respondent's Application for Security for Costs and Disclosure of the Litigation Funding Agreement submitted by the Claimants on 20 May 2016.
Response to the Notice of Arbitration Response to the Notice of Arbitration submitted by the Respondent on 11 June 2015.
SAGMR Kyrgyz State Agency of Geology and Mineral Resources.
Set-Aside Claim Respondent's application to the High Court in London submitted on 22 February 2017 pursuant to Section 67 of the Arbitration Act 1996, requesting that paragraphs 75-80 and 217-236 and Section VI of the Award on Jurisdiction be set aside and/or varied.
Stans or Stans Energy Stans Energy Corp, a publicly-traded company incorporated under the laws of Ontario, Canada. It is one of the Claimants in the present arbitration, together with Kutisay Mining LLC.
Stans KG Stans Energy KG LLC, a company incorporated in the Kyrgyz Republic.
Statement of Claim Statement of Claim submitted by the Claimants on 29 January 2016.
Statement of Defence on the Merits and Memorial on Jurisdiction Statement of Defence on the Merits and Memorial on Jurisdiction submitted by the Respondent on 14 June 2017.
Subsoil Law Depending on the context, Subsoil Law No. 42 of 24 June 1997, as amended on 4 February 2002; as amended on 17 October 2008; or as amended on 15 July 2011; Law on Subsoil No. 160 of 9 August 2012, as amended on by Law No. 77 dated 24 May 2014.
TEA Technical and economic assessment.
TSX Toronto Stock Exchange. Stans Energy is listed on its venture division, Toronto Stock Venture Exchanges.
TSX Rules Toronto Stock Exchange Rules.
UNCITRAL Rules The Arbitration Rules of the United Nations Commission on International Trade Law, adopted in 1976.
USSR The Union of Soviet Socialist Republics.
Vesatel (NZ) Vesatel United Limited, a company incorporated in New Zealand.
VNIIHT Russian Research Institute of Chemical Technology.
WACC Weighted Average Cost of Capital.
2003 Investment Law Kyrgyz Republic's Law No 66 of 27 March 2003 "On Investments in the Kyrgyz Republic", as amended on 22 October 2009.
2010 Information Report Information Report on Works Performed in 2010 and Programme of Work for 2011 at the Kutessay II Field (Exhibit C-214)
2010 Investment Protection Decree Decree No 23 of 26 April 2010 of the Provisional Government of the Kyrgyz Republic on the Protection of Investments.
2012 Information Report Information Report on Works Performed in 2012 and Program of work for 2013 at the Kutessay II Field (Exhibit C-234)
21 December 2009 Minutes Minutes No 1736-N-09 of negotiations between the State Agency of Geology and Mineral Resources (SAGMR) and Kutisay Mining OSJC.
26 June 2012 Resolution Resolution issued by a Parliamentary Committee for Development of Industries of the Economy on 26 June 2012.
17 October 2014 Minutes Minutes No 320-N-14 of the meeting of the Subsoil Use Licensing Commission on 17 October 2014.

 

I. INTRODUCTION

A. THE PARTIES

1.
The Claimants are Stans Energy Corp ("Stans Energy" or "Stans"), and Kutisay Mining Limited Liability Company ("Kutisay Mining LLC", together with Stans Energy, "Claimants"). Stans Energy is a publicly-traded company incorporated under the laws of Ontario, Canada. It directly and wholly owns Stans Energy KG LLC ("Stans KG"), a limited liability company registered under the laws of the Kyrgyz Republic. Kutisay Mining LLC is a limited liability company registered under the laws of the Kyrgyz Republic and owned by Stans KG.1
2.
The Claimants are represented in this arbitration by Mr. Nigel Blackaby, Mr. Noah Rubins, Ms. Mariia Puchyna, Mr. Simon Consedine, Dr. Daniel Müller and Ms. Shirin Chua of Freshfields Bruckhaus Deringer.
3.
The Respondent is the Kyrgyz Republic ("Respondent" or "Republic" or "Kyrgyzstan").
4.
The Respondent is represented in this arbitration by Dr. Andrei Yakovlev, Mr. Wilson Antoon, Ms. Dorothy Murray, Mr. Alexis Namdar, Ms. Dina Suliman and Mr. Marco Toracca of King & Wood Mallesons; Mr. Anvar Askarov and Mr. Ulan Satarov of Satarov, Askarov & Partners; and Mr. Aiaz Baetov and Mr. Mirlan Dordoev of the Center for Court Representation of the Government of the Kyrgyz Republic;
5.
The Claimants and the Respondent together are referred to as the "Parties".

B. THE TRIBUNAL'S TERMINOLOGY AND REASONING

6.
The Tribunal has carefully examined all the arguments and evidence presented by the Parties throughout these proceedings. The Tribunal does not consider it necessary to reiterate in this Award all such arguments or evidence, which are well-known to the Parties. Further, insofar as any matter has not been specifically identified or recorded in the body of this Award, this does not mean that it has not been taken into full consideration. The Tribunal discusses only those submissions which it considers most relevant for its decisions. The Tribunal's reasons, without repeating all the arguments advanced by the Parties, address what the Tribunal considers to be the determinative factors required to decide on the Requests of the Parties.
7.
The Tribunal's use of one Party's terminology is without prejudice to, and in no way reflects, the Tribunal's understanding of a particular issue. Rather, effort has been made to use consistent terminology throughout this Award to facilitate understanding. Likewise, the order in which references are presented is not a reflection of a particular source's value in the eyes of the Tribunal. Instead, effort has been made to format the footnotes consistently and so as to cite all significant documents referenced by the Parties.
8.
The Parties dispute what is the correct English translation of certain provisions of the Subsoil Laws No. 42 and No. 160 and have submitted different versions of those laws. Similarly, as regards the Kyrgyz Law On Investments in the Kyrgyz Republic, the Parties have submitted slightly different English translations. Without prejudice, for convenience, the Tribunal in its own reasoning will generally use and refer to the translations provided by the Claimants. In respect of the Kyrgyz Law On Investments in the Kyrgyz Republic, the Claimants' translation (CLA-98) is in relevant parts consistent with the text published by the Kyrgyz Investment Promotion Agency on its website (CLA-203). In any event, the Tribunal has found that the points in respect of which the Parties have disputed each other's translation are not relevant for the application of a certain provision to the present case.

C. THE ESSENCE OF THE CLAIMANTS' CASE

9.
The Claimants bring their claims pursuant to the Law of the Kyrgyz Republic No 66 On Investments in the Kyrgyz Republic, dated 27 march 2003 ("2003 Investment Law").
10.
The Claimants assert the Tribunal's jurisdiction on the basis of Article 18 of the 2003 Investment Law.2 According to the Claimants, they qualify as foreign investors under the 2003 Investment Law, and the Parties have consented to arbitration of the dispute.3 Stans Energy's participation in Kutisay Mining LLC meets the definition of Article 1(2) of the 2003 Investment Law for a "direct investment".4 Moreover, even disregarding its ownership in Kutisay Mining LLC, Stans Energy is entitled under the 2003 Investment Law to claim compensation for damage to its shareholding in Stans KG and its indirectly-owned investments.5 Kutisay Mining LLC qualifies as a foreign investor under Article 1(3)(2), second alternative, of the 2003 Investment Law.6
11.
According to the Claimants, the material scope of a tribunal's jurisdiction under the 2003 Investment Law is broad. The Claimants argue that Article 18 contains the Respondent's consent to submit to international arbitration all "investment disputes" with foreign investors. According to the Claimants, the provision is not limited to disputes based on the substantive provisions of the 2003 Investment Law;7 as a result, the scope of the Tribunal's jurisdiction encompasses claims for breaches of the Moscow Convention on the Protection of the Rights of Investors, signed in Moscow on 28 March 1997 ("Moscow Convention") and general international law.8 The Claimants argue that the law to be applied by the Tribunal comprises the 2003 Investment Law and other relevant rules of Kyrgyz law and international law, including the Moscow Convention.9 International law should at least be relevant to determine the content of the obligations assumed by the Respondent.10
12.
The Claimants reject each of the jurisdictional objections put forward by the Respondent. The Claimants argue that the Respondent has failed to establish that they obtained the Kutessay II and Kalesay licenses (respectively, "Kutessay II License" and "Kalesay License", and collectively, "Licenses") through corruption.11 The Claimants deny that the 2003 Investment Law contains a "legality requirement".12 In any event, even if it provided for such requirement, it would not amount to an absolute bar to jurisdiction.13 Finally, the Claimants argue that the Respondent has failed to establish any breaches of Kyrgyz law by the Claimants that would bar the Tribunal's jurisdiction.14
13.
In substance, the Claimants assert that the Respondent took a series of cumulative and interconnected measures, starting with a 26 June 2012 Resolution that deprived the Claimants of the effective use and control of their investments, amounting to an indirect de facto expropriation.15 This de facto expropriation was later judicially endorsed, and implemented through the formal revocation of the Licenses on 17 October 2014, amounting to a direct expropriation of their investments.16 According to the Claimants, the expropriation of their Licenses occurred arbitrarily, not in the public interest, and without compensation. It was accordingly in breach of Article 6 of the 2003 Investment Law and international law.17 Furthermore, the Claimants aver that the Respondent was required to accord them fair and equitable treatment.18 The Respondent has breached that obligation by frustrating the Claimants' legitimate expectations and by acting arbitrarily.19
14.
The Claimants assert that Article 6(2) of the 2003 Investment Law does not set out any express compensation standard for unlawful acts and omissions, including unlawful expropriations.20 In the absence of a lex specialis, the Claimants aver that compensation must be determined in accordance with general international law, which requires "full reparation".21 To ensure full reparation, the Claimants argue that the valuation date must be 25 June 2012, the day before the 26 June 2012 Resolution.22 They contend that the appropriate valuation method is the market capitalisation approach. Accordingly, the value of Stans Energy is to be established through its share price,23 to which it is necessary to add a control premium to reflect the full value of the company.24 This results in a fair market value of US$ 128.23 million as at 25 June 2012.25 The Claimants allege that the principle of full reparation also applies to the calculation of interest.26 The Claimants claim pre-award and post-award interest at a commercial rate of 15.5% on the basis of the Weighed Average Cost of Capital ("WACC") of Stans Energy,27 which should accrue semi-annually on a compounded basis.28

D. THE ESSENCE OF THE RESPONDENT'S CASE

15.
The Respondent asserts that, in order to rely on the protections of the 2003 Investment Law, an entity must be an "investor" which has made a "direct investment". Stans Energy's indirect shareholding in Kutisay Mining LLC does not qualify as a "direct investment".29 Likewise, Kutisay Mining LLC is not entitled to protection under such law, as it is neither a "foreign investor" nor an "investor" with a qualifying "direct investment".30
16.
Additionally, the Respondent argues that the Claimants' claims must be dismissed due to illegality, as the Claimants procured the Licenses through corruption and in breach of fundamental provisions of Kyrgyz law.31 In this regard, the Respondent refers in particular to (1) Article 183 of the Kyrgyz Criminal Code, which prohibits money laundering; (2) Article 16 of the Subsoil Law, which sets out requirements for public tenders; and (3) Articles 408 and 409 of the Kyrgyz Civil Code, which lay out requirements for auctions.32
17.
The Respondent argues that the material scope of jurisdiction of tribunals under the 2003 Investment Law is limited to breaches of the substantive provisions of the 2003 Investment Law.33 Thus, the claims that an investor may bring are strictly limited to breaches of the provisions of the 2003 Investment Law and, in determining its content, the Tribunal shall refer to Kyrgyz law principles of statutory interpretation.34 In this regard, the Respondent denies that Article 2(1) of the 2003 Investment Law is an applicable law clause,35 with the effect that international treaties and general international law become applicable to the present arbitration.36
18.
The Respondent denies that the termination of the Licenses amounted to indirect expropriation. Rather, it was merely the consequence of enforcement of Kyrgyz law in accordance with a proper legal procedure.37 Pursuant to a national court decision which found that the Licenses had been invalidly granted, the Licensing Commission of the State Agency of Geology and Mineral Resources ("SAGMR") terminated them under Article 27(5) of the Subsoil Law.38 Kutisay took part in the invalidation procedure and exercised its right to appeal the termination before national courts.39 Even if the termination measures could be characterised as an expropriation (which the Respondent denies), the requirements for a lawful expropriation in Article 6 of the 2003 Investment Law were fulfilled, insofar as the expropriation was (1) provided for by Kyrgyz law; (2) in the public interest; (3) carried out on a non-discriminatory basis; and (4) carried out pursuant to a proper legal procedure.40 According to the Respondent, under the 2003 Investment Law, it is not incumbent upon the Republic to offer compensation to an investor for an expropriation. Rather, it must only make a procedure available to investors through which they may seek compensation.41
19.
The Respondent argues that there is no normative source for the Claimants' fair and equitable treatment claim, since no such standard is amongst the substantive protections of the 2003 Investment Law.42 In any event, the Respondent asserts that the Claimants could not have had any legitimate expectation that the State would not seek to enforce the provisions of the Subsoil Law;43 nor was it reasonable for the Claimants to rely on any of the representations allegedly made by the head of the Respondent's Development Fund, Mr. Eliseev, given the factual circumstances and the presence of numerous "red flags".44 Likewise, the Respondent denies that it acted arbitrarily and considers that the Claimants' complaints are without merit.45
20.
The Respondent further asserts that, should the Tribunal find that there has been an expropriation, any damages should be calculated in accordance with Article 6(2) of the 2003 Investment Law,46 which does not differentiate between lawful and unlawful expropriations.47 According to the Respondent, the Claimants did not suffer any damages because (1) the Licenses were worthless; (2) the Claimants would not have been able to raise the necessary funds to pursue mining; and (3) the Licenses were liable to termination due to the Claimants' persistent breaches of the License agreements' terms.48 The value of the investment is to be assessed as at the date of the alleged expropriation decision, 16 October 2014 (the day before the SAGMR terminated the Licenses).49
21.
In contrast, the Respondent considers that the share price of Stans Energy bore no relationship to the value of the Licenses, so the only reliable way to value the Licenses is to develop a discounted cash flow ("DCF") analysis.50 Should the Tribunal reject that methodology, the Respondent requests that the Claimants be awarded no damages or, in the alternative, be awarded only the amounts actually spent on developing the Licenses.51 Pursuant to Article 6(3) of the 2003 Investment Law, the appropriate interest rate would be a twelve-month LIBOR,52 and would accrue on a simple basis.53
22.
Finally, the Respondent contends that any award on damages should be reduced because (1) the Licenses were liable to be terminated; and (2) the Claimants engaged in wilful or negligent acts or omissions amounting to contributory fault.54 This calls for a reduction of any damages awarded by 75%.55

E. THE SCOPE OF THE PRESENT AWARD

23.
By its Request for Bifurcation of Jurisdiction and Merits, the Respondent requested bifurcation of the proceedings and raised four objections to the Tribunal's jurisdiction: (1) objection regarding the alleged absence of consent; (2) objection regarding the alleged absence of a protected investor and investment; (3) objection regarding Kutisay Mining LLC's alleged non-compliance with the consultation period imposed under the 2003 Investment Law; and (4) objection regarding the alleged unlawfulness of the acquisition of the Claimants' investment.
24.
In Procedural Order No. 2, the Tribunal bifurcated the proceedings such that it would hear the first and third objections (above (1) and (3)) in a preliminary phase and that the other two objections would be heard in conjunction with the merits.
25.
In the jurisdictional phase, the Parties discussed a number of further jurisdictional objections identified only after the adoption of Procedural Order No. 2. As a result, in its Award Regarding Bifurcated Objections to Jurisdiction ("Award on Jurisdiction"), the Tribunal addressed five of these new objections56 in conjunction with the two objections identified in Procedural No. 2, and deferred the remaining jurisdictional issues until the merits phase.57 The Tribunal also decided to defer its decision on the costs of the jurisdictional phase to a later stage.58
26.
In Procedural Order No. 6, the Tribunal accepted a joint proposal by the Parties for a procedural timetable, pursuant to which the Respondent would be entitled to "raise any remaining objections to the jurisdiction of the Tribunal" in its first written pleading on the merits phase. The Respondent accordingly submitted several new jurisdictional objections in its Statement of Defence on the Merits and Memorial on Jurisdiction.59
27.
In the present award, therefore, the Tribunal addresses not only the merits of the Parties' dispute, but also such jurisdictional issues that were not addressed in the Award on Jurisdiction as well as the costs of arbitration.

II. PROCEDURAL HISTORY

A. COMMENCEMENT OF THE ARBITRATION

28.
On 13 May 2015, pursuant to Article 11 of the Moscow Convention, Article 18 of the 2003 Investment Law, and Article 3 of the Arbitration Rules of the United Nations Commission on International Trade Law, adopted in 1976 ("UNCITRAL Rules"), the Claimants served a Notice of Arbitration on the Respondent ("Notice of Arbitration").
29.
On 11 June 2015, the Respondent served on the Claimants its Response to the Notice of Arbitration, in which it indicated that it objected to the jurisdiction of the Tribunal and declared its intention to apply for bifurcation of the proceedings ("Response to the Notice of Arbitration").60

B. CONSTITUTION OF THE ARBITRAL TRIBUNAL

30.
In the Notice of Arbitration, the Claimants appointed the Honourable Colin L. Campbell, Q.C., as co-arbitrator.
31.
In the Response to the Notice of Arbitration, the Respondent appointed Mr. Stephen Jagusch, Q.C., as co-arbitrator.
32.
On 12 October 2015, the Parties jointly informed the co-arbitrators that they recommended that Professor Böckstiegel be selected as presiding arbitrator. On 23 October 2015, the co-arbitrators advised the Parties that they endorsed the appointment of Professor Böckstiegel.

C. WRITTEN AND ORAL PLEADINGS ON JURISDICTION

33.
Following the constitution of the Tribunal, by letter dated 11 November 2015, the Tribunal invited the Parties to comment on a draft Agenda for a first procedural meeting.
34.
On 17 December 2015, both sides submitted proposals for a procedural timetable and explained their respective positions in respect of the issue of bifurcation. The Respondent requested that the proceedings be bifurcated without any written exchanges between the Parties on the issue.61 The Claimants submitted that the Tribunal should consider the question of whether bifurcation would be in the interest of procedural economy only after the Claimants had filed their Statement of Claim.62
35.
By letter of the same date, the Respondent indicated that "the Parties have agreed to the removal of a pre-prescribed production of documents phase for jurisdictional arguments, in the event of bifurcation, with a view to expediting the first stage of the bifurcated proceedings".
36.
Following exchanges between the Tribunal and the Parties, by letter dated 11 January 2016, the Tribunal informed the Parties that in light of the extent of the agreement reached between the Parties it had decided not to hold a first procedural meeting. Instead, the Tribunal issued Procedural Order No. 1, which included the procedural timetable for the initial phase of the proceedings.
37.
On 29 January 2016 the Claimants submitted their Statement of Claim ("Statement ofClaim").
38.
In accordance with the timetable set out in Procedural Order No. 1, on 13 February 2016 the Respondent filed its Request for Bifurcation of Jurisdiction and Merits ("Respondent's Request for Bifurcation") and on 28 February 2016 the Claimants submitted their Response to the Kyrgyz Republic's Request for Bifurcation ("Claimants' Response").
39.
By e-mail of 2 March 2016, the Respondent expressed disagreement with the substance of the Claimants' Response, and conveyed its wish to provide a reply within the framework of the procedural schedule if invited to do so by the Tribunal. By e-mail of 3 March 2016, the Claimants objected to the Respondent's request, submitting that Procedural Order No. 1 only provided for a single exchange on the question of bifurcation, and that any additional round would cause delay. On the same date, the Respondent responded by e-mail to clarify its position.
40.
By e-mail dated 7 March 2016, the Tribunal informed the Parties that, having reviewed the Parties' correspondence and submissions, it did not regard further briefing on the question of bifurcation as necessary.
41.
On 14 March 2016, the Tribunal issued Procedural Order No. 2, in which the Tribunal decided, inter alia, that the proceedings would be bifurcated and identified the jurisdictional objections that would be heard in a preliminary phase.
42.
By letter dated 1 April 2016, the Respondent, having become aware that the Claimants relied on third party funding in the context of the present arbitration, invited the Claimants to provide either "adequate security for costs" or evidence of "available assets that [would] enable the Respondent to pursue a costs award" and, in any event, to disclose the Litigation Funding Agreement between the Claimants and Calunius Capital LLP relating to their claim in this arbitration ("Funding Agreement"). The Respondent noted that it would make an application to the Tribunal without further notice should its invitation be rejected or no satisfactory response be provided by 6 April 2016.
43.
On 5 April 2016, the Tribunal issued Procedural Order No. 3, in which it fixed the procedural timetable for the jurisdictional phase.
44.
By letter dated 6 April 2016, the Claimants informed the Respondent that they were not prepared to provide security for costs or evidence of available assets, nor to disclose the Funding Agreement.
45.
On 25 April 2016, the Respondent submitted its Application for Security for Costs and Disclosure of the Claimants' Litigation Funding Agreement ("Respondent's Application for Security"), seeking "an order from the Tribunal directing that the proceedings continue subject to the Claimants furnishing suitable security for the Respondent's costs, and disclosing the Funding Agreement".
46.
On 13 May 2016, the Respondent filed its Statement of Defence on Jurisdiction in Bifurcated Proceedings ("Respondent's Submission on Jurisdiction").
47.
On 20 May 2016, the Claimants submitted their Response to the Respondent's Application for Security for Costs and Disclosure of the Litigation Funding Agreement ("Response").
48.
By letter dated 3 June 2016, the Claimants requested a two-day extension for their submission on jurisdiction. By letter of the same date, the Respondent requested the Tribunal, if it were to grant the requested extension, to revise the procedural timetable so that it reflected an appropriate extension of the due date for the Respondent's reply.
49.
By letter dated 6 June 2016, after considering the Parties' requests, the Tribunal modified the procedural schedule, granting the extension requested by the Claimants and extending the due date for the Respondent's reply accordingly.
50.
In accordance with the modified timetable, on 10 June 2016, the Claimants submitted their Submission on Jurisdiction ("Claimants' Submission on Jurisdiction").
51.
On 3 July 2016, the Tribunal issued Procedural Order No. 4, in which it denied the Respondent's Application for Security, and deferred the decision regarding the costs related to this Application to a later stage of the proceedings.
52.
On 5 July 2016, the Respondent submitted its Reply on Jurisdiction in Bifurcated Proceedings ("Respondent's Reply on Jurisdiction").
53.
On 29 July 2016, the Claimants submitted their Rejoinder on Jurisdiction in Bifurcated Proceedings ("Claimants' Rejoinder on Jurisdiction in Bifurcated Proceedings").
54.
On 2 August 2016, the Tribunal issued Procedural Order No. 5 regarding the Hearing on Jurisdiction on 23 September 2016, determining certain particulars in preparation of the hearing.
55.
By letter to the Tribunal dated 2 September 2016, the Respondent contended that it had not had an opportunity to respond to an issue that was pleaded for the first time by the Claimants in their Rejoinder on Jurisdiction in Bifurcated Proceedings. Accordingly, the Respondent requested the Tribunal to strike specific paragraphs of the Claimants' Rejoinder on Jurisdiction in Bifurcated Proceedings from the record or, in the alternative, to grant the Respondent leave, pursuant to paragraph 3.1 of Procedural Order No. 5, to submit certain additional documents into evidence.
56.
By letter to the Tribunal dated 5 September 2016, the Claimants argued that the relevant paragraphs of their Rejoinder on Jurisdiction were in fact responsive to arguments developed by the Kyrgyz Republic in its Reply on Jurisdiction. The Claimants noted that, in any event, they did not object to the submission of limited new exhibits, subject to the Claimants' right to introduce rebuttal evidence.
57.
On 7 September 2016, the Tribunal advised the Parties that the Respondent's request that the Tribunal strike certain paragraphs of the Claimants' Rejoinder on Jurisdiction in Bifurcated Proceedings was denied. However, the Respondent was granted leave to introduce certain new exhibits into the record, and the Claimants were invited to submit pertinent rebuttal evidence, if they so wished, by 14 September 2016.
58.
By letter dated 16 September 2016, the Respondent sought the Tribunal's leave to introduce a certain number of new exhibits into the record. By letter to the Tribunal dated 20 September 2016, the Claimants stated that they did not object to the submission of the Respondent's new exhibits. At the same time, the Claimants also requested the Tribunal's leave to introduce a number of new exhibits into the record. By letter to the Tribunal dated 21 September 2016, the Respondent objected to the submission of all but one of the Claimants' new exhibits.
59.
On 22 September 2016, the Tribunal admitted all of the Respondent's new exhibits into the record. It also admitted certain new exhibits submitted by the Claimants into the record while rejecting the remaining exhibits.
60.
On 23 September 2016, a Hearing on Jurisdiction was held in Paris.
61.
By letter dated 2 October 2016, and further to the Tribunal's request during the Hearing, the Respondent made certain clarifications in respect of its argument related to Article 6(3) of the Law of the Kyrgyz Republic No. 241 On Normative Legal Acts of the Kyrgyz Republic, dated 20 July 2009 ("Law On Normative Legal Acts"), accompanied by additional legal authorities.
62.
By letter dated 6 October 2016, the Claimants submitted comments on parts of the Respondent's letter dated 2 October 2016. At the same time, the Claimants requested the Tribunal to disregard other paragraphs in the said letter and not to admit some of the accompanying exhibits (Exhibits RLA-124 to RLA-126). Alternatively, the Claimants requested, in the event that the Tribunal decided otherwise, to be granted an additional opportunity to respond more fully to the Respondent's letter.
63.
On 10 October 2016, the Tribunal advised the Parties that it had decided to admit in full the Respondent's letter of 2 October 2016. Similarly, the accompanying legal authorities, RLA-124 to RLA-128, were admitted into the record. The Claimants were accordingly invited to respond to the remaining paragraphs of the Respondent's letter of 2 October 2016 (as well as Exhibits RLA-124 to RLA-126) by 13 October 2016.
64.
By letter dated 13 October 2016, the Claimants provided their comments on the Respondent's letter of 2 October 2016, and submitted additional exhibits and legal authorities.
65.
By letter dated 14 October 2016, the Respondent responded to the Claimants' letter of 13 October 2016.
66.
By letter dated 16 October 2016, the Tribunal invited the Claimants to submit any final comments they might have in reply to the Respondent's letter of 14 October 2016.
67.
By letter dated 17 October 2016, the Claimants reiterated their disagreement with the Respondent's position, and referred to their prior submissions.

D. AWARD ON JURISDICTION

68.

On 25 January 2017, the Tribunal issued the Award on Jurisdiction, the dispositive part of which provides:

In light of the foregoing discussion, the Tribunal unanimously decides:

a. The objections raised by the Respondent against the jurisdiction of the present Tribunal are dismissed subject to the following exception.

b. The question whether the Claimants qualify as "investors" holding "investments" under the relevant Kyrgyz legislation will be considered in conjunction with the merits of the case.

c. Any decision regarding the costs of the procedure on jurisdiction is deferred to a later stage of the proceedings.63

69.
On 22 February 2017, the Respondent applied to the High Court in London pursuant to Section 67 of the Arbitration Act 1996, requesting that paragraphs 75-80 and 217-236 and Section VI of the Award on Jurisdiction be set aside and/or varied such that the variation takes effect as part of the Award so as to provide that the Tribunal has no substantive jurisdiction ("Set-Aside Claim"). The Respondent informed the Tribunal about the Set-Aside Claim by letter of 23 February 2017.
70.
By letter dated 9 March 2017, the Respondent applied for a stay of the present arbitral proceedings pending the outcome of the Set-Aside Claim ("Respondent's Application for Stay of Arbitral Proceedings"), arguing, among others, that significant costs of the arbitral proceedings could be wasted if the Tribunal continued the proceedings.64
71.
By letter dated 10 March 2017, the Claimants requested that the Tribunal refuse to order a stay of the proceedings and accept the Joint Proposal for a Procedural Timetable, arguing, among others, that the High Court would issue a judgment at the end of 2017 at the earliest and that a further delay of the arbitral proceedings caused by a stay was unjustifiable.65
72.
By letter dated 15 March 2017, the Respondent maintained that a stay was appropriate pending the outcome of the Set-Aside Claim, stating, among others, that the English High Court was likely to issue a judgment in September 2017, rather than at the end of 2017.66
73.
On 15 March 2017, the Tribunal issued Procedural Order No. 6, whereby the Tribunal denied the Respondent's Application to Stay the Proceedings.
74.
By letter dated 9 November 2017, the Claimants informed the Tribunal that the Respondent's Set-Aside Claim had been dismissed by the High Court of England and Wales on 13 October 2017, enclosing a copy of the decision.

E. WRITTEN PLEADINGS ON THE MERITS AND ANY REMAINING OBJECTIONS TO JURISDICTION

75.
By letter dated 25 January 2017, the Tribunal invited the Parties to confer with each other with a view to reaching agreement on a joint proposal for a procedural timetable up to, and including, the Hearing on the Merits and Any Remaining Objections to Jurisdiction ("Hearing"), and circulated the Draft Timetable for the Proceedings on the Merits and Any Remaining Objections to Jurisdiction ("Draft Timetable") in order to facilitate such discussion between the Parties.
76.
By e-mail dated 10 February 2017, the Respondent informed the Tribunal that the Parties had reached agreement on the Draft Timetable up to the Hearing, which could be held in March 2018 ("Joint Proposal for a Procedural Timetable"). The Claimants confirmed their agreement by e-mail of the same date.
77.
By letter dated 22 February 2017, the Tribunal informed the Parties that the Joint Proposal for a Procedural Timetable was accepted but suggested that the Hearing be set for the period from 9 to 13 April 2018 in either London, Paris or Sydney; invited the Parties (1) to confirm their availability for the suggested period and (2) to indicate their preference regarding the venue of the Hearing.
78.
By letter dated 10 March 2017, in response to the Tribunal's letter dated 22 February 2017, the Claimants confirmed their availability for the Hearing during the proposed period from 9 to 13 April 2018 in either Paris or London, and suggested that the Hearing be held in Paris.67
79.
By letter dated 15 March 2017, the Respondent confirmed its availability for the Hearing during the period from 9 to 13 April 2018 in Paris, London or Sydney.68
80.
On 15 March 2017, the Tribunal issued Procedural Order No. 6, whereby the Tribunal established a procedural timetable on the basis of the Parties' Joint Proposal for a Procedural Timetable and decided that the Hearing was to be held from 9 to 13 April 2018 in Paris.
81.
By letter dated 24 May 2017, the Respondent requested a two-week extension of the deadlines set out in the procedural timetable, and the Claimants confirmed their agreement to this extension by e-mail of the same date.
82.
By letter dated 31 May 2017, the Tribunal granted the requested extension and reproduced the revised procedural timetable in the attachment to its letter dated 1 June 2017 ("Procedural Timetable").
83.
On 14 June 2017, the Respondent filed its Statement of Defence on the Merits and Memorial on Jurisdiction ("Statement of Defence on the Merits and Memorial on Jurisdiction").
84.
Pursuant to the Procedural Timetable, each side submitted to the other side a reasoned request for disclosure of documents ("Request to Produce"); and each side produced part of the requested documents while making reasoned objections with regard to the remainder of documents.
85.
On 17 August 2017, pursuant to the Procedural Timetable, the Parties submitted their applications to the Tribunal in the form of two separate Redfern Schedules, setting out any requests for the production of the documents that they maintained despite the other side's objections ("Applications to Order Production").
86.
On 31 August 2017, pursuant to the Procedural Timetable, the Parties submitted to the Tribunal their responses to the Applications to Order Production.
87.
By letter dated 6 September 2017, the Respondent submitted additional comments on the Claimants' Application to Order Production, alleging that the Claimants had submitted a new objection in relation to Nos 1, 2, 4, 7, 8, 9, 10, 11, 13, 16 and 34 of the Respondent's Request to Produce, and that the Claimants had apparently withdrawn their agreement to produce documents Nos 28(a) and (b) of the Respondent's Request to Produce.
88.
By e-mail dated 8 September 2017, the Tribunal invited the Claimants to provide any comments that they might have on the Respondent's letter of 6 September 2017. By letter of the same date, the Claimants provided their comments on the Respondent's letter, stating that the Claimants had previously raised the same objection in relation to Nos 1, 2, 4, 7, 8, 9, 10, 11, 13, 16 and 34 of the Respondent's Request to Produce, and that the Claimants' request to limit the scope of production regarding Nos 28(a) and (b) of the Respondent's Request to Produce was intended to avoid an unreasonable and disproportionate search.
89.
On 18 September 2017, the Tribunal issued Procedural Order No. 7 regarding the Parties' Applications for the Production of Documents.
90.
On 19 September 2017, the Claimants noted that the Tribunal did not indicate its decision on Request to Produce No 31 and requested the supplement of Annex B to Procedural Order No. 7 in this regard.
91.
On 22 September 2017, the Tribunal issued a revised version of Annex B to Procedural Order No. 7 including the Tribunal's decision in respect of Request to Produce No 31.
92.
On 10 October 2017, the Parties informed the Tribunal that they had agreed on a one-week extension of the deadline for the filing of Claimants' Reply to the Respondent's Statement of Defence on the Merits and Counter-Memorial on Jurisdiction to 9 November 2017, and on a corresponding extension of the filing of Respondent's Rejoinder on the Merits and Reply on Jurisdiction to 22 January 2018; as well as on the adjustment of the deadlines for the Claimants' Rejoinder on Jurisdiction and the submission of the notifications of witnesses and experts. On the same date, the Tribunal confirmed its agreement with the new Procedural Timetable.
93.
On 9 November 2017, the Claimants filed their Reply to the Respondent's Statement of Defence on the Merits and Counter-Memorial on Jurisdiction ("Reply to the Statement of Defence on the Merits and Counter-Memorial on Jurisdiction").
94.
On 18 January 2018, the Parties informed the Tribunal that they had agreed to a one-week extension of the due date for the filing of the Respondent's Rejoinder on the Merits and Reply on Jurisdiction, to 29 January 2018, with corresponding adjustments to subsequent deadlines. On the same date, the PCA acknowledged receipt of the Parties' communications.
95.
On 24 January 2018, the Tribunal approved the Procedural Calendar as adjusted.
96.
On 29 January 2018, the Respondent filed its Rejoinder on the Merits and Reply on Jurisdiction ("Rejoinder on the Merits and Reply on Jurisdiction").
97.
By letter dated 31 January 2018, the Claimants requested that the Tribunal exclude from the record of the arbitration the Expert Witness Statement of Mr. Evgenii Shilov, submitted together with the Rejoinder on the Merits and Reply on Jurisdiction.
98.
On 1 February 2018, the Tribunal acknowledged receipt of the Claimants' letter of 31 January 2018, and invited the Respondent to provide any comments that it might have by 6 February 2018.
99.
By letter dated 6 February 2018, the Respondent requested that the Tribunal dismiss the Claimants' application to exclude the Expert Witness Statement of Mr. Evgenii Shilov from the record.
100.
By letter dated 9 February 2018, the Tribunal informed the Parties that the Expert Witness Statement of Mr. Shilov was admissible and invited the Claimants to submit any comments and rebuttal evidence by 5 March 2018.
101.
On 26 February 2018, the Claimants filed their Rejoinder on Jurisdiction ("Rejoinderon Jurisdiction").
102.
By letter dated 26 February 2018, the Respondent enclosed the Witness Statement of Mr. Dmitry Antonenko and requested the Tribunal to admit it into evidence. The Respondent acknowledged that the Witness Statement was submitted after the deadline for production of evidence in these proceedings but asserted that Mr. Antonenko's testimony had only been available to the Respondent since the previous week.
103.
On the same date, the Claimants requested the Tribunal to disregard the Respondent's new evidence and its accompanying letter.
104.
By letter dated 27 February 2018, in view of the nature of the alleged new evidence and the Respondent's contention that it became aware of this evidence only the previous week, the Tribunal (1) provisionally admitted into the record the Witness Statement of Mr. Antonenko, subject to a later decision by the Tribunal; (2) invited the Claimants to submit any comments and rebuttal evidence which they might have by 5 March 2018; and (3) indicated that it would take a final decision as soon as practicable thereafter.
105.
On 5 March 2018, each side submitted notifications of the witnesses and experts whom they wished to examine at the Hearing and a chronological list of all exhibits with indications where the respective documents could be found in the file.
106.
On the same date, the Claimants submitted a letter with six enclosures pursuant to the Tribunal's invitation to the Claimants, by letter dated 9 February 2018, to provide comments on and rebuttal evidence to the Expert Witness Statement of Mr. Evgenii Shilov; and a second letter submitted pursuant to the Tribunal's invitation to the Claimants, by letter dated 27 February 2018, to provide comments on and rebuttal evidence to the Witness Statement of Mr. Dmitry Antonenko.
107.
By letter dated 6 March 2018, the Tribunal conveyed certain decisions to the Parties concerning matters raised in the Claimants' letters of 5 March 2018. Regarding the Claimants' letter providing comments on and rebuttal evidence to Mr. Shilov's Expert Witness Statement, the Tribunal (1) invited the Claimants to explain, in no more than two pages, in support of which facts they had submitted the six documents enclosed to such letter (C-318 to C-323) and/or the relevance of these documents to their case; and (2) invited the Respondent to provide any comments it might have on the Claimants' request of an order for the production of two documents by the Respondent and/or to provide the requested documents. Regarding the Claimants' letter providing comments on and rebuttal evidence to Mr. Antonenko's Witness Statement, the Tribunal (1) admitted such Witness Statement into the record, taking note of the Claimants' confirmation that they "do not object to the submission of the evidence"; (2) directed the Respondent to provide an unredacted version of Mr. Antonenko's Witness Statement to Claimants' counsel, on the conditions that access to the unredacted document would be restricted to Claimants' counsel at Freshfields Bruckhaus Deringer and any such information would not be disclosed to anybody beyond Claimants' counsel; and (3) invited the Respondent to provide any comments it might have on the Claimants' statement that they did not intend to call Mr. Antonenko for cross-examination if the Respondent provided that certain information identified in their letter be provided.
108.
By letter dated 9 March 2018, the Claimants explained the relevance of Exhibits C-318 to C-323 to their case.
109.
By letter of the same date, the Respondent objected to the Claimants' request of an order for production of the "USSR norms" applied by Mr. Shilov, of Mr. Shilov's "Labour Journal", and of Mr. Shilov's curriculum vitae, inter alia contending that the Claimants should have made a prompt reasoned document request before their comments and rebuttal evidence were due on 5 March 2018. Nevertheless, the Respondent indicated it would produce certain relevant USSR norms which, in any event, were publicly available. Regarding the Claimants' Exhibits submitted on 5 March 2018 (C-318 to C-323), the Respondent indicated that it would object to the Claimants making new arguments at the final hearing that had not been made in the various submissions that they had been ordered to file in this arbitration. Regarding the Claimants' request for the provision of certain information concerning Mr. Antonenko as a condition not to call him for cross-examination, the Respondent averred that there was no basis for the Claimants to issue interrogatories to the Respondent.
110.
By the same letter, the Respondent also requested that the Tribunal exclude from record Exhibits C-316 and C-317, submitted by the Claimants with their Rejoinder on Jurisdiction, on the basis that these documents did not concern any jurisdictional issue.
111.
On 12 March 2018, the Claimants submitted a letter in response to the Respondent's letter dated 9 March 2018. The Claimants asserted that their request for the production of the USSR norms and Mr. Shilov's Labour Journal were timely, noted that the documents provided by the Respondent were irrelevant and untranslated. The Claimants argued that their requests for information in relation to Mr. Antonenko were entirely reasonable questions and would alleviate the need to call him from cross-examination. Finally, the Claimants contended that Exhibits C-316 and C-317 formed part of an email chain already submitted as evidence by the Respondent as Exhibits R-408 to R-414.
112.
By letter dated 12 March 2018, the Respondent noted the Parties' inability to reach an agreement in connection with certain differences in translations submitted by the Parties. The Respondent requested that the Tribunal confirm its entitlement to challenge and make submissions in respect of the Claimants' translations at the final hearing. The Respondent also requested leave to admit into the record Exhibit R-498, consisting in a Russian-English dictionary entry for the term of "проект" ("project").
113.
On 12 March 2018, the Tribunal provided the Parties with a draft of Procedural Order No. 8 regarding details of the Hearing, inviting comments from the Parties by 19 March 2018.
114.
By letter dated 13 March 2018, the Respondent requested that the Tribunal exclude Exhibits C-318 to C-323 from the record, arguing that the Claimants had failed, in their letter dated 9 March 2018, properly to explain the relevance of these new Exhibits to the Claimants' allegations, and on what basis they would constitute a rebuttal of the Shilov Report.
115.
By letter dated 15 March 2018, the Claimants requested that all outstanding procedural issues be resolved by the Tribunal at the outset of the Hearing on 9 April or at a short pre-hearing conference, if necessary. As regards to the contested translations, the Claimants pointed out that this issue only became disputed after the Respondent's Rejoinder on the Merits and Reply on Jurisdiction was submitted, and that they had never disputed the Respondent's right to challenge the accuracy of the translations in accordance with Article 16.4 of Procedural Order No. 1. The Claimants objected to the Respondent's attempt to introduce Exhibit R-498 into the record. In the event that the Tribunal were to admit this Exhibit, the Claimants announced that they would request permission to submit new evidence in response. With regard to Exhibits C-318 to C-323, the Claimants averred that all of these Exhibits were relevant to the Shilov Report, as well as to the points that the Respondent would likely develop at the Hearing based on that Report. The Claimants also noted that one of the witnesses called for cross-examination by the Respondent, Mr. Rodney Irwin, had recently undergone neurosurgery and would be seeking on 23 March 2018 an specialist's opinion as to whether we was fit to travel and/or to be cross-examined. Finally, the Claimants sought the Tribunal's leave to submit as evidence a letter from Mr. Savchenko explaining his reasons for declining to participate in these proceedings as a witness.
116.
On 16 March 2018, the Claimants submitted a letter from clinical neuropsychologist Dr. Rees assessing Mr. Rodney Irwin's cognitive ability to testify as a witness during the Hearing.
117.
By letter dated 16 March 2018, the Respondent objected to the Claimants' application for leave to introduce a letter by Mr. Savchenko into the record. In the event that the Tribunal were to admit the letter, the Respondent requested permission to submit evidence in response.
118.
By letter dated 19 March 2018, the Tribunal conveyed to the Parties its decisions regarding the outstanding procedural issues. The Tribunal decided as follows: (1) Exhibits C-316 and C-317 were admitted into the record; (2) Exhibits C-318 to C-323 could be used at the Hearing only in relation to issues touched upon by the Shilov Report; (3) the Claimants' request of an order for the production of the USSR norms and Mr. Shilov's Labour Journal was denied; (4) the Tribunal decided not to formally order the Respondent to disclose the information requested by the Claimants in relation to Mr. Antonenko's Witness Statement, and invited the Claimants to indicate whether they still wished to call Mr. Antonenko for cross-examination by 21 March 2018; (5) the Tribunal confirmed that it remained open to the Parties to comment on the appropriateness of different translations at the Hearing as foreseen in Procedural Order No. 1, decided to admit Exhibit R-498 into the record, and, while it did not order the preparation of a certified translation, it reserved the right to do so, including if it would find at or after the Hearing that the differences in translation should be further clarified; (6) the Tribunal invited the Respondent to provide any comments on the Claimants' information concerning the availability of Mr. Irwin for cross-examination at the Hearing; and (7) the Tribunal noted the Parties' positions regarding the Claimants' request of leave to introduce into the record a letter from Mr. Savchenko, and announced that it would shortly revert to the Parties with a decision in this regard.
119.
On 19 March 2018, the Parties submitted their comments with regard to draft Procedural Order No. 8 regarding details of the Hearing. Taking the Parties' comments into account, the Tribunal issued Procedural Order No. 8 in its final form on 20 March 2018.
120.
By letter dated 21 March 2018, the Respondent provided its comments on the availability of Mr. Irwin for cross-examination at the Hearing.
121.
On 22 March 2018, pursuant to section 5.6 of Procedural Order No. 8, the Parties provided an agreed scheduling proposal indicating the order of appearance of witnesses and experts, the date and approximate time at which each witness or expert will be presented, and the approximate timing of breaks.
122.
By letter of 26 March 2018, the Claimants provided an updated chronological index of the Claimants' Factual Exhibits.
123.
By letter dated 28 March 2018, the Claimants confirmed that Mr. Irwin was able to attend the Hearing.
124.
By letter dated 28 March 2018, the Tribunal conveyed to the Parties, inter alia, that the Claimants' request for leave to introduce into the record a letter from Mr. Savchenko was denied.
125.
On 28 March 2018, the PCA invited the Parties to confirm whether, pursuant to section 15.4 of Procedural Order No. 1, interpretation services which might be required at the Hearing had been arranged by the Parties. On the same date, the Respondent confirmed that the Parties had arranged interpretation services for the Hearing. On 29 March 2018, the Claimants confirmed the Parties' arrangement in this regard.
126.
By letter of the same date, the Claimants requested permission to introduce two new Exhibits (C-324 and C-325) into the record in response to the filing by the Respondent of Exhibit R-498.
127.
By letter of 30 March 2018, the Claimants disclosed that they had entered into a new litigation funding agreement with Gillham LLC and Lucille Investments LLC, both entities within the Burford Capital Group.
128.
On 2 April 2018, the Tribunal admitted Exhibits C-324 and C-325 into the record.
129.
On 4 April 2018, the Claimants submitted copies of Exhibits C-324 and C-325, together with an updated Consolidated Index of the Claimants' Factual Exhibits and an updated Chronological Consolidated Index of the Claimants' Factual Exhibits.
130.
On 7 April 2018, both sides provided updates to their respective lists of Hearing attendees.

F. HEARING ON THE MERITS AND ANY REMAINING OBJECTIONS TO JURISDICTION

131.
The Hearing on the Merits and Any Remaining Objections to Jurisdiction took place between 9 and 13 April 2018 in Paris.
132.
The Claimants were represented at the Hearing by the following representatives and counsel:

Mr. Noah Rubins Dr. Daniel Müller
Ms. Mariia Puchyna
Ms. Shirin Chua
Mr. Joshua Kelly Ms. Anna Lanshakova
Ms. Francesca Lionetti
Freshfields Bruckhaus Deringer

Mr. Boris Aryev
Mr. Rodney Irwin
Stans Energy Corp

133.
The Respondent was represented at the Hearing by the following representatives and counsel:

Dr. Andrei Yakovlev
Mr. Wilson Antoon
Mr. Marco Toracca
Ms. Dina Suliman
Ms. Viktoriya Krasyuk
King & Wood Mallesons

Mr. Mirlan Dordoev
Centre for Court Representation for the Government of the Kyrgyz Republic

Mr. Eldiyar Mukanov
State Agency for Geology and Mineral Resources

134.

The following witnesses and experts gave oral evidence during the Hearing:

Mr. Boris Aryev
Mr. Rodney Irwin
Stans Energy Corp
as Fact Witnesses

Mr. Ermek Beysheyev
as Fact Witness

Mr. Evgenii Shilov
as Mining Expert

Mr. Santiago Dellepiane Avellaneda
Compass Lexecon
as Valuation Expert

Mr. Simon Maxwell Ziff
Ziff-Ivan Associates
as Valuation Expert

135.
On 11 April 2018, the Claimants provided electronic copies of Exhibits C-212, C-245, and C-250 containing a corrected Russian version of the respective documents.
136.
On the same date, the Respondent provided an electronic copy of the updated Exhibit R-141.
137.
On 17 April 2018, pursuant to section 3.4 of Procedural Order No. 8, the Respondent dispatched to the Tribunal members, the PCA, and Claimants' counsel, an electronic copy of the Respondent's Hearing Binder, witness and expert bundles, and demonstrative exhibits and presentations.
138.
On the same date, the Respondent also provided updated versions of the Respondent's Consolidated Index of Factual Exhibits and Chronological List of Factual Exhibits.
139.
On the same date, the Claimants, pursuant to section 3.4 of Procedural Order No. 8, submitted an electronic copy of the Claimants' Hearing Binder, and all witness and expert bundles, as well as electronic copies of updated Exhibits C-212, C-245, and C-250.
140.

On 19 April 2018, the Tribunal issued Procedural Order No. 9, Regarding Post-Hearing Procedures. Among other things, the Tribunal put the following questions to the Parties, which they might address in their post-hearing briefs:

Jurisdiction

1. Assuming that the Tribunal accepts the scheme described by Mr. Beysheyev in his witness testimony as true, what is the evidence on the record that the Claimants (i) were aware or (ii) could have been expected to be aware of it? Based on that evidence, what are the legal consequences for the Claimants' claims in these proceedings?

2. Assuming that the Tribunal concludes that the 29 December 2009 auction at the Central Asian Stock Exchange was contrary to Kyrgyz law, what is the evidence on the record that the Claimants (i) were aware or (ii) could have been expected to be aware of such unlawfulness? What would be the legal consequence if the auction was contrary to Kyrgyz law but the Claimants were unaware of it?

Merits

3. Was the Government legally entitled to revoke License No. 3, as a result of Kutisay Mining LLC's failure to comply with the terms of the Kutessay II License Agreement No. 3? Assuming that the Government was legally entitled to revoke the License, does there remain scope for compensation claims under the 2003 Investment Law in view of the work completed by the Claimants since 2009?

4. Assuming that the Tribunal adopts a market capitalization approach on damages (consistently with the Claimants' submission), what would be the amount of damages on the following hypothetical valuation dates: (i) 25 June 2012; (ii) 14 April 2013; (iii) 16 October 2014.

5. Assuming that the Tribunal adopts an income approach on damages based on DCF analysis (consistently with the Respondent's primary submission), what would be the amount of damages on the following hypothetical valuation dates: (i) 25 June 2012; (ii) 14 April 2013; (iii) 16 October 2014. To demonstrate the sensitivity of their models to particular parameters, the Parties are requested to indicate a value range for each valuation date, explaining how the results would change if the following inputs are used:

Parameter <= Range =>
Extraction rate 62.56% 72% (accounting for new processes that might have been introduced following VNIIHT studies)
Operating expenditures As in AsiaRud reports 25% lower (accounting for new processes that might have been introduced following VNIIHT studies)
Capital expenditures As in AsiaRud reports 25% higher (accounting for investments made to improve efficiency)
WACC 15.5% 20%
Forecast REE prices Visor Capital VisionGain Byron Capital

Should additional inputs be required, the Parties are requested to base their assessment on the information described in the AsiaRud reports.

6. Assuming that the Tribunal adopts a sunk costs approach on damages (consistently with the Respondent's submission in the alternative), what are the amounts expended by the Claimants by (i) 14 April 2013 and (ii) 16 October 2014? What is the evidence on the record that such expenditures were incurred?

7. The Parties' experts have conceded that each of them had less then optimal information for valuation purposes, which seems to have been a main reason for rejecting the methodology of the opposing side's expert (namely that the opposing methodology was inappropriate given the lack of information). If the Tribunal were to consider that in this case there is insufficient information for conventional valuation methodologies, what principles, if any, exist in international law to award damages for the loss of the investment and the chance to achieve its objective that a claimant has suffered as a result of a taking? If there are any such principles, how are they to be applied, and is there a difference in measurement of damages between lawful expropriation and unlawful expropriation?

141.
By letter dated 18 May 2018, pursuant to section 2.3 of Procedural Order No. 9, the Claimants requested leave to submit new documents into the record.
142.
On 21 May 2018, the Respondent informed the Tribunal that, in order to properly consider the Claimants' application, the Respondent had requested copies of the new documents, following the receipt of which, the Respondent requested to be afforded an opportunity to consider and, if necessary, comment on the Claimants' application.
143.
On 22 May 2018, in order to provide the Respondent with a meaningful opportunity to comment on the Claimants' request for leave to introduce new documents into the record, the Tribunal invited the Claimants to share the documents in question with the Respondent, and requested the Respondent to submit any comments it may have within three days after the receipt of the documents. In case a decision from the Tribunal were to be required, the Claimants were requested to share the documents in question with the Tribunal to enable the latter to appreciate the Respondent's comments.
144.
On the same date, the Claimants informed the Tribunal that they had shared copies of the documents referred to in the Claimants' request for leave and which were already in their possession with the Respondent, and had also informed the Respondent that they were in the process of collating documents which they would share as soon as they were received.
145.
By letter dated 25 May 2018, the Respondent provided comments in response to the Claimants' request, enclosing copies of the new documents and other documents.
146.
By letter dated 28 May 2018, the Tribunal decided that: "1) All documents mentioned in the Claimants' application are admitted into the record; 2) The Respondent is given leave to submit, with its Post-Hearing Brief, any new documents it considers relevant in rebuttal to the Claimants' new documents or to the questions of the Tribunal in the Annex to Procedural Order No. 9; 3) The Parties may comment on the new documents submitted by the other side in their second-round Post-Hearing Briefs, due by 13 July 2018."
147.
On 7 June 2018, the Parties informed the Tribunal that they had reached agreement on the extension of the deadlines set out in Procedural Order No. 9. On the same date, the Tribunal confirmed that the requested extensions were approved.
148.
On 29 June 2018, both sides simultaneously submitted their Post-Hearing Briefs with enclosures.
149.
On 17 August 2018, both sides simultaneously submitted their Reply Post-Hearing Briefs with enclosures.
150.
By letter dated 21 August 2018, the Respondent objected to portions of the Claimants' Reply Post-Hearing Brief, notably in respect of a new argument on estoppel presented by the Claimants therein, and certain new evidence and requested that these be struck from the record.
151.
On 29 August 2018, the Tribunal indicated that it took the Respondent's objection to portions of the Claimants' Reply Post-Hearing Brief and certain evidence relied upon by the Claimants under advisement. The Tribunal would consider and take a decision on the admissibility of these materials in the context of its deliberations in respect of the Award in the present proceedings.
152.
On 26 September 2018, the Parties conveyed their agreement to extend the deadlines for the Submissions on Costs and the Comments on opposing side's Submissions on Costs. On 27 September 2018, the Tribunal approved the extension requested by the Parties.
153.
On 5 October 2018, both sides simultaneously filed their Submissions on Costs.
154.
On 2 November 2018, both sides simultaneously submitted their comments on the opposing side's Submission on Costs.

III. THE PARTIES' REQUESTS

A. THE CLAIMANTS' REQUESTS

155.

The Claimants, in their Statement of Claim, requested that the Tribunal:

(a) DECLARE that:

(i) The Kyrgyz Republic has breached its obligations toward Claimants under the Kyrgyz Investment Law, the Moscow Convention, the Investment Protection Decree and international law by expropriating the Claimants' investments in the Kyrgyz Republic; and

(ii) The Kyrgyz Republic has breached its obligations toward Claimants under the Kyrgyz Investment Law, the Moscow Convention, the Investment Protection Decree and international law by failing to accord the Claimants' investments fair and equitable treatment, and full protection and security;[69]

(b) ORDER the Kyrgyz Republic to pay the Claimants compensation for the injury caused by its breaches of the Kyrgyz Investment Law, the Moscow Convention, the Investment Protection Decree and international law in the amount of US$128.23 million;

(c) ORDER the Kyrgyz Republic to pay pre-award interest on (b) above, calculated from 25 June 2012 at the rate of 15.5%, accruing on a compounded basis until the date of the Tribunal's Award or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(d) ORDER the Kyrgyz Republic to pay post-award interest on (b) and (c) above, at a rate of 15.5% per annum from the date of the Tribunal's Award, compounded semi-annually, or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(e) DECLARE that:

(i) The award of damages and interest in (b), (c) and (d) is made net of applicable Kyrgyz taxes; and

(ii) The Kyrgyz Republic may not deduct taxes in respect of the payment of the award of damages and interest in (b), (c) or (d);

(f) ORDER the Kyrgyz Republic to compensate the Claimants in respect of any double taxation liability that would arise in Canada or elsewhere that would not have arisen but for the Kyrgyz Republic's adverse measures;

(g) AWARD such other relief as the Tribunal considers appropriate; and

(h) ORDER the Kyrgyz Republic to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and the administrative costs of the PCA.70

156.

In their Reply to the Statement of Defence on the Merits and Counter-Memorial on Jurisdiction, the Claimants requested that the Tribunal:

(a) REJECT the objections to jurisdiction and admissibility made by the Kyrgyz Republic;

(b) DECLARE that:

(i) The Kyrgyz Republic has breached its obligations toward Claimants under the 2003 Investment Law and international law by expropriating the Claimants' investments in the Kyrgyz Republic; and

(ii) The Kyrgyz Republic has breached its obligations toward Claimants under the 2003 Investment Law and international law by failing to accord the Claimants' investments fair and equitable treatment;[71]

(c) ORDER the Kyrgyz Republic to pay the Claimants compensation for the injury caused by its breaches of the 2003 Investment Law and international law in the amount of US$128.23 million;

(d) ORDER the Kyrgyz Republic to pay pre-award interest on (c) above, calculated from 25 June 2012 at the rate of 15.5% per annum, accruing on a compounded basis until the date of the Tribunal's Award or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(e) ORDER the Kyrgyz Republic to pay post-award interest on (c) and (d) above, at a rate of 15.5% per annum from the date of the Tribunal's Award, compounded semi-annually, or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(f) DECLARE that:

(i) The award of damages and interest in (c), (d) and (e) is made net of applicable Kyrgyz taxes; and

(ii) The Kyrgyz Republic may not deduct taxes in respect of the payment of the award of damages and interest in (c), (d) or (e);

(g) ORDER the Kyrgyz Republic to compensate the Claimants in respect of any double taxation liability that would arise in Canada or elsewhere that would not have arisen but for the Kyrgyz Republic's adverse measures;

(h) AWARD such other relief as the Tribunal considers appropriate; and

(i) ORDER the Kyrgyz Republic to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and the administrative costs of the PCA.72

157.

In their Rejoinder on Jurisdiction, the Claimants requested that the Tribunal:

(a) REJECT the objections to jurisdiction and admissibility made by the Kyrgyz Republic;

(b) DECLARE that:

(i) The Kyrgyz Republic has breached its obligations toward Claimants under the 2003 Investment Law and international law by expropriating the Claimants' investments in the Kyrgyz Republic; and

(ii) The Kyrgyz Republic has breached its obligations toward Claimants under the 2003 Investment Law and international law by failing to accord the Claimants' investments fair and equitable treatment;

(c) ORDER the Kyrgyz Republic to pay the Claimants compensation for the injury caused by its breaches of the 2003 Investment Law and international law in the amount of US$128.23 million;

(d) ORDER the Kyrgyz Republic to pay pre-award interest on (c) above, calculated from 25 June 2012 at the rate of 15.5% per annum, accruing on a compounded basis until the date of the Tribunal's Award or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(e) ORDER the Kyrgyz Republic to pay post-award interest on (c) and (d) above, at a rate of 15.5% per annum from the date of the Tribunal's Award, compounded semi-annually, or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(f) DECLARE that:

(i) The award of damages and interest in (c), (d) and (e) is made net of applicable Kyrgyz taxes; and

(ii) The Kyrgyz Republic may not deduct taxes in respect of the payment of the award of damages and interest in (c), (d) or (e);

(g) ORDER the Kyrgyz Republic to compensate the Claimants in respect of any double taxation liability that would arise in Canada or elsewhere that would not have arisen but for the Kyrgyz Republic's adverse measures;

(h) AWARD such other relief as the Tribunal considers appropriate; and

(i) ORDER the Kyrgyz Republic to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and the administrative costs of the PCA.73

158.

In their Post-Hearing Brief, the Claimants requested that the Tribunal:

(a) REJECT the objections to jurisdiction and admissibility made by the Kyrgyz Republic;

(b) DECLARE that:

(i) The Kyrgyz Republic breached its obligations toward the Claimants under the 2003 Investment Law and international law by expropriating the Claimants' investments in the Kyrgyz Republic; and

(ii) The Kyrgyz Republic breached its obligations toward the Claimants under the 2003 Investment Law and international law by failing to accord the Claimants' investments fair and equitable treatment;

(c) ORDER the Kyrgyz Republic to pay the Claimants compensation for the injury caused by its breaches of the 2003 Investment Law and international law in the amount of US$128.23 million;

(d) ORDER the Kyrgyz Republic to pay pre-award interest on (c) above, calculated from 25 June 2012 at the rate of 15.5% per annum, accruing on a compounded basis until the date of the Tribunal's Award or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(e) ORDER the Kyrgyz Republic to pay post-award interest on (c) and (d) above, at a rate of 15.5% per annum from the date of the Tribunal's Award, compounded semi-annually, or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(f) DECLARE that:

(i) The award of damages and interest in (c), (d) and (e) is made net of applicable Kyrgyz taxes; and

(ii) The Kyrgyz Republic may not deduct taxes in respect of the payment of the award of damages and interest in (c), (d) or (e);

(g) ORDER the Kyrgyz Republic to indemnify the Claimants in respect of any tax imposed on the Tribunal's award;

(h) AWARD such other relief as the Tribunal considers appropriate; and

(i) ORDER the Kyrgyz Republic to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and the administrative costs of the PCA.74

159.

In their Reply Post-Hearing Brief, the Claimants requested that the Tribunal:

(a) REJECT the objections to jurisdiction and admissibility made by the Kyrgyz Republic;

(b) DECLARE that:

(i) The Kyrgyz Republic breached its obligations toward the Claimants under the 2003 Investment Law and international law by expropriating the Claimants' investments in the Kyrgyz Republic; and

(ii) The Kyrgyz Republic breached its obligations toward the Claimants under the 2003 Investment Law and international law by failing to accord the Claimants' investments fair and equitable treatment;

(c) ORDER the Kyrgyz Republic to pay the Claimants compensation for the injury caused by its breaches of the 2003 Investment Law and international law in the amount of US$128.23 million;

(d) ORDER the Kyrgyz Republic to pay pre-award interest on (c) above, calculated from 25 June 2012 at the rate of 15.5% per annum, accruing on a compounded basis until the date of the Tribunal's Award or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(e) ORDER the Kyrgyz Republic to pay post-award interest on (c) and (d) above, at a rate of 15.5% per annum from the date of the Tribunal's Award, compounded semi-annually, or at such other rate and compounding period as the Tribunal determines will ensure full reparation;

(f) DECLARE that:

(i) The award of damages and interest in (c), (d) and (e) is made net of applicable Kyrgyz taxes; and

(ii) The Kyrgyz Republic may not deduct taxes in respect of the payment of the award of damages and interest in (c), (d) or (e);

(g) ORDER the Kyrgyz Republic to indemnify the Claimants in respect of any tax imposed on the Tribunal's award;

(h) AWARD such other relief as the Tribunal considers appropriate; and

(i) ORDER the Kyrgyz Republic to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and the administrative costs of the PCA75.

B. THE RESPONDENT'S REQUESTS

160.

In its Statement of Defence on the Merits and Memorial on Jurisdiction, the Respondent requested the following relief:

830.1 a declaration and order that the Tribunal lacks jurisdiction over the Claimants' claims;

830.2 further or in the alternative, a declaration and order that the Claimants' claims are inadmissible;

830.3 further or in the alternative, an order that the Claimants' claims be dismissed on the merits;

830.4 an order awarding the Respondent the costs associated with this arbitration, including, but not limited to, fees and expenses of the arbitral tribunal, costs of expert advice, costs of legal representation, fees and expenses of the appointing authority and expenses of the Secretary General of the Permanent Court of Arbitration, and all other professional fees, disbursements and expenses, plus interest thereon;

830.5 an order apportioning any remaining costs of arbitration in a manner such that one hundred per cent of such costs are borne by the Claimants; and

830.6 such further and other relief as the Tribunal sees fit.76

161.

In its Rejoinder on the Merits and Reply on Jurisdiction, the Respondent requested the following relief:

702.1 a declaration and order that the Tribunal lacks jurisdiction over the Claimants' claims;

702.2 further or in the alternative, a declaration and order that the Claimants' claims are inadmissible;

702.3 further or in the alternative, an order that the Claimants' claims be dismissed on the merits;

702.4 an order awarding the Respondent the costs associated with this arbitration, including, but not limited to, fees and expenses of the arbitral tribunal, costs of expert advice, costs of legal representation, fees and expenses of the appointing authority and expenses of the Secretary General of the Permanent Court of Arbitration, and all other professional fees, disbursements and expenses, plus interest thereon;

702.5 an order apportioning any remaining costs of arbitration in a manner such that one hundred per cent of such costs are borne by the Claimants; and

702.6 such further and other relief as the Tribunal sees fit.77

162.
In its Post-Hearing Brief, the Respondent "respectfully request[ed] the relief stated in paragraph 702 of R[espondent]'s Rejoinder dated 29 January 2018."78

IV. SUMMARY OF RELEVANT FACTS

163.
The Parties' dispute arises from efforts by Stans Energy to invest in two mines for the extraction of so-called rare earth elements in the Kyrgyz Republic. Both sides have described the factual background in great detail. In the following, the Tribunal shall summarize these facts only insofar as the Tribunal regards it as necessary for its decision.

A. RARE EARTH ELEMENTS MARKETS

164.
Rare earth elements ("REEs") are comprised of chemical elements, which are useful in a wide variety of applications including batteries, catalysts, magnets, and phosphors.79 There are two categories of REEs: (1) light rare-earth elements ("LREEs") and (2) heavy rare-earth elements ("HREEs").80 As the word "rare" indicates, it is difficult to find ore deposits containing sufficient amounts of REEs for commercial exploitation.81
165.

The global production of REEs started increasing in the 1950s and 1960s.82 According to the US Geological Survey Factsheet 087-02,83 at that time, countries other than the United States and China dominantly supplied REEs produced from Monazite-placers.84 In the mid-1960s, Mountain Pass, mine in California, the United States, began REEs production and remained as the largest REEs mine until the mid-1980s, when China began increasing its REEs production.85 China became the largest REEs supplier in the early 1990s, and established its dominant position in the early 2000s.86

Source: Statement of Claim, after para. 22.

166.
REEs prices remained low until 2009, when China introduced an export quota on its REEs exports.87 REEs prices rose significantly from 2010, and peaked in April 2011.88 Since then, however, REEs prices have dropped significantly, once Chinese export restrictions were eased.89
167.

The Parties have different views regarding the prospect of REEs business of today. The Claimants allege that, because China dominates the worldwide REEs supply, "there continues to be significant strategic value in non-Chinese deposits capable of commercial production of REEs".90 The Respondent, on the contrary, alleges that the REEs business is no longer profitable as the global REEs market is expected to continue to decline until at least 2018.91

 

Source: Statement of Defence on the Merits and Memorial on Jurisdiction, after para. 26.

B. THE KYRGYZ REPUBLIC

168.
The Kyrgyz Republic is a country in Central Asia. It formed part of the Union of Soviet Socialist Republics ("USSR") together with other 14 republics until 1991.92 On 25 December 1991, following the disestablishment of the USSR, the Kyrgyz Republic declared independence.93
169.
The first president of the Kyrgyz Republic was Askar Akayev, whose presidency continued until the Tulip Revolution of 2005.94 The successor of Mr. Akayev was Kurmanbek Bakiev.95 Mr. Bakiev was in office until April 2010, when protests against his presidency spread throughout the country and opposition leaders established an interim government.96 On 15 April 2010, Mr. Bakiev resigned and fled to Belarus.97
170.
In June 2010, a new Constitution was approved in a national referendum. Pursuant to this new Constitution, parliamentary elections were held in October 2010 and a new government was formed in December 2010.98
171.
The Respondent alleges that the Bakiev regime was corrupt.99 According to the Respondent, bribes were laundered through AsiaUniversalBank ("AUB"),100 a Kyrgyz bank incorporated in August 1997, and the Claimants obtained their mining licenses through this money laundering scheme.101 The Claimants, however, deny any involvement in corruption.102

C. STANS ENERGY'S INVESTMENTS IN THE KYRGYZ REES SECTOR

172.
Beginning in 2005, the Claimants made various investments in the Kyrgyz Republic. Following initial investments by the Claimants in the uranium sector, they proceeded to acquire investments in the REEs sector. It is the alleged expropriation of these latter investments that forms the basis of the present dispute.

1. Stans Energy's Investments in the Kyrgyz Uranium Sector

173.
Stans Energy's activities in the Kyrgyz Republic began with its investments in the uranium sector.103 In 2005, Mr. Boris Aryev, founder and COO of Stans Energy, and his business partner, Mr. Albert Grenke, decided to invest in the Kyrgyz uranium sector.104 In July 2005, they identified three potential uranium properties: (1) Shaltin, (2) Kyzyluraan; and (3) Kapkatash.105 According to the First Witness Statement of Mr. Aryev, in the fall of 2005, they obtained prospecting licenses for the three uranium properties from the SAGMR through Viol Grand Ltd, a Kyrgyz company that Mr. Aryev and Mr. Grenke had acquired.106
174.
On 26 September 2005, Stans Energy was incorporated under the laws of Ontario, Canada, for the purpose of investing the Kyrgyz uranium sector.107 According to the First Witness Statement of Mr. Aryev, the founding directors were Mr. Aryev and Mr. Robert Mackay, a Toronto-based financier.108
175.
In March 2006, Stans Energy incorporated its local subsidiary in the Kyrgyz Republic, Stans KG, to hold its assets, including the licenses which had been previously acquired by Viol Grand Ltd.109 According to the First Witness Statement of Mr. Aryev, under Kyrgyz law only Kyrgyz companies may hold licenses and assets, and conduct business in the Kyrgyz Republic.110
176.
In 2006 and 2007, Stans Energy added four further licenses for uranium properties at Alamudun, Alabuga,111 Baetov and Koshdube.112 In late 2007, Stans Energy participated in the tender for the Kara-Balty uranium processing facility held by the Kyrgyz State Property Management Fund but its US$ 5 million bid was unsuccessful.113 In December 2008, Stans Energy listed on the Toronto Stock Venture Exchange ("TSXV") through a reverse takeover, merging with JM Capital Corp.114 The Claimants indicate that, by the end of 2008, Stans Energy had invested approximately C$ 5 million in the Kyrgyz uranium sector.115
177.
In June 2009, Stans Energy returned the Kapkatash and Shaltin properties to the Kyrgyz State Geological Agency.116 In 2011, Stans Energy relinquished its rights to the Alabuga, Baetov and Koshdube properties.117 Since then, Stans Energy has held only one uranium licence in the Kyrgyz Republic, known as Kargysh, which was part of the original Kyzyluraan license and is currently in the process of being relinquished.118
178.
The Parties hold different views of Stans Energy's investments in the uranium sector. The Claimants state that their investments were initially promising but "a combination of falling uranium prices and the 2008 global financial crisis impeded Stans' prospects of raising the financing needed to advance development."119 The Respondent, on the other hand, observes that the uranium properties were "loss-making" from the beginning, considering that "at the time the Claimants decided to invest between 2006 and 2007, uranium mining in the Kyrgyz Republic was not the most promising area of investment".120

2. Acquisition of the Licenses for Kutessay II and Kalesay

179.

Retreating from the uranium sector, Stans Energy was looking for another investment target in the Kyrgyz Republic.121 The Claimants aver that, being aware that the REEs prices were increasing, and following advice from Dr. Savchenko, Former Deputy Director of the Geology and Investment Department of the Kyrgyz State Agency for Geology and Mineral Reserves, Stans began to review the potential for rare earth exploration of the Aktyuz Ore Field, where Kutessay II rare earth deposit ("Kutessay II") and Kalesay beryllium deposit ("Kalesay") were located.122 In contrast, the Respondent defines the Claimants' activity as "speculative license grabbing"123 and asserts that Stans Energy:

never constructed, developed or operated a mine in the Kyrgyz Republic or anywhere else in the world. It has also received no revenue to date from exploration or development […] if the Claimants are awarded even a small fraction of this sum [of their damages request], this arbitration will represent the only successful business venture in Stans Energy's corporate history.124

180.
Kutessay II was discovered in 1953 and put into operation in 1958.125 Since then, the mine had produced 80% of the USSR's REEs until 1992.126
181.
After the dissolution of the USSR, Kutessay II was abandoned for approximately 15 years.127 In 2006, the Kyrgyz Republic opened a public bidding process for the Kutessay II and Kalesay deposits, and Central Asia Metals Group LLC ("CAMG") won the tender with a bid of approximately US$ 50,000.128 On 15 November 2006, the Kyrgyz Republic issued its licence to CAMG.129
182.
On 30 December 2008, the Kyrgyz government issued Resolution No 736 On Measures for Implementing Requirements of the Tax Code of the Kyrgyz Republic (amended by Resolution No 410 of 25 June 2009; "Resolution No 736"), which stipulated a list of (1) known mineral deposits for tender in the Kyrgyz Republic and (2) tariffs for each deposit.130 This Resolution listed tariff rates for Kutessay II and Kalesay as US$ 392,220 and US$ 35,103, respectively.131
183.
Stans Energy learned about an investment opportunity in Kutessay II in June 2009, when Mr. Aryev met with the then Minister of Natural Resources of the Kyrgyz Republic, Mr. Kapar Kurmanaliev.132 During the meeting, Mr. Aryev expressed his interest in the REEs sector, and Mr. Kurmanaliev explained that CAMG had not fulfilled its license obligations regarding Kutessay II and Kalesay and that the Kyrgyz Republic was seeking a new investor for these deposits.133 According to the meeting minutes of the Board of Directors of Stans Energy, Stans Energy was "offered to acquire Kutessay II for US$432,000 as per Kyrgyz Law."134
184.
According to the meeting minutes of the Board of Directors of Stans Energy on 9 October 2009, the Board of Directors of Stans Energy resolved that it "desires to acquire Kutessay II and approve raising of US$ 600,000".135 According to the exhibits submitted by the Claimants, on 15 October 2009, Stans Energy's Chairman of the Board of Directors, Ambassador Rodney Irwin, sent a letter to Minister Kurmanaliev stating that "we would like to ask you to consider issuance to our subsidiary «Stans Energy Kg» licenses to develop Kutessay II and Kalesay deposits without tender with the bonus payment in the abovementioned amount [of US$ 427,323 (392,220+35,103)]."136 This amount of US$ 427,323 corresponded to the sum of the tariff rates for Kutessay II (US$ 392,220) and Kalesay (US$ 35,103) stipulated in Resolution No. 736.137 Stans Energy eventually paid double this amount, as described below.138
185.
In November 2009, Stans Energy's management travelled to the Kyrgyz Republic to finalize the license deal.139 They met with Minister Kurmanaliev and Dr. Alexei Eliseev, the head of Kyrgyz Republic Development Fund ("Development Fund").140 The Development Fund is a State-owned closed joint-stock company established in August 2008 by Resolution No. 469 for the purposes of developing and stimulating the priority and strategic sectors of the Kyrgyz Republic.141
186.
The Parties are in disagreement as to the relationship of Mr. Eliseev with the Kyrgyz Government. The Respondent argues that Mr. Eliseev did not hold any post with the Respondent.142 On the other hand, the Claimants deem the Respondent's denial at the Hearing of Mr. Eliseev's status as a State official as "an attempt to downplay the assurances provided" by him.143 The Claimants also note that the Respondent's position throughout these proceedings had been that Mr. Eliseev was a "public official" in connection with bribery allegations.144 According to the Claimants, the acts of the Development Fund as well as the statements made by Mr. Eliseev are attributable to the Respondent.145
187.
The Claimants aver that Mr. Eliseev assured Mr. Aryev "that the procedure for issuing the licenses was lawful and that Stans' licenses would be secure".146 According to Mr. Aryev's First Witness Statement, Mr. Eliseev told them that the licenses would be issued through a "bullet-proof" process and that no one would be able to challenge Stans Energy's rights in the future.147 According to Mr. Aryev's First Witness Statement, at another meeting, Mr. Eliseev informed him that his team had figured out how to set up such a "bullet-proof" procedure for Stans Energy to obtain the Licenses.148 According to the Respondent, on the other hand, "Stans Energy and several corrupt members of the Bakiev regime concocted an ad-hoc, convoluted and illegal scheme which they (quite remarkably) referred to as 'bullet-proof' scheme which was designed to ensure that the Claimants obtained the Licenses without the required competitive tender".149
188.
According to the Claimants, after the final meeting, Minister Kurmanaliev telephoned Mr. Aryev, and demanded double the tariff rates stipulated in Resolution No. 736.150 The Minister purportedly described that the additional payment would be used for the activities of the Development Fund.151 According to Mr. Aryev's First Witness Statement, he replied to the Minister that Stans Energy would discuss this matter at the Board and inform the Minister of the result in due course.152 After Mr. Aryev's return to Canada, Stans Energy discussed this matter internally, and consulted with Novadan Capital, a Toronto-based investment fund providing financial support for Stans Energy.153 According to Mr. Aryev's First Witness Statement, Stans Energy then decided to accept Minister Kurmanaliev's invitation to pay double the tariff rates.154
189.

The Subsoil Law of the Kyrgyz Republic of 24 June 1997, as in effect in December 2009 ("Subsoil Law"), established two possible procedures for granting subsoil licenses: (1) tenders; and (2) direct negotiations.155 Article 16 of the Subsoil Law provided:

[Claimants' translation] [Respondent's translation]

Article 16. Procedure for Granting Subsoil Use Rights

Subsoil use rights shall be granted by holding tenders and direct negotiations.

Tenders shall be announced and held for gold ore, oil, gas and other sites of national significance by decision of the Government of the Kyrgyz Republic. The terms and conditions of the tender and the winning bidder shall be determined by the tender committee of the Government of the Kyrgyz Republic to be appointed for each particular site.

Subsoil use rights by way of direct negotiations shall be granted on application by natural persons and legal entities by the state subsoil use authority to be determined by the Government of the Kyrgyz Republic. The application must contain information about the applicant, and the location and type of subsoil use. The following documents shall be annexed to the application:

- copies of the constitutive documents and charter for legal entities, or registration documents for natural persons;

- geological survey or development program or program of construction and operation of underground structures not connected with the extraction of minerals at the site in question, with consolidated technical and economic assessment of capital investments, operating expenses, revenues and project profitability;

- statement of availability of financing for the works envisaged at the subsoil site in question pursuant to the submitted development program.

The application for the right to use the subsoil site and materials annexed thereto shall be considered by the state subsoil use authority within a period of up to one month.

The right to use the subsoil or the right to participate in a tender may be denied if the applicant:

- provides false information about itself;

- does not have the required financial resources for the efficient and technically and environmentally safe development of the subsoil site.

Licensing of subsoil use and preparation of license agreements for work design between licensor and licensee shall be performed by the state subsoil use authority on the basis of a decision taken by the tender committee of the Government of the Kyrgyz Republic with respect to the sites subject to tender and approved by the Government of the Kyrgyz Republic, or on the basis of the minutes issued by the state subsoil use authority.

Within the time limits stipulated by the license agreement, the licensee shall submit to the state subsoil use authority an engineering design for the works together with expert opinions on the technical and environmental safety, subsoil protection, and certificate(s) for the right of temporary use of the land plot during development of the mineral deposits or a written consent to geological survey from the owner of the land rights.

Conducting works that entail breaching the subsoil integrity before the engineering design is approved shall be prohibited.

Regulations on the procedure for licensing of subsoil use and the lists of common mineral deposits and deposits of local significance shall be approved by the Government of the Kyrgyz Republic.156

Article 16. Procedure for Granting Subsoil Use Rights

Subsoil use rights shall be granted by holding tenders and direct negotiations.

Tenders shall be announced and held for gold ore, oil, gas and other sites of national significance by decision of the Government of the Kyrgyz Republic. The terms and conditions of the tender and the winning bidder shall be determined by the tender committee of the Government of the Kyrgyz Republic to be appointed for each particular site.

Subsoil use rights by way of direct negotiations shall be granted on application by natural persons and legal entities by the state subsoil use authority to be determined by the Government of the Kyrgyz Republic. The application must contain information about the applicant, and the location and type of subsoil use. The following documents shall be annexed to the application:

- copies of the constitutive documents and charter for legal entities, or registration documents for natural persons;

- geological survey or development project or project of construction and operation of underground structures not connected with the extraction of minerals at the site in question, with consolidated technical and economic assessment of capital investments, operating expenses, revenues and project profitability;

- statement of availability of financing for the works envisaged at the subsoil site in question pursuant to the submitted development project.

The application for the right to use the subsoil site and materials annexed thereto shall be considered by the state subsoil use authority within a period of up to one month.

The right to use the subsoil or the right to participate in a tender may be denied if the applicant:

- provides false information about itself;

- does not have the required financial resources for the efficient and technically and environmentally safe development of the subsoil site.

Licensing of subsoil use and preparation of license agreements for work design between licensor and licensee shall be performed by the state subsoil use authority on the basis of a decision taken by the tender committee of the Government of the Kyrgyz Republic with respect to the sites subject to tender and approved by the Government of the Kyrgyz Republic, or on the basis of the minutes issued by the state subsoil use authority.

Within the time limits stipulated by the license agreement, the licensee shall submit to the state subsoil use authority a technical project for the works together with expert opinions on the technical and environmental safety, subsoil protection, and certificate(s) for the right of temporary use of the land plot during development of the mineral deposits or a written consent to geological survey from the owner of the land rights.

Conducting works that entail breaching the subsoil integrity before the a technical project is approved shall be prohibited.

Regulations on the procedure for licensing of subsoil use and the lists of common mineral deposits and deposits of local significance shall be approved by the Government of the Kyrgyz Republic.157

 

190.
Paragraph 2 of Article 16 of the Subsoil Law provided that tender procedures must be held for granting subsoil rights regarding "gold ore, oil, gas and other sites of national significance".158 According to the Respondent, such "other sites of national significance" were specified by Resolution No. 736, which provided a list of mineral deposits to be allocated by tender, including Kutessay II and Kalesay.159 Paragraph 3 of Article 16 required, with regard to direct negotiations, that an applicant submit certain documentations upon its application.160
191.
On 1 December 2009, the Kyrgyz Government issued Resolution No 725 of 1 December 2009 on the Development of Competitive Procedures for Granting Subsoil Use Rights ("Resolution No 725"), which permitted the Ministry of Natural Resources to issue mining licenses without a tender to entities wholly managed by the Development Fund, for subsequent sale of these entities by auction at stock exchange.161 According to the Claimants, Stans Energy obtained the Kutessay II and Kalesay Licenses in accordance with this process, without a tender procedure, by purchasing Kutisay Mining JSC.162
192.
As regards the first step of the process, on 9 December 2009, Kutisay Mining Open Joint Stock Company ("Kutisay Mining OJSC") was incorporated by Vesatel United Limited ("Vesatel (NZ)"), a New Zealand company.163 Kutisay Mining OJSC issued 19 million shares at incorporation, the value of which was KGS 1 per share.164 On the same day, an individual named Mr. Khalil Akylbekov deposited KGS 19 million in cash to Kutisay Mining OJSC's bank account at AUB to satisfy the mandatory capital requirement under Kyrgyz corporate law.165 On 16 December 2009, Vesatel (NZ) transferred all of its 19 million common shares in Kutisay Mining OJSC to the Development Fund to be held in trust.166
193.
According to the exhibits submitted by the Claimants, Kutisay Mining OJSC filed applications requesting the issuance of subsoil licenses for Kutessay II and Kalesay (File No 1349 and 1350 dated 21 December 2009).167 After discussion, on 21 December 2009, the SAGMR and Kutisay Mining OJSC agreed that the SAGMR would issue the Kutessay II License and the Kalesay License to Kutisay Mining OJSC for a period of 20 years (until 21 December 2029) in return for payment of statutory tariffs amounting to US$392,220 for Kutessay II and US$35,103 for Kalesay, and subject to certain conditions which would have to be fulfilled by Kutisay Mining OJSC.168 This agreement is recorded in the Minutes No 1736-N-09 ("21 December 2009 Minutes").169 On the same day, the SAGMR and Kutisay Mining OJSC entered into license agreements with regard to Kutessay II and Kalesay (respectively, "Kutessay II License Agreement No. 1" and "Kalesay License Agreement No. 1"; and collectively "License Agreements No. 1"), which set out the conditions for the mining activities under the Licences.170
194.
As regards the second step of the process, on 29 December 2009, the Central Asian Stock Exchange ("CASE") held an auction for all of the 19 million shares of Kutisay Mining OJSC.171
195.
While the Claimants allege that "the Development Fund and other State agencies organised the process,"172 the Respondent argues that CASE is "a commercial entity unrelated to the State," and the seller was Vesatel, "a company incorporated in New Zealand and not owned by the State."173 The Respondent contends that the Claimants knew that the seller was Vesatel before the auction took place or, alternatively, "at the absolute latest before the transaction completed on 19 January 2010."174 According to the Respondent, Vesatel was "readily identifiable" in the basic transaction documents in the possession of the Claimants,175 and "it defies credibility that a serious publicly-listed company would engage in this transaction without knowing the identity of the actual seller and registered owner of the target company[…]"176 In any event, the Respondent asserts that the Claimants should have known the identity of the seller pursuant to their duty to conduct due diligence.177
196.
On the other hand, the Claimants argue that they had no opportunity to discover the identity of Kutisay Mining OJSC's shareholder, Vesatel (NZ), until after the acquisition of the company.178 They allege that "[t]he corporate structures used by the Development Fund were within its discretion, and Stans Energy sought and received an explanation from Mr Eliseev about the Fund's use of a New Zealand entity[…]"179 The Claimants also contend that their additional due diligence conducted after the acquisition of the Licenses did not reveal any concern over the legitimacy of the Licenses and its purchasing process.180
197.
According to the Respondent, at the auction there was another bidder, Gremar Assets SA ("Gremar"), a Panama-registered company, which ultimately did not bid.181 Stans KG successfully bid KGS 37,620,000182 (recorded in Stans Energy's financial statements as US$ 863,550).183 This amount was approximately double the sum of the tariff rates for Kutessay II and Kalesay stipulated in Resolution No. 736. Stans KG paid this amount to the CASE on the same day.184 As a result, Stans Energy, through Stans KG, became a sole owner of Kutisay Mining OSJC, which owned the Licenses and the License Agreements No. 1.
198.
The Respondent alleges that Stans Energy obtained the Licenses in breach of Kyrgyz law through a bribe.185
199.
The Respondent contends that Stans Energy violated the tender requirement of Article 16 of the Subsoil Law, by obtaining the Licenses through auction instead of tender.186 According to the Respondent, Stans Energy and corrupt members of the Bakiev regime agreed to establish the "bullet-proof scheme" designed to ensure that Stans Energy obtained the Licenses without the required tender process.187 The Respondent emphasizes that this agreement is notably apparent from (1) Stans Energy's letter dated 15 October 2009 stating that "we would like to ask you to consider issuance to our subsidiary «Stans Energy Kg» licenses to develop Kutessay II and Kalesay deposits without tender with the bonus payment in the abovementioned amount"; and (2) Mr. Eliseev's statement during the meeting in November 2009 that Stans Energy's Licenses would be secured through a "bullet-proof scheme".188
200.
On the contrary, the Claimants contend that "[t]here is no basis to read Stans Energy's letter as prompting impropriety[…]"189 Rather, the Claimants consider that through such letter "the Kyrgyz authorities were put on notice that they should take all necessary steps to ensure legality. This was in any event entirely within their control."190
201.
The Respondent argues that Resolution No 725, through which Stans Energy obtained the Licenses, was invalid because it circumvented the fundamental provisions of the Subsoil law by replacing a tender with an auction.191 The Respondent further contends that, even if the Licenses had been issued through the alternative direct negotiations procedure, Stans Energy would have failed to comply with the requirements of Section V.A(1)(b) of the Subsoil Law.192 The Claimants deny these allegations, claiming that at that time there were no tender regulations.193 The Claimants contend that they followed the Resolution No 725 procedure, instead of the direct negotiations process.194
202.
The Respondent also argues that Stans Energy paid a bribe to acquire the Licenses.195 According to the Respondent, none of the KGS 37.62 million paid by Stans Energy at the auction was transferred to the State budget.196 The Respondent contends that the Development Fund retained KGS 8,379 million, instead of half of the KGS 37.62 million as described by Mr. Aryev, and transferred 28.31 million to Vesatel (NZ).197 In the Respondent's view, this KGS 28.31 million constituted a bribe, and was laundered through several AUB accounts held by Vesatel (NZ), Avatroniks LLP (UK), Ostencomm LLP (UK), Velcona Limited (UK), Wenden LLP (UK) and Sorento Resources Ltd (UK).198 The Respondent argues that none of these companies appears to have any genuine economic activity.199
203.
The Respondent further alleges that the CASE auction was rigged.200 According to the Respondent, the Kyrgyz Civil Code provided strict requirements, the breach of which invalided the auction results, namely: (1) 30-day advance notice; and (2) participation of more than one bidder.201 However, CASE gave notice only one week in advance.202 In addition, the Respondent alleges that Gremar's participation was fictitious and that Stans Energy was de facto the one and only bidder.203 In this regard, the Respondent argues that Gremar's auction bond payment of KGS 1.9 million (approximately US$ 50,000) on 28 December 2009 was a fiction.204 In support of this contention, inter alia, the Respondent submitted a Witness Statement of Mr. Dmitry Antonenko, purported attorney in fact, ultimate beneficial owner and bank account signatory of Gremar, in which Mr. Antonenko avers that he had no knowledge whatsoever of Gremar or AUB and that his signatures on AUB's bank account documents for Gremar are not his and had apparently been forged.205
204.
The Respondent also contends that the KGS 19 million, deposited in Kutisay OJSC's account on 9 December 2009, was the product of financial fraud and money laundering through a series of suspicious transactions among offshore companies using their AUB accounts.206 In the Respondent's view, this is supported by the fact that the amount was deposited in cash by Mr. Khalil Akylbekov, instead of being paid either by Vesatel (NZ), Kutisay Mining OJSC's shareholder, or by the Development Fund, which was intended to control Kutisay Mining OJSC.207
205.
Furthermore, according to the Respondent, the Claimants knew or should have known that they acquired the Licenses in breach of Kyrgyz law through corruption.208 The Respondent argues that the Kyrgyz Republic was recognized as one of the most corrupt countries.209 The Respondent also claims that it was publicly known that the Subsoil Law laid out a tender requirement and that the Licenses were indeed first issued to CAMG through a tender procedure.210 According to the Respondent, the Claimants' participation in corruption is corroborated by the fact that Stans Energy knowingly paid double the sum of the tariff rates for Kutessay II and Kalesay stipulated in Resolution No. 736; and the Claimants were aware of the involvement of Vesatel (NZ), an offshore company.211 The Respondent further contends that the Claimants knew that the CASE auction was rigged, because Stans KG participated in the auction despite the late notice and the lack of another bidder, and paid double the starting price even if it was de facto the only one bidder.212
206.
The Claimants strongly oppose to these allegations contending that Stans Energy obtained the Licenses in accordance with Kyrgyz law, including that Resolution 725 validly established the licensing procedure.213
207.
The Claimants also deny any involvement in the alleged corruption.214 The Claimants argue that the Respondent's allegations of illegality are "a post hoc construct".215 They maintain that the Respondent has failed to demonstrate that corruption was reasonably discoverable,216 and criticize the Respondent's suggestion that the Claimants "should have known of the State's "buried" wrongdoing, although the State itself apparently had no suspicions for years".217 According to the Claimants, the Respondent has not shown that investors could be aware of the specific risk of corruption prior to 2010.218 The Claimants contend that the Kyrgyz government hid the wrongdoing of AUB and the Development Fund from investors by controlling the outflow of information.219
208.
The Claimants also aver that they conducted sufficient due diligence prior to their acquisition of Kutisay Mining OJSC and its Licenses,220 which is contested by the Respondent.221 As regards the auction price paid, the Claimants contend that it was reasonable to trust Minister Kurmanaliev's explanation that an additional payment was necessary for the Development Fund to finance its projects, because the recipient was an official agency and the stated purposes were "almost universal in natural resources projects in less-developed countries".222 Accordingly, they claim that there was no reason to expect that State officials would misappropriate the consideration paid at the auction.223
209.
Likewise, the Claimants assert that there was no reason to believe that the amount of KGS 19 million in Kutisay Mining OJSC's account was the product of money laundering.224 The Claimants aver that this sum corresponded to the fee necessary to obtain the Licenses and that it was indeed spent in March and April 2010 to pay the statutory fees for the Licenses to the State treasury.225
210.
The Claimants further contend that the Kyrgyz Republic ratified the transaction.226 The Claimants argue that when Kutisay Mining OJSC was reorganized as Kutisay Mining LLC, the Kyrgyz government re-issued the Licenses in accordance with Kyrgyz law.227 In the Claimants' view, although this process was an opportunity for the Respondent to re-consider the legality of the Licenses and the transaction underlying them, the Government failed to point out any concern over the Licenses and re-issued them. The Claimants further aver that the Respondent did not raise any suggestion of corruption until it was notified of the Claimants' intent to pursue international arbitration.228
211.
This contention is strongly opposed by the Respondent,229 noting that the Claimants have not submitted any authority to support "their bizarre assertion that an illegal act can be legitimised in this manner".230 The Respondent also contests that the legal authorities submitted by the Claimants in their Post-Hearing Brief are apposite.231 According to the Respondent, the September 2010 re-issuance was an automatic administrative process which applies when a license holder changes its corporate form.232 The SAGMR did not have the legal power to investigate the legality of the Licenses or cancel them; such power resided within the GPO and the courts, respectively, and was exercised in due course.233 The Respondent also rejects the Claimants' assertion that it did not raise the illegality of the Licenses until after a notice of arbitration was filed with the MCCI on 23 March 2013, noting that investigations concerning this issue had been started by the GPO already in August 2011 and continued during the following years.234 However, the Claimants note that the Respondent has not submitted any official investigative report on corruption or bribery, and deny the relevance of the documents put forward to purportedly support the existence of investigations prior to March 2013.235
212.

The Claimants contend that the Respondent's position that it re-issued the Licenses as a gesture of generosity "begs credulity".236 On the other hand, the Respondent contends that the granting of such extensions in circumstances in which the Licenses were subject to automatic termination pursuant to Article 18 of the Subsoil Law was contrary to Kyrgyz law and resulted in the criminal conviction of the SAGMR employees that granted them.237 Article 18 of the Subsoil Law provided as follows:

[Claimants' translation] [Respondent's translation]

Article 18. Suspension and Termination of Subsoil Use Rights

Subsoil use right may be suspended for a period of up to three months in the following cases:

1) use of the subsoil for a purpose other than that for which it is granted;

2) breach of the terms and conditions of the license agreement;

3) occurrence of force-majeure.

Subsoil use right shall terminate by withdrawal/cancellation of the relevant license in the following cases:

1) completion of geological exploration, depletion of mineral reserves and/or liquidation of the relevant enterprise;

2) use of technologies in development of the subsoil create a threat to the health and safety of employees and the population, as well as a threat of irreparable harm to the natural environment and of loss of mineral reserves;

3) where during the term agreed in the license agreement no technical plan for carrying out the works, approved by the state authorities responsible for subsoil protection, the natural environment and technical safety and by the owners of land rights, has been provided;

4) where during a period of more than one year after obtaining the license the user fails to start development of the subsoil to the extent stipulated by the terms and conditions of such license;

5) voluntary refusal to use the subsoil or expiry of the term of the relevant license.238

Article 18. Suspension and Termination of Subsoil Use Rights

Subsoil use right may be suspended for a period of up to three months in the following cases:

1) use of the subsoil for a purpose other than that for which it is granted;

2) breach of the terms and conditions of the license agreement;

3) occurrence of force-majeure.

Subsoil use right shall terminate by withdrawal/cancellation of the relevant license in the following cases:

1) completion of geological exploration, depletion of mineral reserves and/or liquidation of the relevant enterprise;

2) use of technologies in development of the subsoil create a threat to the health and safety of employees and the population, as well as a threat of irreparable harm to the natural environment and of loss of mineral reserves;

3) where during the term agreed in the license agreement no technical plan for carrying out the works, approved by the state authorities responsible for subsoil protection, the natural environment and technical safety and by the owners of land rights, has been provided;

4) where during a period of more than one year after obtaining the license the user fails to start development of the subsoil to the extent stipulated by the terms and conditions of such license;

5) voluntary refusal to use the subsoil or expiry of the term of the relevant license.239

 

3. Operation Under the License Agreements

a. License Agreements No. 1

213.
While Kutisay Mining OJSC held the Licenses, its activities had to be conducted in accordance with the conditions set out in the License Agreements No. 1.
214.

Kutessay II License Agreement No.1, signed on 21 December 2009 and valid until 31 December 2010, set out four key requirements for activities under the Kutessay II License providing, in relevant part:

[Claimants' translation] [Respondent's translation]

1. Kutisay Mining shall pay a bonus in the amount of US$392,220 to the tax authorities at its place of registration before 21 January 2010.

2. Before the expiration of this License Agreement the Licensee shall submit the following:

2.1. The Kutessay II mine development plan

2.2. Expert opinions with respect to the following aspects of the project:

a) Environmental safety

b) Technical safety

c) Subsoil protection and use

2.3. Land allotment

[…]

4. License Agreement validity period: Until 31 December 2010240

1. Kutisay Mining shall pay a bonus in the amount of US$392,220 to the tax authorities at its place of registration before 21 January 2010.

2. Before the expiration of this License Agreement the Licensee shall submit the following:

2.1. Project for the development of the Kutessay II deposit

2.2. Expert opinions with respect to the following aspects of the project:

a) Environmental safety

b) Technical safety

c) Subsoil protection and use

2.3. Land allotment

[…]

4. License Agreement validity period: Until 31 December 2010241

 

215.
The first requirement was the payment of US$ 392,220 to the tax authority by 21 January 2010. Kutisay Mining OJSC paid this fee two months late in three tranches on 23 March 2010, 31 March 2010 and 1 April 2010.242
216.
The second requirement was the submission of a "mine development plan"/ "project" by 31 December 2010.243 The Parties have different understandings as to which document was required as "mine development plan"/ "project", and which is the appropriate English translation of this term.
217.
The Respondent contends that this purported "mine development plan", which it translates as "project", was a technical plan required by the Subsoil Law,244 and avers that the Claimants' denials in their Reply to the Statement of Defence on the Merits and Counter-Memorial on Jurisdiction of their obligation to provide a technical plan are based on their inconsistent translation of the same terms used in the Subsoil Law and Kutessay II License Agreement No 1.245 The Respondent avers that the Claimants' interpretation that the Licenses refer to some other "mine development plan" is unsustainable, relying on the Expert Witness Statement of Mr. Shilov, a Kyrgyz mining expert.246 The Respondent adds that all the license agreements issued by the SAGMR in 2010 and 2011, including the Licenses at issue, contained the requirement to submit a technical project or technical plan.247 That requirement was accepted by the Claimants, as evidenced by contemporaneous statements.248 The Respondent describes the Claimants' position as an attempt to escape the conclusion that their Licenses were subject to termination due to their failure to provide the "technical plan" pursuant to Article 18 of the Subsoil Law.249
218.
The Claimants, on the other hand, allege in their submissions that this "mine development plan" was different from such a technical plan.250 According to the Claimants, a failure to submit a "mine development plan" could not have resulted in termination of the Licenses pursuant to Article 18 of the Subsoil Law.251 In contrast, the Respondent notes that Mr. Aryev testified at the Hearing that each of Kutisay's License Agreements required the submission of a TP [technical plan].252
219.
The third requirement was the submission of expert reports, by 31 December 2010, on (1) environmental safety; (2) technical safety; and (3) subsoil protection and use.253 As of 2009, the Ministry of Natural Resources, the SAGMR's predecessor, was the governmental body to issue these reports.254 According to the Respondent, pursuant to Article 18 of the Subsoil Law, a failure to submit these expert reports would result in termination of a license.255
220.
The fourth requirement was the submission of a land allotment by 31 December 2010.256 This is a certificate issued by the local authority evidencing the licensee's right to use a land plot, and a failure to comply this requirement would result in termination of a license.257
221.
Kalesay License Agreement No. 1, signed on 21 December 2009 and valid until 31 December 2010, set out the same requirements as those of Kutessay II License Agreement No.1, except that the initial payment to the tax authority was US$ 35,103.258
222.

After the conclusion of the License Agreements No. 1, Stans Energy proceeded with its preparations for the operation of the mines which, according to the Claimants, included:

(1). Stans Energy added three REE experts in its advisory board: Mr. James Hedrick and Mr., James Allan in January 2010;259 and Dr. Valey Kosynkin in April 2010.260

(2). In February 2010, Stans Energy raised C$ 1.5 million by a private placement.261

(3). In February 2010, Stans Energy entered into an exclusive option agreement with the Kyrgyz Chemical and Metallurgical Plant ("KCMP") to purchase the processing plants and the railway terminal at Kashka.262

(4). From February 2010, Stans Energy engaged a number of contractors to verify the existing data from the Soviet era.263

(5). By the end of April 2010, Stans Energy announced its plant of the summer geophysical drilling program.264

223.
In April 2010, President Bakiyev was replaced after a brief uprising, and personnel changes in the government followed.265
224.
In June 2010, Kutisay Mining OJSC was re-organized into a limited liability company, and re-registered as Kutisay Mining LLC.266
225.
The Parties disagree on whether Kutisay Mining complied with the requirements under the License Agreements No. 1.267 The Claimants consider that the Respondent's allegations that they were in breach of the License Agreements terms fails in light of "the complete absence of any complaint by the regulatory authorities at the time about how the projects were being handled".268
226.

The Claimants also argue that they never had the opportunity to challenge such allegations at the time nor to invoke Article 356(1) of the Kyrgyz Civil Code:

which excuses non-compliance with a contractual obligation where the breaching party can show that he or she took "all necessary measures for proper performance of the obligation with the degree of care and prudence required by the nature of the obligation and by the conditions of the transaction[…]"269

The Respondent denies that Article 356(1) of the Civil Code could have been invoked. According to the Respondent, the Civil Code "does not apply to subsoil licensing, including license agreements granted under the Subsoil Law." Rather, the termination of a subsoil license is regulated only by the Subsoil Law.270

227.
In any event, the Claimants argue that the alleged breaches were "ratified" when the Kyrgyz government granted the new License Agreements No. 2.271 The Respondent, on the other hand, asserts that "it is not the function or the role of SAGMR or the Government at large to 'complain' about the licensee's breaches. When a licensee fails to submit the required documents, SAGMR is entitled to terminate the license. There is no requirement to 'complain'".272
228.
First, the Respondent points out that the License fee was paid two months late in three tranches.273 In response, the Claimants observe that the delay was because Stans Energy had to comply with a number of formal requirements to gain control over Kutisay Mining OJSC's account and the National Bank of the Kyrgyz Republic did not accept their initial attempt to make a full payment of the license fee.274 The Respondent considers that the reasons alleged for the delay are not sufficiently explained and are unsupported by evidence.275 The Claimants continue that in any event such a delay should not have invalidated the Licenses, because the Kyrgyz Republic had accepted the late payments.276
229.
Second, the Respondent points out that Kutisay Mining OJSC failed to submit the technical plan, expert reports, and land allotment.277 In response, the Claimants contend, as described above, that the License Agreements No. 1 did not require a technical plan but a development plan, and that a failure to submit such a development plan could not have resulted in termination of the License.278
230.
The Claimants further contend that the Minister of Natural Resources assured them that the one-year timeline for the license agreement's requirements would not be enforced as long as they would submit a report before the end of the year requesting more time.279 The Respondent disputes the existence of such assurances, considering that it is implausible that assurances contrary to the express terms of the License Agreements were made and noting that, despite the Tribunal's order for document production, the Claimants have failed to produce any document relating to them.280 Moreover, the Respondent points out that Mr. Aryev testified at the Hearing that he was never assured by the Minister that the period for compliance with License Agreements No. 1 would be extended if the Claimants asked for more time.281 According to the Respondent, he also admitted that the Claimants did not place any reliance on alleged assurances in respect of any extension,282 which he recognised were given after the Claimants had acquired the Licenses.283
231.
The Claimants also allege that the uprising in April 2010 impacted their ability to progress work over several months.284 The Claimants add that the deadlines for the submission, set in less than a year from the conclusion of the License Agreements, were "ambitious".285 The Respondent disputes that the uprising in April 2010 provided any excuses for the Claimants' non- compliance, stating that the uprising lasted only a few days, and that most work would have been possible regardless of the uprising.286 The Respondent also alleges that the deadlines set out in the License Agreements were in line with the SAGMR's practice at the relevant time.287

b. License Agreements No. 2

232.
In August 2010, Stans Energy met with the new Minister of Natural Resources.288 During the meeting, the Minister agreed to re-issue the Kutessay II and Kalesay Licenses to the newly registered entity, Kutisay Mining LLC, and to conclude new License Agreements with Kutisay Mining LLC.289
233.
On 20 September 2010, the Ministry of Natural Resources re-issued the Kutessay II and Kalesay Licenses to Kutisay Mining LLC, for 20 years, until 21 December 2029.290 On the same day, the Ministry and Kutisay Mining LLC entered into a License Agreement for Kutessay II ("Kutessay II License Agreement No. 2")291 and Kalesay ("Kalesay License Agreement No. 2",292 together with Kutessay II License Agreement No. 2, "License Agreements No. 2").
234.

Kutessay II License Agreement No. 2 set out the key requirements for Kutisay Mining LLC to exercise its Kutessay II License, providing that, in relevant part:

[Claimants' translation] [Respondent's translation]

1. Before the expiration of this License Agreement the Licensee shall submit the following:

1.1. Drafts of

- The Kutessay II mine development

- The Mill Plant, tailings pond and other infrastructure facilities

1.2. Expert opinions with respect to the following aspects of the project:

a) Environmental safety

b) Technical safety

c) Subsoil protection and use

1.3. Land allotment

2. Additional conditions:

During the preparation of the feasibility study and mine development plan the following activities are permissible: control sampling and sample collection; construction of infrastructure and communications facilities after approval of individual plans with respective state agencies; engineering and geological as well as hydrogeological and environmental surveys; geological and prospecting works in the licensed area on a project that has received necessary expert approvals.

[…]

4. License Agreement validity period: Until 31 December 2011293

1. Before the expiration of this License Agreement the Licensee shall submit the following:

1.1. Projects for:

- The development of the Kutessay II deposit

- The Mill Plant, tailings pond and other infrastructure facilities

1.2. Expert opinions with respect to the following aspects of the project:

a) Environmental safety

b) Technical safety

c) Subsoil protection and use

1.3. Land allotment

2. Additional conditions:

During the preparation of the technical and economic assessment and mine development plan the following activities are permissible: control sampling and sample collection; construction of infrastructure and communications facilities after approval of individual plans with respective state agencies; engineering and geological as well as hydrogeological and environmental surveys; geological and prospecting works in the licensed area on a project that has received necessary expert approvals.

[…]

4. License Agreement validity period: Until 31 December 2011294

 

235.
The Parties interpret provision 1.1 of License Agreement No. 2 differently. The Respondent alleges that it requires the submission of a technical plan pursuant to the Subsoil Law. The Respondent asserts that such a technical plan should have contained two parts: (1) technical plan for the mine; and (2) technical plan for the plant, tailing facility and infrastructure.295 On the other hand, the Claimants contend that they were required to provide two separate documents: (1) a mine development plan; and (2) a plan for a mill plant, a tailings pond and other infrastructure facilities.296 In the Claimants' view, the submission of a technical plan was unnecessary.297
236.
The Agreement required the submission of expert reports on environmental safety, technical safety and subsoil protection and use by 31 December 2011.298
237.
The Agreement required Kutisay Mining LLC to submit a land allotment by 31 December 2011.299
238.
The key requirements set out by Kalesay License Agreement No. 2 were identical to those of the Kutessay II License Agreement No. 2.300
239.
After the conclusion of the License Agreements No. 2 on 20 September 2010, Stans Energy continued preparing for mining.301 In January 2011, Stans Energy exercised its option under the February 2010 agreement to purchase the KCMP processing plants and the rail terminal.302 While the original complex was constituted by four plants, Stans Energy only purchased three of them and planned to build a new plant, because the fourth plant was not in good condition.303 In addition, because the facilities were outdated, Stans Energy needed to make substantive investment for renovation.304
240.
On 20 January 2011, the Ministry of Natural Resources issued an order that temporarily suspended access to the State's geological data for the following six months pending the introduction of new funding mechanisms.305 Nevertheless, the Respondent points out that Stans KG successfully requested permission for transfer of library materials on 16 February 2010, and received them on 3 March 2010.306 Moreover, the Respondent argues that, by letter dated 15 October 2010, Stans KG requested a six-month extension to use the data, which was granted on the same day.307
241.
According to the Claimants, in March 2011, Stans Energy received a technical report from Kazakhstan Mineral Company on Kutessay II, which provided similar results to the Soviet data and outlined a US$ 9.3 million recommended work program.308 In April 2011, Stans Energy received another report from Ms. Natalia Malyukova on the distribution of individual rare earth elements in Kutessay II, which confirmed the existence of critical HREEs in the Kutessay II deposit, including dysprosium, yttrium, terbium, neodymium and europium.309
242.
In the same month, according to the Claimants, Stans Energy raised C$ 28 million via a private placement.310 With this money, Stans Energy closed the US$ 5.5 million acquisition of KCMP plant and the railway terminal at Kashka.311 Stans Energy renamed the KCMP plant as Kashka REE Plant ("KRP").312 The Claimants aver that these facilities were fundamental for their production plan especially because "the railroad ensured that supplies (including chemicals and explosives) necessary to extract rare metals and oxides could be shipped to the site".313
243.
In April 2011, Stans Energy commissioned Asiarudproject Mining Planning-Production Company CJSC ("AsiaRud") to complete a technical and economic assessment of Kutessay II.314 In July 2011, AsiaRud completed its assessment report ("AsiaRud 2011 Report"), and recommended an open pit mining to restart production at the rate of one million tons of ore per year.315 According to the Claimants, on the basis of this conclusion, Stans Energy decided to design its mining operation to process one million tons of ore per year.316 This necessitated the construction of a new mill and tailings pond, and the upgrade of the processing facilities.317
244.
In August 2011, Stans Energy requested AsiaRud to produce a mine development plan "Production Complex Plan for the Kutessay II Deposit with Phase I Works at the Kalesay Deposit" in line with the July report recommendations.318
245.
The Claimants aver that in the second half of 2011, Stans Energy had negotiations with industry players for technical and financial partnerships.319 In July 2011, Stans Energy entered into three non-disclosure agreements.320 Stans Energy had discussions with Japanese and Korean companies regarding potential partnerships,321 and also conducted site visits with the representatives of various potential strategic partners in April, July, August and October 2011.322
246.
On 27 September and 13 December 2011, the Kyrgyz Republic State Administration of the Kemin District granted Kutisay Mining LLC land leases for the licensed areas of Kalesay and Kutessay II for the entire terms of the Licenses.323
247.
On 12 December 2011, Kutisay Mining LLC sent letters to the Ministry of Natural Resources, requesting the extensions of the License Agreements No. 2 or the conclusion of new License Agreements No. 3 until 31 December 2012.324 The Respondent denies that this letter was the start of negotiations regarding the conclusion of a third license agreement and notes that it was a request for another extension of the term to comply with License Agreements No. 2.325 In the abovementioned letter, Kutisay Mining LLC alleged that its delay to satisfy the conditions of the License Agreements was due to inter alia (1) the "run-down state" of the related infrastructures; (2) the different ownerships of these infrastructures; (3) "the significant time lost in relation to the events of April 2010"; and (4) "the half-year restriction by the Kyrgyz Republic Ministry of Natural Resources on access to information in 2011".326 This letter also enclosed numerous documents including "Draft technological scheme for rehabilitation of the enrichment plant".327
248.
On 30 December 2011, Kutisay Mining LLC sent another letter to the Ministry of Natural Resources, enclosing the "Production Complex Plan for the Kutessay II Deposit with Phase I Works at the Kalesay Deposit".328 In this letter, Kutisay Mining LLC described that it planned to carry out its design works in two stages: (1) a design of regeneration of the existing mill with 300,000 tons per year capacity at the first stage (end of 2011 – beginning of 2012); and (2) a design of a new mill with the one million tons per year capacity at the second stage (before the end of 2012).329 The enclosed Plan corresponded to the first stage.330
249.
The Parties disagree on whether Kutisay Mining LLC complied with the requirements of the License Agreements No. 2.331
250.
The Respondent contends that Kutisay Mining failed to submit a technical plan and the expert reports.332 According to the Respondent, the "draft technological scheme for rehabilitation of the enrichment plant" enclosed in the 12 December 2011 letter was not qualified as a technical plan because it "was a tiny portion of what needed to be included in the required TP".333 Also, the "Production Complex Plan for the Kutessay II Deposit with Phase I Works at the Kalesay Deposit" enclosed in the 30 December 2011 letter was insufficient as a technical plan, because it only covered the operation of 300,000 tons per year despite that Kutisay Mining LLC envisaged the processing capability of one million tons per year, and because it failed to cover the mine itself.334
251.
In response, the Claimants allege that the Respondent's position that the Claimants breached the License Agreements is contradicted by the sworn testimony of Mr. Ryskulov.335 According to the Claimants, the License Agreement No. 2 did not require a technical plan but a mine development plan.336 The Claimants contend that the Plan enclosed in the 30 December letter was sufficient as a mine development plan, alleging that nothing in the License Agreements No. 2 required a mine development plan for any particular processing capacity and that the Plan covered the mine itself and, inter alia, considered the geology of the deposit.337 However, in this regard the Respondent maintains the same position as concerning License Agreement No. 1 and asserts that Claimants had to submit a technical plan and points to contemporaneous evidence which would confirm that Claimants were aware about this requirement.338
252.
The Claimants further contend that, with regard to Kutessay II, the Respondent ratified the Claimants' work by entering into a third license agreement.339 The Respondent strongly opposes this argument, asserting that Kutessay License Agreement's No. 3 was granted unlawfully and the SAGMR's employees involved were investigated and criminally convicted.340
253.
The Claimants assert that their delay to comply with the deadlines was caused by factors beyond their control, as described in their letter dated 12 December 2011.341 In response, the Respondent alleges that none of these factors could have justified the Claimants' failure to provide the required submissions, claiming that they did not substantively affect the Claimants' work.342
254.
The Claimants allege that non-compliance with the license agreement conditions was not cited amongst the reasons for termination of the project at the relevant time and argue that only after these arbitral proceedings started did the Respondent contend that the Claimants were in "chronic breach" of the License Agreements terms.343 The Claimants consider that these are allegations constructed post hoc solely to justify the Respondent's actions in the context of this arbitration.344
255.
The Claimants also contend that Kyrgyz law would not have permitted such termination without first granting the Claimants the opportunity to argue that any failure to perform might be excused pursuant to Article 356(1) of the Civil Code.345 As noted above, the Respondent denies that Article 356(1) of the Civil Code could have been invoked because, according to the Respondent, the Civil Code does not apply to subsoil licensing.
256.
Moreover, the Claimants contend that the Respondent's mining expert, Mr. Shilov, "testified [at the Hearing] that the Claimants had completed almost all their obligations under the License Agreement No 2, to a high standard."346
257.
This position is contested by the Respondent, which submits that Kutisay Mining LLC persistently failed to comply with the License Agreements and argues that the non-compliance with the License Agreements requirements was documented in contemporaneous evidence.347

4. Conclusion of the Kutessay II License Agreement No. 3

258.
Following presidential elections held in December 2011, Kyrgyzstan's new president, Mr. Almazbek Atambayev, appointed Mr. Omurbek Babanov as the new Prime Minister and Mr. Uchkumbek Tashbayev as the new Minister of Natural Resources.348
259.
According to the Claimants, in January 2012, Stans Energy met separately with Mr. Babanov and Mr. Tashbayev.349 During the meetings, they discussed the possibility of entering into a partnership between Stans Energy and the Kyrgyz Republic.350 It is unclear, however, which side first proposed such a partnership.351 The Claimants allege that Prime Minister Babanov surprised Stans Energy, by stating that Stans Energy needed to enter into a partnership with the State if it wished to continue its Kutessay II work.352 The Respondent, on the other hand, claims that Stans Energy voluntarily made such a proposal.353
260.
While it had not entered into new license agreements, Stans Energy continued to prepare for mining operation.354 On 9 February 2012, Stans Energy reported that it had discovered a new mining zone at Kutessay II.355 On 17 February 2012, Stans Energy appointed the Russian Research Institute of Chemical Technology ("VNIIHT"), a division of the State Atomic Energy Corporation of Russia, as the lead engineering firm for the design build process at Kutessay II.356
261.
On 15 February 2012, the Prime Minister changed the boundaries of Chon Kemin State Natural National Park ("National Park") by issuing Resolution No 93 to repeal Kyrgyz Republic Government Resolution No 374 issued on 13 June 2009 "On changing the Boundaries of Chon Kemin State National Park" ("Decree No 93").357 According to the Decree No 93, it adopted "[f]or the purposes of preserving the unique natural habitats, biological and landscape variety, and to preserve species of flora and fauna which are entered in the Red Book of the Kyrgyz Republic".358 According to the Claimants, the new territory of the National Park covered substantial portions of Stans Energy's open-pit infrastructures for Kutessay II.359 As a result, the Claimants assert that the open-pit mining plan became impossible to implement.360
262.
On 1 and 19 March 2012, Stans KG sent letters to the SAGMR describing the impacts of Decree No. 93 on the Kutessay II and Kalesay projects, and requesting to amend the Decree No 93 so that the licensed areas would be excluded from the National Park.361 On 24 May 2012, the SAGMR informed the Claimants that the Inter-District Court of Bishkek had declared the Decree No 93 invalid; that court decision was being examined by the Appellate Instance of the Bishkek City Court.362 On 9 July 2012, SAGMR sent another letter informing that an inter-agency working group would be set up to resolve the issues regarding the mining deposits and the natural habitat protection.363
263.
According to the Claimants, after consulting with Kyrgyz and Canadian experts, Stans Energy amended its mining plan to introduce two-phase mining: (1) open-pit mining of 300,000 tons per year outside the boundaries of the National Park at Phase I; and (2) underground mining of one million tons per year at Phase II.364 This new plan, however, required Stans Energy to design a new mining complex.365
264.
The Respondent explains that the change in the National Park boundaries was declared invalid and reversed by the Respondent's courts on 4 April 2012. The Respondent alleges that this became known to Kutisay Mining LLC on 24 May 2012 at the latest so that "the short-lived change in national park boundaries (during the 1.5 month period from 15 February 2012 to 4 April 2012, when Kutisay Mining LLC did not even have a valid license agreement in place) had no effect on the Claimants".366 The Respondent further argues that even Mr. Aryev admits that the reasons for Kutisay Mining LLC changing its plans from open pit mining to combined open pit and underground mining "was completely unrelated to the temporary change in the national park boundaries or any other State actions".367
265.
On 29 March 2012, Kutisay Mining LLC requested the SAGMR to enter into revised Kutessay II and Kalesay License Agreements No. 3 reflecting the change of mining plan.368
266.
On 14 April 2012, Mr. Aryev met with Mr. Tashbayev to discuss the conclusion of License Agreements No. 3 for Kutessay II and Kalesay.369 According to Kutisay Mining LLC's letter of 17 April 2012, Mr. Tashbayev "offered to consider creating a public-private partnership by way of transfer of part of the share capital of Kutisay Mining LLC to the Kyrgyz Republic and to submit new drafts of License Agreements No 3."370 On this letter, Kutisay Mining LLC enclosed a revised draft License Agreement No. 3 for Kutessay II.371
267.
On 15 June 2012, the SAGMR, Stans KG and Kutisay Mining LLC entered into License Agreement No. 3 for Kutessay II ("Kutessay II License Agreement No. 3"), valid until 31 December 2014.372 According to the Respondent, far from being a "ratification" of the Claimants' performance, the granting of this license agreement was illegal and the SAGMR officials involved were later prosecuted.373
268.

License Agreement No. 3 set out the requirements for Stans KG and Kutisay Mining LLC to exercise the Kutessay II License and provides, in relevant part, as follows:

[Claimants' translation] [Respondent's translation]

1. The Licensee is granted the right to develop a mining development plan for the Kutessay II deposit located in the Kyrgyz Republic, Chui Oblast, Kemin Region, within the boundaries of a geological land allotment with the following land corner coordinates: […]

2. The Licensee's Founder undertakes:

2.1. Before 31 July 2012 to reach a preliminary agreement with the Kyrgyz Republic, represented by State Property Management Fund of the Government of the Kyrgyz Republic (or authorized state body or entity) (hereinafter – the "Fund"), for the free transfer of shares in the charter capital of the Licensee, in accordance with the laws of the Kyrgyz Republic.

2.2. The precise share to be transferred to the Fund will be determined and agreed by the Parties after economic analysis and calculations with respect to the Kutessay II deposit during negotiations between the parties before 30 September 2012.

[…]

3. The Licensee undertakes to:

3.1. Perform the following works within the following timeframe:

[…]

3.2. Perform works complying with effective regulations, rules regarding environmental and ecological safety, subsoil protection and technical safety.

3.3. Before 31 March 2013 submit the following to the Licensor:

1) A draft of the new feasibility study of conditions with reserves re-estimated for combined mining of the deposit and with programs: phase I program for the development of the deposit with an open pit mining with a 300,000 ton annual production capacity; phase II program for the development of the deposit with the underground mining of remaining reserves with a 1 million ton annual production capacity;

2) A plan of the mine site with combined deposit mining: phase I program for the development of the deposit with an open pit mining with 300,000 ton annual production capacity to be processed at the existing mill under construction; phase II program for the development of the deposit with underground production with a 1 million ton annual production capacity to be processed at the newly built mill.

3) A reconstruction plan for the existing mill, tailings pond, and other infrastructure facilities (provided they are purchased by the Licensee) of phase I development of the deposit with an annual production capacity of the refining mill of 300,000 tons.

4) Expert opinions with respect to the following aspects of the project:

• Environmental safety;

• Technical safety;

• Subsoil protection and use.

3.4. By 1 January 2014 submit to the Licensor designs of a new mill plant, tailings pond and infrastructure facilities of phase II of the development of the deposit with the annual production capacity of the refining mill of 1 million ton.

3.5. All deposit development works shall be performed in accordance with the "Technical plan for the production complex with combined mining of the Kutessay II deposit", the "Technical plan for reconstruction of the existing refining mill", the "Technical plan for the construction of tailing pond No 5", and the "Designs of infrastructure facilities".

[…]

6. License Agreement validity period: Until 31 December 2014374

1. The Licensee is granted the right to prepare a project for the development of the Kutessay II deposit located in the Kyrgyz Republic, Chui Oblast, Kemin Region, within the boundaries of a geological land allotment with the following land corner coordinates: […]

2. The Licensee's Founder undertakes:

2.1. Before 31 July 2012 to reach a preliminary agreement with the Kyrgyz Republic, represented by State Property Management Fund of the Government of the Kyrgyz Republic (or authorized state body or entity) (hereinafter – the "Fund"), for the free transfer of shares in the charter capital of the Licensee, in accordance with the laws of the Kyrgyz Republic.

2.2. The precise share to be transferred to the Fund will be determined and agreed by the Parties after economic analysis and calculations with respect to the Kutessay II deposit during negotiations between the parties before 30 September 2012.

[…]

3. The Licensee undertakes to:

3.1. Perform the following works within the following timeframe: […]

3.2. Perform works complying with effective regulations, rules regarding environmental and ecological safety, subsoil protection and technical safety.

3.3. Before 31 March 2013 submit the following to the Licensor:

1) A draft of the new technical and economic assessment of conditions with reserves reestimated for combined mining of the deposit and with projects: phase I project for the development of the deposit with an open pit mining with a 300,000 ton annual production capacity; phase II project for the development of the deposit with the underground mining of remaining reserves with a 1 million ton annual production capacity;

2) A project of the mine site with combined deposit mining: phase I project for the development of the deposit with an open pit mining with 300,000 ton annual production capacity to be processed at the existing mill under construction; phase II project for the development of the deposit with underground production with a 1 million ton annual production capacity to be processed at the newly built mill.

3) A reconstruction project for the existing mill, tailings pond, and other infrastructure facilities (provided they are purchased by the Licensee) of phase I development of the deposit with an annual production capacity of the refining mill of 300,000 tons.

4) Expert opinions with respect to the following aspects of the project:

• Environmental safety;

• Technical safety;

• Subsoil protection and use.

3.4. By 1 January 2014 submit to the Licensor projects of a new mill plant, tailings pond and infrastructure facilities of phase II of the development of the deposit with the annual production capacity of the refining mill of 1 million ton.

3.5. All deposit development works shall be performed in accordance with the "Technical project for the production complex with combined mining of the Kutessay II deposit", the "Technical project for reconstruction of the existing refining mill", the "Technical project for the construction of tailing pond No 5", and the "Designs of infrastructure facilities".

[…]

6. License Agreement validity period: Until 31 December 2014375

 

269.
The Agreement required Stans KG to reach a preliminary agreement for the transfer of shares in Kutisay Mining to the State Property Management Fund by 31 July 2012.376
270.
Kutisay Mining LLC had to perform infrastructural works within set timeframes in accordance with Clause 3.1 of the Agreement.377
271.
Kutisay Mining LLC had to submit a series of documents by 31 March 2013;378 and others by 1 January 2014.379 The Parties disagree on the meaning and translation of such documents.
272.

The Respondent alleges that the Kutisay II License Agreement No. 3 required a technical plan in accordance with the Subsoil Law.380 According to the Respondent:

[t]he original TP [Technical Plan] was split into four parts: (i) a TP for the mine with a capacity of 300,000 tpa; (ii) a TP for the mine with 1 million tpa capacity; (iii) a TP to refurbish the existing plant, tailing facility and related infrastructure, which were to be submitted to SAGMR by 31 March 2013 ; and (iv) a TP to build a new processing plant, tailing facility and related infrastructure, which was to be submitted by 1 January 2014.381

273.
The Respondent further points out that the "feasibility study" (Clause 3.3(1)) was meant to be a technical and economic assessment as defined by Article 3 of the Subsoil Law.382
274.
The Respondent asserts that the Claimants failed to comply with the conditions set forth in the Kutessay II License Agreement No. 3, including by failing to provide the technical plan, the expert reports and the technical and economic assessment ("TEA") by the deadline.383 Accordingly, the License was due to automatically terminate, and Kutisay Mining LLC had no right to any further license agreement or extension thereof. This leads the Respondent to conclude that the Claimants do not have any rights of value and the Kutessay II License was worthless.384 On the other hand, the Claimants argue that any failure to perform their obligations under License Agreement No. 3 would be the result of the Respondent's expropriatory and arbitrary measures against the Claimants.385 According to the Claimants, "[i]f the Kyrgyz Republic had not engaged in any wrongful conduct then it must be assumed that the Claimants would have completed their obligations under License Agreement No 3[…]"386
275.
On 20 June 2012, Kutisay Mining LLC sent the SAGMR a draft License Agreement No. 3 with regard to Kalesay.387 That License Agreement was however never concluded. The Respondent contends that, since no further license was granted, the Kalesay License automatically terminated as at 1 January 2012 pursuant to Article 18(3) of the Subsoil Law and, with no further right to an extension, the Kalesay License was lost and worthless.388

D. THE RESPONDENT'S MEASURES IN RESPECT OF THE LICENSES

276.
Beginning in March 2012, the Respondent adopted various measures in respect of the Licenses whose impact on the Claimants' investments is disputed between the Parties.

1. 26 June 2012 Resolution

277.
On 19 March 2012, three months prior to the conclusion of the Kutisay II License Agreement No. 3, Stans Energy's then President and CEO, Mr. Robert Mackay, received an unsolicited e-mail entitled "Kyrghyzstan Kutesay II Mining Cooperation" [sic] from Mr. Liu Jiangang, the President and CEO of a Chinese REEs company, Baotou Hongbo Technology LLC ("Baotou").389 In this e-mail, Mr. Jiangang expressed Baotou's interest to cooperate with Stans Energy in developing Kutessay II, noting that Baotou owned CAMG, the previous holder of the Kutessay II and Kalesay Licenses.390
278.
Mr. Jiangang continued that "[a]t present, we have attend versteigern about licence (maybe only your company and mine). If we can have cooperation before this versteigern, it can reduce cost and get benefit for us."391 [sic] In this regard, the Claimants observe that, because "versteigern" is a German term referring to auction, Mr. Jiangang appeared to suggest that an auction for Kutessay II License was expected to be held despite the fact that Kutisay Mining LLC held the same License valid until 2029.392 The Respondent, however, points out that Mr. Jiangang did not refer to any specific mine.393
279.
In May 2012, Stans Energy's Kyrgyz management and local representatives of Baotou had an introductory meeting in Kyrgyzstan.394 A further meeting between the top level management was arranged.395 In e-mail exchanges arranging the meeting, Mr. Jiangang stated that Baotou "have contacted with [KCMP (the previous owner of KRP)] many times and reached a cooperative frame agreement".396 The Claimants allege that this statement was incorrect, noting that Stans Energy had owned KRP since 2011.397 The Respondent, however, points out that the e-mail is unclear and that Baotou could have entered into such an agreement with KCMP prior to Stans Energy's acquisition of KRP.398
280.
On or about 18 June 2012, Mr. Aryev and Mr. Mackay of Stans Energy met with Mr. Jiangang and other representatives of Baotou in Bishkek.399 According to the Claimants, Baotou offered US$ 6 million to purchase 60% of stake in the Kutessay project.400 The Claimants allege that this offer was unworthy of consideration, claiming that the market capitalization of Stans Energy exceeded US$ 100 million even without a control premium.401
281.
On 21 June 2012, six days after the conclusion of Kutessay II License Agreement No. 3, Deputy Badykeyeva raised the issue of whether Kutessay II Agreement No. 3 had been concluded legally at a session of the Jogorku Kenesh (Parliament).402
282.
On 26 June 2012, a Parliamentary Committee for the Development of Industries of the Economy issued a resolution ordering the SAGMR (1) to cancel the Kutessay II License Agreement No. 3; (2) to announce a tender for Kutessay II in accordance with the Subsoil Law; and (3) to inform the Committee of the results by 10 September 2012 ("26 June 2012 Resolution").403 The Resolution explained that the SAGMR had concluded the Kutessay II License Agreement No. 3 in breach of Article 18 of the Subsoil Law and that Kutisay Mining LLC had failed to comply with the terms and conditions under the Kutessay II License Agreements No. 1 and 2.404
283.
On the same day, Stans Energy received an e-mail from Mr. Liangang requesting that it cooperate with Baotou in developing Kutessay II.405 In this e-mail, Mr. Liangang further noted that "[sic] [o]ur company have get Chinese government support, if you are not cooperate with us for next step, we will search National large listed enterprises to cooperate to develop this project."406
284.
On 24 July 2012, Kutisay Mining LLC filed a Statement of Claim in the Inter-District Court of Bishkek requesting the Court to declare invalid the 26 June 2012 Resolution.407
285.
By press release of 30 July 2012, Stans Energy announced that it had initiated legal action.408 According to the exhibits submitted by the Claimants, the market reacted to this release and Stans Energy's market capitalization dropped from US$ 76.8 million (30 July) to 65.9 million (31 July).409
286.
The Claimants contend that Baotou appeared to have affiliates within the Kyrgyz government that backed up Baotou's take-over of the Kutessay II project.410 In this regard, the Claimants submit that there was a personal relationship between Deputy Badykeeva and Baotou: Ms. Badykeeva's family had owned or controlled a significant share in CAMG, in which Baotou had purchased a stake in 2008.411 The Respondent denies such a potential conspiracy, alleging that Baotou was a private foreign party unrelated to the Kyrgyz government and that Baotou's approach to Stans Energy was nothing more than an offer of cooperation or joint-venture.412 The Respondent also adds that the SAGMR, a governmental authority, supported Kutisay Mining LLC in the court proceedings in which Baotou sought invalidation of Stans Energy's Licenses.413
287.
The Respondent contends that the 26 June 2012 Resolution was not implemented and is irrelevant to the ultimate termination of the Licenses.414 In support of this contention, the Respondent argues that the Resolution was not binding, the SAGMR actually did not follow it, and the Resolution was ultimately invalidated by Kyrgyz courts.415 In response, the Claimants contend that these facts do not undermine the importance of the Resolution, alleging that it significantly impacted on Stans Energy's market capitalization.416

2. Thirty-days' Work Suspension Order of the Kutessay II License Agreement No. 3

288.
As described above, the Kutessay II License Agreement No. 3 required Stans KG to enter into a preliminary and main agreements with the Kyrgyz Republic regarding the transfer of shares in Kutisay Mining LLC to the State Property Management Fund.417
289.
In this regard, on 16 July 2012, two weeks before the deadline set out in Clause 2.1 of Kutessay II License Agreement No. 3, Stans Energy sent the SAGMR a draft preliminary agreement.418 The Claimants assert that they obtained no response, so Stans Energy wrote follow-up letters to SAGMR on 27 July 2012, and to the State Property Management Fund on 31 July 2012, without receiving any response either.419 The Respondent, on the other hand, avers that the SAGMR was not the appropriate counterparty to receive such letters as "SAGMR did not have the authority to enter into any such agreement – only the State Property Management Fund did".420 The Respondent notes that the Claimants submitted their draft to the State Property Management Fund only on 31 July 2012, the deadline date, in order to leave the Fund with insufficient time to review and approve it, especially because its general practice was to provide an answer within 30 calendar days of any request.421
290.
On 29 August 2012, Stans Energy wrote to the State Property Management Fund attaching a sealed and stamped version of the preliminary agreement, and noting that there was little time remaining until 30 September, the deadline for the main agreement on the share transfer to the Fund.422
291.
On 30 August 2012, the Subsoil Use Licensing Commission of the SAGMR decided on a suspension and subsequent stop-work order concerning the Kutessay II License Agreement No. 3 for thirty days until 30 September 2012.423 According to the Commission's minutes, these measures were taken due to the failure of Stans KG (the founder of the licensee) to reach a preliminary agreement on the free transfer of shares in Kutisay Mining LLC to the State Property Management Fund by 31 July 2012.424
292.
On 10 September 2012, Kutisay Mining LLC filed a Statement of Claim against the SAGMR (the defendant) and the State Property Management Fund (a third party) before the Bishkek Inter-District Court, requesting a declaration that the Commission's meeting minutes of 30 August 2012 were invalid to the extent that the Commission suspended Kutessay II License Agreement No. 3.425
293.
On 12 September 2012, Kutisay Mining LLC sent a letter to First Deputy Prime Minister D. K. Otorbayev requesting to resolve this matter.426
294.
On 24 September 2012, Stans KG wrote the State Property Management Fund, emphasizing that the Fund had not responded to Stans KG's proposal for the preliminary agreement, and proposing to have negotiations in this regard.427
295.
On 28 September 2012, the SAGMR replied to Stans KG's letter of 24 September 2012, noting that the Fund had not received any letter from Stans KG but Kutisay Mining LLC before 24 September 2012, and informing that the Fund suspended its consideration of entering into the preliminary agreement until the Bishkek Inter-District Court delivered its decision regarding the validity of the suspension order.428
296.
After the suspension order expired on 30 September 2012, Stans Energy resumed its work on the Kutessay II project and announced that it had produced dysprosium, terbium and gadolinium metals at the KRP.429
297.
On 8 October 2012, the Inter-District Court of Bishkek ruled in favour of Kutisay Mining LLC, invalidating the Parliamentary Committee's Resolution of 26 June 2012.430 The Court reasoned that the power to allocate subsoil rights was vested to the Government, instead of the Parliament.431
298.
On 16 October 2012, the Inter-District Court of Bishkek ruled in Kutisay Mining LLC's favour, invalidating the work suspension order.432 According to the Court, Kutisay Mining "took all of the steps within its power in order to conclude the preliminary agreement with the Fund."433
299.
On 16 October 2012, the State Property Management Fund wrote a letter to the SAGMR.434 In this letter, the Fund advised the SAGMR that it would not decide to conclude the preliminary and main agreements before obtaining opinions from other governmental entities.435
300.
According to the Respondent, the Minister of Economy and Antimonopoly Police (the "Minister of Economy Order") established an interdepartmental committee to investigate the issuance of Kutessay License Agreement No. 3 by order dated 20 December 2012.436 Pursuant to this order, in January 2013, the General Prosecutor's Office ("GPO") carried out an inspection regarding the extensions of Kutessay II License Agreements, which led to the conviction of the SAGMR's Director and the other members of the Commission who granted the Agreements.437 The Respondent contends that it was during this inspection that it emerged that the Licenses had been granted through direct negotiations, allegedly on the basis of Resolution 725, and in breach of the requirement set forth by Article 16 of the Subsoil Law that they be granted through a tender.438
301.
On 14 January 2013, Kutisay Mining LLC sent to the SAGMR an environmental report titled "the Environmental Safety section of 'Open Pit – Existing Mill' Haul Road Repair Project for Kutessay II" concerning its intended repairs for the road to the pit from the old Aktyuz mill.439
302.
On 30 January 2013, Kutisay Mining LLC sent a letter to the SAGMR enclosing an Information Report describing its work in 2012.440 In the same letter, Kutisay Mining LLC also enclosed its 2013 Work Program, which required approval by the SAGMR.441
303.

The Claimants contend that, not having received a response to these letters, concerns about their ability to still fulfil the deadlines set forth in License Agreement No. 3 led Kutisay Mining LLC to request, on 12 February 2013, that the SAGMR consider an addendum to Kutessay II License Agreement No. 3 extending the deadlines for certain tasks.442 In this letter, Kutisay Mining LLC argued that, due to the one-month suspension order:

we and our contractors were forced to stop all preparatory and design works on Kutessay II […] we were forced to abandon a project that provided for the use of an old mill plant and tailings pond in Aktyuz, because […] long-lasting legal proceedings between previous owners have led to the loss of the opportunity to purchase the mill plant.443

304.
On 19 February 2013, the SAGMR refused to approve the 2013 Work Program, reasoning that Kutisay Mining LLC had not provided an expert-approved design documents required under the Subsoil Law.444 On 28 February 2013, Kutisay Mining LLC requested the approval of the 2013 Work Program, informing that it would provide the expert opinions by September 2013.445 On 11 March 2013, SAGMR declined to approve the Program, noting that the expert opinions should have been submitted by 31 March 2013, instead of September 2013.446
305.
On 12 March 2013, the SAGMR informed Kutisay Mining LLC that it had suspended the consideration of the environmental assessment report submitted on 14 January 2013 until the GPO completed its investigation concerning the validity of Resolution No 725.447
306.
On 28 March 2013, Stans Energy sent the Kyrgyz Republic a Notice of Initiating Proceedings pursuant to Article 18 of the 2003 Kyrgyz Investment Law concerning alleged breaches of its rights regarding Kutessay II and Kalesay.448 Stans Energy requested that the SAGMR consider and decide within one month on its request for approval of a Kutessay II license addendum and that Kyrgyz authorities comply with Kyrgyz law.449 In the absence of progress in that regard, Stans claimed that, pursuant to Article 18 of the Investment Law, after three months it was entitled to submit the dispute to international arbitration.450
307.
The Respondent alleges that Kutisay Mining LLC failed to comply with the requirements of the Kutessay II License Agreement No. 3.451 The Respondent points out that Kutisay Mining LLC submitted none of the required documents under the Agreement.452 According to the Respondent, the Claimants' assertion that the SAGMR refused to engage with the Claimants was pointless.453 The SAGMR could not consider the 2013 work program because Kutisay Mining LLC had failed to submit a technical plan and expert reports.454 The Respondent argues that "[T]he Environmental Safety section of 'Open Pit – Existing Mill' Haul Road Repair Project for Kutessay II" submitted on 14 January 2013 was not an expert report but a part of technical plan.455 The Respondent notes that the Claimants blame the 30-day suspension imposed on 30 August 2012 for their delays in complying with Kutessay II License Agreement No. 3.456 Nevertheless, the Respondent points out that such suspension only affected the Claimants' work for one month, that Claimants have failed to specify which works they were unable to complete due to the suspension and further contends that the suspension "did not and could not have a material or any impact on the project deliverables that Kutisay was required to achieve under the terms of Kutessay LA 3".457 Thus, the SAGMR did not agree to extend the deadlines of the Kutessay II License Agreement No. 3 because it considered that Kutisay Mining LLC had not shown justifiable reasons for its delay.458
308.
The Claimants, in response, argue that Kutisay Mining LLC's failure to comply with the requirements was due to the SAGMR's disengagement with the Claimants.459 The Claimants assert that"[t]he Environmental Safety section of 'Open Pit – Existing Mill' Haul Road Repair Project for Kutessay II" submitted on 14 January 2013 was an independent expert report, and that in any event this report was unrelated to the deliverables under Kutessay II License Agreement No. 3.460 The Claimants further allege that the SAGMR refused to agree on the extension of the deadlines under the Agreement despite the fact that the Kyrgyz government had created the obstacles for the Claimants' work.461 Moreover, the Claimants argue that the Respondent's mining expert, Mr. Shilov, "firmly rejected the contention that the Claimants' interactions with SAGMR had been unnecessary[…]"462 Rather, his view was that such exchanges were necessary as the Subsoil Law only provided general concepts.463 According to the Claimants, Mr. Shilov's opinion was that "the Claimants had acted precisely as he advises his own clients to do in circumstances where 'something [is] forced upon [them]' by SAGMR."464

E. ASIARUD REPORTS AND STANS ENERGY'S DISCLOSURE

309.
On 21 December 2012, approximately three months after the expiration of the suspension order, AsiaRud, which Kutisay Mining had commissioned to complete a technical and economic assessment required under Clause 3.3(1) of the Kutessay II Licence Agreement No. 3, sent a letter to Kutisay Mining LLC.465 In this letter, AsiaRud concluded that it "considers that there is no point at present time to work on the [TEA] of conditions and of the project of the underground mine",466 describing that "the current price of REE (as at November 2012) and the calculated amount of REE in the concentrate is significantly lower than the critical amount which points out that the development of REE deposit Kutessay II at the current price is already loss-making and the reserves are off-balance".467
310.
On 10 January 2013, Kutisay Mining LLC instructed AsiaRud to employ the price of US$ 128.75/kg for the feasibility calculations in its TEA.468
311.
By letter of 4 April 2013, AsiaRud informed Kutisay Mining LLC that it had concluded that "due to no-provision of the information, required for the development of the Feasibility conditions […] and receipt of negative economic effectiveness arrival, based on preliminary calculations, at a negative economic efficiency […] for the work on the conditions for Feasibility should be deemed to be pointless".469
312.
In its letter dated 24 April 2013, Kutisay Mining LLC notified that it had accepted the then-current concentrate price of US$ 18.45/kg for the feasibility calculation.470 In the same letter, Kutisay Mining LLC asked AsiaRud to indicate the concentrate price at which the project would be profitable with an IRR of 12%.471
313.
In July 2013, AsiaRud issued a report ("AsiaRud 2013 Report").472 In this Report, AsiaRud described that "[a]t present time, the REE concentrate price at the processing plant and in the market of rare earth does not allow to implement profitable development of Kutessay II. Because of this, at [Kutisay's] instructions all project solutions were developed for the version with the assumed price for REE concentrate of 74$/kg which provides for the floor of profitability of the project at 12% IRR."473 AsiaRud also mentioned in the Report that "[t]he calculated reserves in this report are referred to as 'balance' [reserves] conditionally because they are not in line with the real economics of the project due to a lower price for them at present time".474
314.
In this regard, the Respondent alleges that Stans Energy failed to disclose the AsiaRud 2013 Report in breach of Toronto Stock Exchange ("TSX") Rules ("TSX Rules").475 According to the Respondent, this Report constituted "Material Information" which should be timely disclosed pursuant to the TSX Rules.476 The Respondent continues that Stans Energy also failed to timely-disclose other "Material Information".477
315.
The Claimants, in response, allege that Stans Energy complied with the TSX Rules.478 The Claimants emphasize that Stans Energy's decisions to disclose or not to disclose information were fully in compliance with Ontario Securities Act and the National Instrument 43-101 on Standards of Disclosure for Mineral Projects ("NI 43-101"), under which the AsiaRud Reports were not required to be disclosed as a report prepared by a "qualified person".479 The Claimants also contend that their decisions on disclosure were made in accordance with expert legal advice, and that in any event most of the information listed by the Respondent was in the public domain accessible to the market.480

F. JUDICIAL PROCEEDINGS REGARDING THE VALIDITY OF THE GRANTING OF THE LICENSES

316.
After the measures described above, several judicial proceedings took place before the Respondent's national courts concerning the validity of the process through which the Licenses had been granted to the Claimants. These judicial proceedings, the relevance of which is disputed between the Parties, are described in the following paragraphs.

1. Proceedings Brought by the Prosecutor General Before the Inter-District Court of Bishkek Asking to Invalidate the 21 December Minutes (No 736-N-09)

317.
After concluding that the issuance of the Licenses without tender had been illegal through its January 2013 inspection, on 4 April 2013, the GPO filed its Statement of Claim against the SAGMR (defendant) and Kutisay Mining OJSC (third party) before the Inter-District Court of Bishkek, requesting that the Court invalidate the 21 December 2009 Minutes (the "GPO Claim").481 The GPO claimed that the 21 December 2009 Minutes should be declared invalid because, inter alia, (1) Resolution No 725 contradicted Article 16 of the Subsoil Law, and Article 32 of the Law on Normative Acts provides that in case of conflict between normative legal acts, entities shall be guided by the normative act with the highest rank in the hierarchy of norms; and (2) Resolution No 725 was not in force when the Licenses were granted to Kutisay because it had not yet been officially published.482
318.
On 9 April 2013, the Council of the Coalition of the Parliamentary Majority recommended that the Kyrgyz Republic cancel the Licenses and that the GPO "take measures to prevent the disposal by Kutisay Mining LLC of the licenses for the development of the Kutessay II Deposit and the Kalesay Deposit."483
319.
On 15 April 2013, the Inter-District Court of Bishkek granted the GPO's request for an injunction prohibiting anyone, including Kutisay Mining LLC and the SAGMR, from taking any action with respect to the Licenses.484
320.
In response, Kutisay Mining, along with the Aktyuz town council appealed the Court's order of 15 April 2013.485 On 29 May 2013, the Court declined the appeal arguing that revoking the interim measures may complicate the execution of the Court's decision on the merits.486 The Claimants contend that, since then, they have not conducted any work at Kutessay II and Kalesay.487
321.
The Inter-District Court of Bishkek held the hearing on 13 February 2014.488 On 19 March 2014, the Court rendered its decision sustaining the GPO's claim and invalidating the 21 December 2009 Minutes.489
322.

This decision was upheld by the Bishkek City Court on 30 July 2014490 and by the Supreme Court of Kyrgyzstan on 24 March 2015.491 Following a detailed exposition of relevant provisions of Kyrgyz law, the Supreme Court explained, inter alia :

[…] the judicial panel has reached a conclusion that the decisions of the trial court and the appellate court invalidating Minutes No 1736-N-09 of direct negotiations between the State Agency of Geology and Mineral Resources of the Government of the Kyrgyz Republic and Kutisay Mining OJSC dated 21 December 2009 were well founded.

[…]

The judicial panel agrees with court findings that the Kyrgyz Republic Government Resolution [No. 725] was not in force as of the date of license issue as it was officially published in Erkin-Too newspaper only on 25 December 2009. Pursuant to Article 30 of the Law of the Kyrgyz Republic "On Regulatory Legal Acts of the Kyrgyz Republic", the official publication of regulatory legal acts is a mandatory condition for acts to come into force. Pursuant to Part 3 Article 30 of the Law of the Kyrgyz Republic "On Regulatory Legal Acts of the Kyrgyz Republic", regulatory legal acts shall come into force 15 days after the official publication, unless otherwise provided by the relevant act itself. Kyrgyz Republic Government Resolution No 725 dated 1 December 2009 does not provide for specific effective date and, therefore, pursuant to the above-mentioned Law, the Resolution came into force on 9 January 2010, i.e. the license was issued 19 days before the effective date of Kyrgyz Republic Government Resolution No 725 dated 1 December 2009.

[…]

Based on above, the judicial panel of the supervisory instance is of opinion that courts reasonably reached a conclusion that the State Agency of Geology and Mineral Resources of the Government of the Kyrgyz Republic had violated the law in force in the Kyrgyz Republic by issuing licenses Nos. 2488ME and 2489ME for Kutessay and Kalesay, respectively, through direct negotiations, as indicated in the Minutes No. 1736-H-09 dated 21 December 2009 […]492

323.
While the Claimants argue that the Respondent's courts considered "the SAGMR's acceptance of the claim dispositive as a matter of Kyrgyz civil procedure and effectively ignored Kutisay Mining's rights in a clear breach of due process";493 the Respondent contends that its courts "did not merely dismiss the claims by treating SAGMR's acceptance of the claim as dispositive [but] considered the merits of the claims in detail".494

2. Proceedings Brought by Baotou Before the Bishkek City Court Asking to Invalidate the SAGMR's 2009 Decisions

324.
In January 2013, Baotou purchased the remaining shares in, and became the sole owner of, CAMG.495
325.
Baotou then filed its claim against the SAGMR before the Inter-District Court of Bishkek, requesting the Court to invalidate SAGMR's 2009 decisions (1) to terminate CAMG's licenses to Kutessay II and Kalesay; and (2) to award these Licenses to Kutisay Mining OJSC.496
326.
On 11 June 2013, the Inter-District Court of Bishkek decided in favour of Baotou, invalidating the 2009 decisions, and ordering the SAGMR to reinstate Baotou's supposed rights.497
327.
On 29 August 2013, however, the Bishkek City Court overturned the Inter-District Court's decision, holding that (1) Baotou did not have standing because the license holder was CAMG instead of Baotou; (2) the claim was time-barred; and (3) CAMG had failed to comply with its license agreements.498

G. THE CLAIMANTS' ARBITRATION BEFORE THE MCCI

328.
On 30 October 2013, Stans Energy and Kutisay Mining LLC filed their Statement of Claim in an international arbitration before the Moscow Chamber of Commerce and Industry ("MCCI") against the Kyrgyz Republic ("MCCI Arbitration"), pursuant to the Moscow Convention.499
329.
The Respondent considers that the Claimants initiated international arbitration before the Moscow Chamber of Industry and Commerce because they acknowledged that the Kutessay II project would not be profitable.500 In contrast, the Claimants assert that the Respondent's version of their motivations is "distorted and unsupported by the evidence […] makes no attempt to prove the irrelevant allegation that the Claimants were reckless and interested only in a quick exit".501
330.
In April 2014, the tribunal in the MCCI Arbitration issued an award ordering the Kyrgyz Republic to pay in excess of US$ 118 million.502
331.
The Respondent criticizes the Claimants' choice of MCCI Arbitration, asserting that such system "has long been heavily criticised: the practice of setting up arbitral institutions to serve the interests of Russian industrial groups (known as 'pocket arbitrations') was endemic".503 The Respondent points out that Ms. Kuranova, former CFO of Stans Energy, explains "that the valuation report filed in the MCCI Arbitration […] materially overstated prices for REEs and thus materially overstated the value of the Kutessay II project".504 The Respondent also notes with concern that the daughter of one of the arbitrators in the MCCI Arbitration was a partner in the law firm of one of the Claimants' representatives.505
332.
The Claimants argue that the allegations put forward by Ms. Kuranova in an unrelated litigation were never established in a court of law (as the parties reached a confidential settlement), are an impermissible attempt to adduce facts through untested argument from an unrelated case and are, in any event, untrue.506
333.
On 25 May 2015, the Moscow Arbitrazh Court set aside the MCCI award, accepting the Kyrgyz Republic's argument that the tribunal in the MCCI Arbitration had no jurisdiction under the Moscow Convention.507 On 11 January 2016, the Russian Supreme Court (the last instance of review) rejected Stans Energy's application for review.508

H. FORMAL TERMINATION OF THE LICENSES BY THE SAGMR

334.

On 17 October 2014, the SAGMR's Subsoil Use Licensing Commission decided to terminate Kutisay Mining LLC's Licenses, referring to the decisions of the Kyrgyz courts in favour of the GPO.509 According to the extract of the minutes provided by the Claimants ("17 October 2014 Minutes"), the SAGMR decided as follows:

Having exchanged opinions, the Committee DECIDES:

To take note of the decision of the Inter-District Court of Bishkek dated 14 March 2014 that has entered into force and been upheld by the decision of the Bishkek City Court dated 30 July 2014 and to deem the subsoil use rights under Licenses Nos 2488 ME and 2489 ME terminated pursuant to Article 27, Part 5, of the Kyrgyz Republic Law "On Subsoil", and to deliver to Kutisay Mining LLC a relevant notice of termination of subsoil use rights under:

- Subsoil License No 2488 ME issued to Kutisay Mining LLC on 20 September 2010 for a term until 21 December 2029 for the right of subsoil use at the Kutessay II deposit for the purpose of development of rare earth elements, bismuth, molybdenum and silver. Decision is carried unanimously. U.D. Ryskulov and K.K. Zhumabekov were absent.

- Subsoil License No 2489 ME issued on 20 September 2010 for a term until 21 December 2029 for the right of subsoil use at the Kalesay deposit for the purpose of development of beryllium and lead. Decision is carried unanimously. U.D. Ryskulov and K.K. Zhumabekov were absent.510

335.
Kutisay Mining LLC filed a claim with the Inter-District Court of Bishkek seeking invalidation of the 17 October 2014 Minutes.511 On 8 December 2014, the Inter-District Court of Bishkek dismissed this claim, referring to the court decisions of 19 March 2014 and 30 July 2014 which invalidated the 21 December 2009 Minutes.512
336.
The Bishkek City Court and the Supreme Court of Kyrgyzstan averred this decision on 27 January 2015 and 15 October 2015, respectively.513
337.
On 22 January 2016, the Kyrgyz Government announced a tender for the Kutessay II and Kalesay deposits.514 A repetition of the bidding process was announced in September 2017.515 The tender conditions provided for a minimum bidding price of US$ 10 million.516 According to the Claimants, such amount comprises a statutory fee and a bonus, as was the case with the purchase by Kutisay Mining OJSC in December 2009.517 Furthermore, the Claimants contend that the minimum bid was determined "on the basis of a valuation commissioned by the government that reflected a project value of more than US$ 110 million – in stark contrast to the Respondent's assertion in these proceedings that the licenses were worth nothing."518 As evidence of the above-mentioned valuation, the Claimants submitted a spreadsheet which, they consider, reflects a post-tax valuation by the Respondent of the Kutessay II deposit in an amount of over US$ 110 million.519 In contrast, the Respondent argues that the said spreadsheet merely contains two models with hypothetical assumptions, which do not amount to a valuation and which, in any case, show a range of mostly negative NPVs.520 The above-referenced tenders were unsuccessful. The Respondent points out that the mining rights over the Kutessay II and Kalesay deposits remain unallocated until the date of this arbitration.521

V. JURISDICTION AND ADMISSIBILITY

338.
The Claimants assert that the Tribunal has jurisdiction on the basis of Article 18 of the 2003 Investment Law.522 They further argue that they qualify as foreign investors, that their investments are protected pursuant to the 2003 Investment Law, and that the Parties have validly consented to arbitration of the dispute.523
339.
The Respondent contends that, in order to rely on the protections of the 2003 Investment Law, an entity must be an "investor" which has made a "direct investment".524 Stans Energy's indirect shareholding in Kutisay Mining LLC, however, is not a "direct investment",525 while Kutisay Mining LLC is not a "foreign investor" nor an "investor" with a qualifying "direct investment".526 Moreover, the Respondent argues that the Claimants' claims must be dismissed due to illegality.527
340.
In addition, the Parties disagree as to the scope of the Tribunal's jurisdiction under the 2003 Investment Law.

A. MATERIAL SCOPE OF JURISDICTION UNDER THE 2003 INVESTMENT LAW

341.
Specifically, the Respondent disputes that all of the legal bases or causes of action invoked by the Claimants in the present arbitration fall within the jurisdiction of the present Tribunal pursuant to Article 18 of the 2003 Investment Law. The Respondent also disputes the relevance of international law in claims pursuant to Article 18.
342.

Article 18 of the 2003 Investment Law provides:

[Claimants' translation] [Respondent's translation]

Article 18. Settlement of Investment

Disputes

1. An investment dispute shall be settled in accordance with any applicable procedure preliminarily agreed upon by the investor and the authorized government bodies of the Kyrgyz Republic, which does not preclude the investor from seeking other legal remedies in accordance with Kyrgyz laws.

2. In the absence of such agreement, the investment dispute between the authorized government bodies of the Kyrgyz Republic and the investor shall, to the extent possible, be settled by consultations between the parties. If the parties do not reach an amicable settlement within a 3-month period from the day of the first written request for such consultation, any investment dispute between the investor and the government bodies of the Kyrgyz Republic shall be settled by judicial bodies of the Kyrgyz Republic, unless in case of a dispute between a foreign investor and a government body one of the parties requests the dispute to be considered in accordance with one of the following procedures by applying to:

а) the International Center for Settlement of Investment Disputes (ICSID) under the Convention on the Settlement of Investment Disputes between States and Citizens of Other States or the rules regulating the use of additional remedies for conducting the hearings by the Secretariat of the Center; or

b) arbitration or an international temporary arbitral tribunal (commercial court) formed in accordance with the arbitration rules of the United Nations Commission on International Trade Law.

3. In the event that an investment dispute is submitted to arbitration mentioned in subparagraphs "a" and "b" of paragraph 2 of this Article, the Kyrgyz Republic shall waive its right to request that all domestic administrative or judicial procedures be first utilized before submitting the dispute to international arbitration.

4. Any investment dispute between foreign and domestic investors shall be considered by the judicial bodies of the Kyrgyz Republic unless the parties agree on any other dispute settlement procedure, including national and international arbitration.

5. Disputes between foreign investors and individuals and legal entities of the Kyrgyz Republic may be settled by an arbitral tribunal of the Kyrgyz Republic, as well as a foreign arbitral tribunal, by agreement of the parties. Failing such agreement, the disputes will be settled in a manner provided by Kyrgyz laws.528

Article 18

(1) An investment dispute shall be resolved in accordance with any applicable procedure agreed in advance between the investor and the state agencies of the Kyrgyz Republic, which shall not exclude the use by the investor of other legal remedies in accordance with the legislation of the Kyrgyz Republic.

(2) In the absence of such an agreement, an investment dispute between authorized state agencies of the Kyrgyz Republic and an investor shall be settled, if possible, through consultations between the parties. If the parties do not reach an amicable settlement of the dispute within three months from the day of the initial written request for such consultations, any investment dispute between an investor and state agencies of the Kyrgyz Republic shall be resolved in the judicial authorities of the Kyrgyz Republic, unless, in the case of a dispute between a foreign investor and a state agency, one of the parties asks for the dispute to be considered in accordance with one of the following procedures, by applying to:

(a) to the International Centre for Settlement of Investment Disputes (ICSID) based on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States or Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre; or

(b) to arbitration or an international ad hoc arbitral tribunal (commercial court) formed in accordance with the arbitration rules of the United Nations Commission on International Trade Law.

(3) If an investment dispute is referred to arbitration in sub-paragraphs (a) and (b) of paragraph 2 of this article, the Kyrgyz Republic shall waive the right to demand the prior exhaustion of all internal administrative or judicial procedures before referring the dispute to international arbitration.529

 

1. Whether Article 3(1) of the 2003 Investment Law Limits the Tribunal's Jurisdiction to Claims Under the Substantive Provisions of the 2003 Investment Law

343.
The Claimants argue that Article 18 of the 2003 Investment Law contains the Respondent's consent to submit to international arbitration all "investment disputes" with foreign investors (as defined in Article 1(6) of the same instrument).530 That consent is not limited to disputes based on the substantive provisions of the 2003 Investment Law. Therefore, the scope of the Tribunal's jurisdiction would encompass claims for breaches of the Moscow Convention and general international law.
344.

The Respondent argues that the material scope of jurisdiction of tribunals under the 2003 Investment Law is limited to breaches of the substantive provisions of that Law. Accordingly, any claims that an investor may file must be strictly limited to breaches of the provisions of the 2003 Investment Law. This jurisdictional objection is based on Article 3(1) of the 2003 Investment Law, which provides:

[Claimants' translation] [Respondent's translation]

Article 3. Scope of the Law

1. The relations in the field of direct investment in the Kyrgyz Republic shall be regulated by this Law and other normative legal acts of the Kyrgyz Republic enacted in accordance with this Law.531

Article 3

(1) Relations connected with direct investment in the Kyrgyz Republic shall be regulated by this Law and other normative legal acts of the Kyrgyz Republic adopted in accordance with this Law.532

 

a. The Claimants' Position

345.
The Claimants disagree with the Respondent's view that Article 3(1) of the 2003 Investment Law limits the Tribunal's jurisdiction to breaches of the substantive provisions of the 2003 Investment Law. Rather, the Claimants assert that the Tribunal's jurisdiction is circumscribed only by Article 18 of the 2003 Investment Law and that Article 3(1) is irrelevant in this regard.533
346.
Article 18 of the 2003 Investment Law contains the Respondent's consent to submit to international arbitration all "investment disputes" with foreign investors. The term "investment dispute" is defined in Article 1(6) of the 2003 Investment Law, and none of these provisions are limited to disputes based on the substantive provisions of the 2003 Investment Law.534
347.
Article 18(2) of the 2003 Investment Law codifies the Respondent's consent to arbitration of "any dispute […] arising in the process of investment" and does not make distinctions as to the legal basis of the investor's position.535 In support of a broad definition of the term "disputes", the Claimants rely on the decision in Philip Morris v. Uruguay, where the Tribunal concluded that "[t]he term "disputes" […] is to be interpreted broadly as concerning the subject matter and facts at issue and not as limited to particular legal claims, including specifically BIT claims".536 Likewise, the Tribunal in SGS v. Philippines considered that "[t]he term "disputes with respect to investments" […] is not limited by reference to the legal classification of the claim that is made".537
348.
They also deny the Respondent's contention that the Claimants attempt to use an applicable law clause to expand the Tribunal's jurisdiction (an approach that, according to the Respondent, had been rejected by the tribunals in the Eurotunnel Arbitration and the OSPAR Convention arbitration).538 The Claimants argue that the Respondent's reliance on the Eurotunnel case is inappropriate because in that case the applicable Concession Agreement specifically limited the jurisdiction of the arbitral tribunal to disputes relating to such agreement.539 Similarly, the Claimants criticize the Respondent's reference to the OSPAR Arbitration given that the dispute resolution clause in the underlying treaty limited arbitration to "[a]ny disputes between Contracting Parties relating to the interpretation or application of the Convention";540 while no comparable limitation is found in Article 18 of the 2003 Investment Law.
349.
The Claimants contend that, pursuant to Article 18 of the 2003 Investment Law, the scope of the Tribunal's jurisdiction therefore includes claims for breaches of the Moscow Convention and general international law.541

b. The Respondent's Position

350.
The Respondent argues that Article 3(1) of the 2003 Investment Law limits the Tribunal's jurisdiction to breaches of the substantive provisions of the 2003 Investment Law.542 Accordingly, any claims that an investor can bring in the present proceedings are strictly limited to breaches of the provisions of the 2003 Investment Law.
351.
In ascertaining the contents of the 2003 Investment Law, the Respondent contends that the Tribunal must refer to Kyrgyz law principles of statutory interpretation.543 It argues that, pursuant to those principles, there is no justification for interpreting the term "investment dispute" broadly.544 While the Respondent accepts that the Tribunal may have to incidentally consider other Kyrgyz laws, like the Subsoil Law and the Law on Normative Legal Acts, which might pertain to the relations between the Kyrgyz Republic and investors, such laws are outside the scope of relationships regulated by the 2003 Investment Law "and cannot provide a basis for a claim brought based on the offer to arbitrate in the 2003 Investment Law".545
352.
On the contrary, pursuant to Article 18(2) of the 2003 Investment Law, an investor can only commence international arbitration if it has made a "direct investment" and Article 3(1) of the same law defines the scope of the relations in this field. According to the Respondent, the claims that an investor may file are necessarily limited by the scope of those relations as defined in Article 3(1) ("this Law and other normative legal acts of the Kyrgyz Republic enacted in accordance with this Law").546 The Respondent notes that the Claimants mistakenly aver that Article 2(1) of the 2003 Investment Law is an "applicable law" clause, and a basis for them to bring claims based on international law.547 According to the Respondent, this interpretation renders Article 3(1) devoid of meaning, as the only plausible interpretation for Article 3(1) is that it defines the claims which may be brought under the 2003 Investment Law.548
353.
The Respondent argues that international tribunals have recognised that there is a "cardinal distinction" between the questions of jurisdiction and applicable law, which the Claimants attempt to deliberately intertwine.549 In this regard, the Respondent points out that Article 3(1) of the 2003 Investment Law is very similar to the relevant clause in the Eurotunnel Arbitration, where the Tribunal rejected the Claimants attempt to use the "applicable law" clause to expand the jurisdiction of the Tribunal.550 Similarly, the tribunal in the OSPAR Convention rejected an attempt by the claimant to use an applicable law clause to expand the jurisdiction of an arbitral tribunal.551 Moreover, the Respondent alleges that consent to arbitration under Article 18(2) of the 2003 Investment Law is a unilateral declaration which, according to Article 8 of the ILC Guiding Principles, entails obligations only if it is stated in clear and specific terms, and which must be interpreted in a restrictive manner.552 In this regard, the Respondent avers that the definition of "investment dispute" in Article 1(6) cannot be interpreted as a "clear and specific" undertaking to arbitrate disputes based on any normative source.553
354.

Finally, the Respondent submits that it would be unreasonable to conclude that the Respondent had intended to offer an "unqualified jurisdictional regime" to investors by enacting the 2003 Investment Law.554 It notes that accepting the Claimants' broad interpretation of that clause would go against the restrictive interpretation predicable of unilateral declarations.555 Furthermore, the Respondent rejects the Claimants' contention that by only establishing certain substantive protections under the 2003 Investment Law, the State would be abrogating its international obligations through national legislation.556 In this respect, the Respondent underscores that:

[l]imiting the claims that an investor can bring to specific causes of action does not in any way infringe this principle. A State may be under an obligation not to breach the customary international standards on investment protection. However, a State is not under an obligation to consent to arbitrate all investment disputes […] Such a limited consent to jurisdiction is perfectly consistent with international law.557

c. The Tribunal's Analysis

355.

At the outset, the Tribunal recalls that the dispositif of its Award on Jurisdiction of 25 January 2017 decided as follows:

a. The objections raised by the Respondent against the jurisdiction of the present Tribunal are dismissed subject to the following exception.

b. The question whether the Claimants qualify as "investors" holding "investments" under the relevant Kyrgyz legislation will be considered in conjunction with the merits of the case.

356.
The Tribunal notes that, in this dispositif, the Tribunal accepted jurisdiction subject only to the notions of "investors" and "investments", which will be examined below in this Award, but not to any limit to the substantive provisions of the 2003 Investment Law.558
357.

Irrespective thereof, in the view of the Tribunal, the wording of Article 18 of the 2003 Investment Law is clear as it provides in the Respondent's own translation:

Article 18

(1) An investment dispute shall be resolved in accordance with any applicable procedure agreed in advance between the investor and the state agencies of the Kyrgyz Republic, which shall not exclude the use by the investor of other legal remedies in accordance with the legislation of the Kyrgyz Republic.

(2) In the absence of such an agreement, an investment dispute between authorized state agencies of the Kyrgyz Republic and an investor shall be settled, if possible, through consultations between the parties. If the parties do not reach an amicable settlement of the dispute within three months from the day of the initial written request for such consultations, any investment dispute between an investor and state agencies of the Kyrgyz Republic shall be resolved in the judicial authorities of the Kyrgyz Republic, unless, in the case of a dispute between a foreign investor and a state agency, one of the parties asks for the dispute to be considered in accordance with one of the following procedures, by applying to:

(a) to the International Centre for Settlement of Investment Disputes (ICSID) based on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States or Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre; or

(b) to arbitration or an international ad hoc arbitral tribunal (commercial court) formed in accordance with the arbitration rules of the United Nations Commission on International Trade Law.

(3) If an investment dispute is referred to arbitration in sub-paragraphs (a) and (b) of paragraph 2 of this article, the Kyrgyz Republic shall waive the right to demand the prior exhaustion of all internal administrative or judicial procedures before referring the dispute to international arbitration.559

358.

And subparagraph (4) of Article 18 (of which only a translation by the Claimants has been provided), provides:

4. Any investment dispute between foreign and domestic investors shall be considered by the judicial bodies of the Kyrgyz Republic unless the parties agree on any other dispute settlement procedure, including national and international arbitration.560

359.

The Tribunal notes that, in the above provisions, the terms "an investment dispute" and "any investment dispute" are used. Article 1(6) of the 2003 Investment Law provides the following definition of the term: "Investment dispute" means any dispute between an investor and government bodies, officials of the Kyrgyz Republic and other participants of investment activity, arising in the process of investment.561

360.
As the wording of neither of the above provisions in the 2003 Investment Law makes the limitation suggested by the Respondent (by relying on Article 3(1) of the 2003 Investment Law), and particularly the above definition in Article 1(6) refers to "Any dispute", the Tribunal sees no ground for restricting its jurisdiction to only disputes under the substantive provisions of the 2003 Investment Law on the basis of its Article 3(1), but rather concludes that, indeed, any investment dispute between the Parties is under its jurisdiction, subject to the further examination of the Respondent's other jurisdictional objections in the following sections.

2. Whether International Treaties and General International Law Form Part of the Applicable Law Pursuant to Article 2(1) of the 2003 Investment Law