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. |
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
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
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
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?
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
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
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
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
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.
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
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
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.
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.
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
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 |
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 |
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$392,220 to the tax authorities at its place of registration before 21 January 2010. 2. Before the expiration of this License Agreement the Licensee shall submit the following: 2.1. Project for the development of the Kutessay II deposit 2.2. Expert opinions with respect to the following aspects of the project: a) Environmental safety b) Technical safety c) Subsoil protection and use 2.3. Land allotment […] 4. License Agreement validity period: Until 31 December 2010241 |
After the conclusion of the License Agreements No. 1, Stans Energy proceeded with its preparations for the operation of the mines which, according to the Claimants, included:
(1). Stans Energy added three REE experts in its advisory board: Mr. James Hedrick and Mr., James Allan in January 2010;259 and Dr. Valey Kosynkin in April 2010.260
(2). In February 2010, Stans Energy raised C$ 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
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
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 |
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 |
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
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
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
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
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 |
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 |
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
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.
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
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
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