Kumtor Gold Company States that Dispute with Kyrgyz Republic Environmental Agencies is about Improper Kyrgyz Republic Demands additional Taxes and Payments for Environmental Impact

published: 14 June 2016

Kumtor Gold Company (KGC) stated today that the claims by Kyrgyz Republic environmental agencies are, in substance, an attempt by the Kyrgyz Republic to impose additional taxes and payments on the Kumtor project. The Kumtor project operates in accordance with Kyrgyz Republic and international environmental standards. This has been confirmed by independent international environmental experts, including the Kyrgyz Republic’s own international environmental consultant, AMEC.

For example, the State Inspectorate Office for Environment and Technical Safety (SIETS) claim in the amount of 6,698,878,290 Kyrgys soms (approximately U.S.$98.4 million) alleges that KGC owes tariffs for the period between 2000 and 2011 for the placing of waste rock on the mine waste dumps and the State Agencies did not know this practice . In fact, the placing of such material on the mine waste dumps has been fully approved and permitted by all relevant Kyrgyz Republic state agencies each year since the beginning of the project the State Agencies never required KGC to pay for waste rock in the Dump. SIETS claim that KGC should pay for such placement of material as if it were household waste. Other claims by SIETS are also monetary claims disguised as environmental claims.

Similarly, the claim of the State Agency for Environment Protection and Forestry (SAEPF) alleges that Kumtor owes additional environmental fees that are greater than the environmental fees specified in the Restated Investment Agreement (2009) and claims damages of 15,004,297,963 (approximately $220 million). All of the activities which are subject of the environmental fees paid by Kumtor have also been fully permitted and approved each year since the beginning of the project by the State Agencies.

The State Agencies of Kyrgyz Republic demands are contrary to the Restated Investment Agreement (2009), which provides a complete code of all taxes, payments and charges applicable to the Kumtor project and states that, except for those taxes, payments and charges specifically set out in the Restated Investment Agreement (2009), Kumtor shall be “…exempt from all other present and future…taxes, duties, rates, royalties, withholding obligations, deductions or other governmental charges whatsoever, however characterized, and whether assessed by the Kyrgyz Republic or by any national, regional, municipal, local or administrative instrumentality of the Kyrgyz Republic”. As such, the Restated Investment Agreement (2009) prohibits the imposition of any new or additional taxes, payments or charges on the Kumtor project.

The Bishkek Inter-District Court has now awarded a judgment in favour of SIETS and is expected to consider the claim of SAEPF shortly. Centerra and KGC will continue to dispute and challenge the Kyrgyz Republic’s claims in the Kyrgyz Republic and in international arbitration.

Previous publicationCenterra Provides Update on Kyrgyz Republic Legal Proceedings and Restrictive Measures Against Kumtor and its Personnel Next publicationOfficial Commentary of CJSC Kumtor Gold Company on June 15, 2016
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