Negotiation process and courts of arbitration

published: 28 November 2013

The Government is preparing a new agreement on Kumtor… It is hard to say whether the Canadian party approves this document or not. Centerra Gold is not going to cede more than 50%. But the Parliament still holds its ground – not less than 67%… the Government should take drastic measures, which mean denunciation or nationalization of Kumtor. However, in this case the Republic will face protracted litigations, and the country’s President urges deputies to make a rational decision on the budget-making enterprise of Kyrgyzstan.

The international proceeding at the suit of Kazakhstani company Visor will start in the Netherlands in a couple of weeks. Kyrgyzstan will be the respondent party. The amount of claim is $400 million. Canadian Stans Energy company is also trying to win back its losses. The amount of claim exceeds $100 million for the expropriation of Kutessay-2 deposit. These precedents are not the first and isolated cases when investors protect their rights in the international courts of arbitration. And, alas, Kyrgyzstan is not always successful.
All difficulties and consequences of high-profile litigations, in particular, possible arbitration proceeding at the suit of Centerra, have made the head of the state anxious. Following the results of his visit to South Korea, the President declared that, being a realist, he believes 50% to be maximally possible for the Republic. And demands of the majority of deputies are only politics and populism.
Experts also support the President’s position. While deputies are not able to rationally explain the demand of 67%, we can only regard it as a political manipulation. And populist statements about unilateral withdrawal from the agreement will lead to even more disastrous consequences.
A protracted legal action on Kumtor is possible not only in case of denunciation, but also in case of nationalization of the deposit. This variant is advocated by leader of Ata Meken Omurbek Tekebayev, who in principle should understand that during the court proceedings, the operation of Kumtor and distribution of dividends will be kept under the current agreement of 2009. And if the Canadian investor wins in the court, in addition to the payment of all legal costs, those 33%, which today owned by Kyrgyzstan, may be arrested to secure the claim.

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