Canada-based Centerra Gold Inc. has brought additional claims against the government of the Kyrgyz Republic and the state-owned entity Kyrgyzaltyn JSC in response to what it believes is the wrongful expropriation of the Kumtor Mine. The company’s amended Notice of Arbitration seeks to hold the Kyrgyz government and Kyrgyzaltyn JSC responsible for any and all losses and damages that result from their “campaign to seize” the gold mine, which it said is in violation of longstanding investment agreements and without compensation to Centerra.
On May 6, the Kyrgyz Parliament passed a resolution, instructing the government to install “external management” at the Kumtor mine. The government seized control of the mine in mid-May after sending government authorities to the mine, KGC’s office in Bishkek, and the homes of several KGC employees.
Centerra’s amended notice added claims against Kyrgyzaltyn JSC, the gold refining monopoly in the Kyrgyz Republic and Centerra’s largest shareholder. It claimed that Kyrgyzaltyn JSC conspired with the Kyrgyz government to take control of the mine under the guise of temporary “external management” and continues to act at the behest of the government with regard to the operation of Kumtor and its shareholding in Centerra.
“Rather than honor its commitment to arbitrate any disputes in a transparent manner in a neutral forum, the government and those acting in concert with it have proceeded to expropriate the Kumtor Mine, placing Centerra’s investment and the livelihoods of thousands of Kyrgyz workers at risk,” Centerra President and CEO Scott Perry said. “Centerra would much prefer to resolve this dispute in a constructive dialogue with the Kyrgyz authorities, but their repeated refusal to engage leaves us no choice but to seek effective remedies through arbitration and other legal means.”
On May 16, Centerra initiated binding arbitration against the Kyrgyz government in response to actions taken against the company’s wholly owned subsidiary Kumtor Gold Co., including fines and tax claims as well as legislation providing for its operations to be placed under “external management.”
Centerra’s claims will be adjudicated by a single arbitrator in arbitration proceedings to be held in Stockholm, Sweden, and conducted under the rules of the United Nations Commission on International Trade Law. Under the agreements, the governing law is the law of the state of New York.
At the end of May, the company filed Chapter 11 bankruptcy in the Southern District of New York. The court-supervised process provides, among other things, for a worldwide automatic stay of all claims against KGC and KOC. The Chapter 11 proceeding will not impact any other areas of the company’s business, including the Mount Milligan Mine in Canada, the Öksüt Mine in Turkey and the molybdenum business in North America.
