The Canadian World Wide Minerals case vs Kazakhstan

On October 22, 2018, the business world discussed one rather interesting news – the National Atomic Company of the Republic of Kazakhstan – Kazatomprom announced its intention to initially publicly offer its shares (IPO procedure) on the London Stock Exchange. The event is significant, because the successful placement of shares on the stock exchange allows us to take the company to a new level of development.

One of the first to rejoice at a momentous event was Paul Carroll. This name is hardly known to the general public, but many Kazakhstani people, especially lawyers, know it well.

On the same day, Mr. Carroll said that in no case would he interfere with Kazatomprom’s IPO, since the money raised by Kazakhstan from selling shares would be required to compensate him for huge losses. It is worth noting that Paul Carroll did not have, and there is not a single opportunity to somehow hinder such transactions. However, this person generously «approved» the IPO.

What is this Canadian citizen famous for and why is he known in Kazakhstan? The story is rather scandalous and famous. Let me remind you in a few words how it was.

In 1995-1997, World Wide Minerals (WWM), led by Paul Carroll, invested in the development of the largest uranium reserves in Kazakhstan. The project was extremely important, bearing in mind the strategic value of uranium ores, therefore, it was under special control of the Government of the Republic of Kazakhstan and President N.Nazarbayev personally. WWM pledged to invest at least 100 million USD in the nuclear industry in Kazakhstan, but in the end all its operations were curtailed, the company went bankrupt, and its assets and property were sold out. The blame for the fact that the profitable uranium plants were in pre-bankruptcy state, Canadians laid on Kazakhstan.

The fact that with the start of WWM activities in Kazakhstan, the uranium industry began to decline (strangely, the company came to develop and develop) – the Canadians were least worried. It didn’t worry that after only half a year of WWM’s presence, the Virgin Mining and Chemical Combine was at a loss of 9 million USD, and the level of production fell by almost 60 percent. And before the workers in these factories, which all this time were sitting without wages and abandoned social facilities, which the Canadians undertook to maintain, the company didn’t care! Why? Because the activities of WWM, obviously, was aimed at the resale of raw materials and profit.

Realizing this, the Kazakhstani side broke the contract with Canadians and absolutely reasonably accused WWM of violating local laws and causing significant material damage to enterprises and the environment. The company, which expected to get rich quick on Kazakhstani uranium, quickly collapsed.

Mr. Carroll took the failure of his mission in Kazakhstan very painfully – at first he was offended by the Government of the Republic of Kazakhstan, and then filed Kazakhstan and Kazatomprom in international arbitration in Stockholm and the American courts.

The litigation of the two sides is a special story. The story is absurd, comic and absurd at the same time. The point is this: firstly, for WWM, all attempts to return assets or receive compensation were not successful. All courts (except Canadian) invariably occupied the position of Kazakhstan. This is not surprising: the Canadian company is so frankly invented in Kazakhstan that its fault was obvious even to applicants from rural law colleges. WWM’s lawyers understood the futility of litigation on this flank and moved the attack to the other flank. I also note that Mr. Carroll has been complaining all the time that the factor that caused the bankruptcy of his company is that Kazakhstan did not issue a license for the export of uranium to the United States, which, in his opinion, is a flagrant violation of international law.

The «other flank» is … a 1989 bilateral investment agreement between Canada and the USSR, which guarantees the protection of Canadian investments. The Canadian side is now referring to it. Where is the USSR, where is Kazakhstan and that Russia is the successor of the Soviet Union – this is obviously not being studied in secondary and higher educational institutions of the Federal State of Canada. And it’s a pity … Since these litigations do not in the best way characterize this country as a reliable and honest partner. But more on that later.

So, having understood that it is difficult to pass on their incompetence and inefficiency in the conduct of “atomic” affairs to the government of RK, nobody in the world noticed the ruins and decay of the uranium industry in Kazakhstan – it’s even harder for WWM lawyers to Kazakhstan “exclusively” inherited the right of the USSR to bear full responsibility under the investment agreement between the two countries.

From this Canadian “turn”, they lost the ability to think even the most authoritative US legal instances (this is where the case is considered). And the District of Columbia Court of Appeal reminded Mr. Carroll that «the decision to issue or not issue an export license … is the sovereign right of Kazakhstan based on domestic laws and decrees of the republic».

The result was a situation that can be figuratively called “one soldier in the field”. The fact that the case is doomed to failure seems obvious to everyone except a warrior named Paul.

It remains unclear why the Government of Canada has taken to support the claims of WWM to Kazakhstan? Obviously, this trial significantly complicates the bilateral relations of countries. By engaging in a knowingly losing business, Canada unwittingly damages itself and its image. Responsible people should also understand the following nuance: because of this kind of litigation, the authority of Kazakhstan among foreign investors is indirectly undermined, and this could result in a counterclaim.

Than this legal case is not completed, one thing is certain to say – Kazakhstan sincerely would not want for the incompetent decisions of odious «businessmen» and Canadian politicians supporting them to have to pay an ordinary Canadian taxpayer. After all, court costs in such cases, as a rule, reach very significant amounts. Reputation is even more expensive.

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