The truth about World Wide Minerals against Kazakhstan’s case

The Canadian company for about 20 years has been sluggish judicial war with the Republic of Kazakhstan. Despite the logic and common sense, it continues to struggle blinded by glitter “golden calf.” The next round of confrontation fell in 2016, when in January, the Arbitration Tribunal of Canada reviewed and upheld the claim «WWM» in Kazakhstan.

kaz mine

What is the crux of the matter? Speaking briefly the investor has come to Kazakhstan who has not met its obligations, and for that reason very soon found himself on the sidelines. It would seem, that’s all. However, the company «WWM» is guided by an entirely different logic, it sees the event in a different light. In their opinion, the reason for the problems lies in the fact that Kazakhstan has been preventing the normal operation of the investor.

However, let’s see.

So this brain twisting story began in 1996, when the Canadian campaign of World Wide Minerals signed an agreement with Kazakhstan, an agreement on the management of the northern uranium mining complex of virgin and Mining and Chemical Combine (TSGHK). And everything was normal. The new independent republic had a good approach with the investors, creating all possible conditions for the work. It was a question of survival of the young Kazakhstan which has rich resources, but had neither the means nor the technologies for their development.

There was no reason for the conflict in principle. However, one is not very fine day an event occurred, which turned the investor into a plaintiff.

What happened? All turned to the banal simple. In 1997 the company «WWM» appealed to the Government of Kazakhstan for export of uranium license for sale in the United States. And it was refused. As it turned out, the exclusive right to supply uranium to the United States was granted to the American company Nukem Inc.

Note that, the United States was carried out while a very aggressive policy, fearing that cheap uranium from the former Soviet republics, including from dismantled nuclear warheads, will lead to loss of control over the market. Uranus is indeed traded at prices below cost.

Therefore, the Ministry of Commerce of the United States and six representatives of the CIS countries in 1992 signed an agreement imposing quotas on imports of uranium products in the United States. Among them are Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Under the terms of the US agreements we were given the right to restrict imports for eight years and monitor transition from quota to unlimited imports of two more years.

In other words, in this case, it was heavily fulgurated the policy. And Canadians, when they came in 1996 on the market of Kazakhstan could not have been unaware of the situation.

Furthermore, the overall impression was that they were acting on an elaborated plan with the expectation for the future. After just three years after their arrival in Kazakhstan the development of a powerful industry has begun.

In particular, in 1999 Kazakhstan won antidumping process in the United States. In 2001 the country for the first time entered the uranium market of China, and the next year – South Korea. In 2002, Kazakhstan took the 5th place in the world in production of natural uranium (compared to 13th place in 1997 we are considering).

However, the company «WWM» missed its chance. Making sure that they will not receive  the export license for trade with the United States  the Canadians stopped production and stopped any work, referring to the impossibility of sales than literally blew up the social situation in the region of residence. Without trying to find another way out, find finally other markets or some other solution to the problem, they chose the worst case scenario.

As a result, Kazakhstan was forced to take over the management control of the northern uranium mining complex and terminated the contract because of the failure WWM commitments and the heavy financial and economic position TSGHK. Government Resolution of 30 July 1997, the right of operational management holding company “Tselinny Mining and Chemical Combine” was handled by JSC “NAC Kazatomprom”.

However, Canadians didn’t give up. One year later, WWM filed a lawsuit in US District Court against Kazakhstan, presenting complaints, which mainly concerned the unlawful refusal to grant a license for the export of uranium to the United States. The court, of course, pointed out that the decision to issue or not  an export license is a sovereign action of Kazakhstan, based on domestic laws and decrees of the Republic.

August 8, 2002 US Court of Appeals issued a final decision to stop the trial in favor of Kazakhstan and NAC “Kazatomprom”.

Against this, however, history has not ended. Increased demand for uranium in the world only further provoke the former investor, biting his elbows because of the loss of profit. It is no accident and the amount of claims increased from the initial 29 million dollars to a billion.

And then came a new round of confrontation, which began in 2016.

In January of this year, the Canadian court upheld a lawsuit against a Canadian mining company in Kazakhstan. And thus cause a sharp cooling in relations between the two countries.

In Astana, are perplexed by this decision. After the tribunal, oddly enough,  was referring to the regulatory framework of the Soviet Union. Yes, you heard right. The fact that the Soviet Union and Canada in the midst of restructuring signed an agreement on encouragement and mutual protection of investments on June 20, 1989. And now for the things of bygone days is responsible new independent state. Naturally, Kazakhstan is trying to explain that the country has been living in a new geopolitical reality and the old contract is illegitimate.

However, objections can not be accepted. Furthermore, UNCITRAL Tribunal (United Nations Commission on International Trade Law) declared Kazakhstan a legal successor of the bilateral investment treaty of 1989 between Canada and the USSR. Arbitration decision established that the agreement is valid for Canada and the modern Kazakhstan economic relations.

To say that such feint ears by international Themis looks very strange, then, to say nothing. This decision does not hold water.

However, down with emotion, long live the facts. So, to understand the logic of the Tribunal decision is necessary to get acquainted with the 1978 Vienna Convention “On State succession in respect of treaties”, on which it relies in its conclusions.

The study of this international instrument shows the following. In accordance with section 3 “Bilateral agreements”, paragraph 1 of Article 24, a bilateral treaty which at the date of the succession of States was in force in respect of the territory to which the succession of States, it is considered as being in force between a newly independent State and the other State party when:

  1. a) they are clearly agreed on this;
  2. b) by virtue of their behavior, they must be considered as having so agreed.

What also agreed to Kazakhstan and Canada? Yes, nothing. At first time relations were built by inertia. Indeed, in the early 90’s, the new-born republic lived, in fact, under the legislation of the USSR. This is indicated by the following facts: Kazakhstan instead of national currency monetary units operated the Soviet Union one, the population had passports of defunct country by the that time, all legislative acts adopted some time in the Soviet era continued to operate, although they did not meet the national interests.

To understand the processes occurring in society, we recall that the national currency tenge – appeared only in Kazakhstan in 1993. The first Constitution was adopted on 28 January of the same year. That is all that happened before, it should be seen as a transition period, when sovereignty was not filled with real legal content.

Only by 1995, legal and economic reforms have allowed Kazakhstan to carry out de facto and jure real independent policy. In this year the Constitution was adopted a new sample, which laid the foundations of the state.

It is not surprising that many of the bilateral agreements of the USSR disappeared immediately, but were revised. This is evidenced by the fact that all countries with which the Soviet Union in the years 1989-1990 entered into bilateral investment treaty –  Finland, Great Britain, Germany, Italy (1989), Austria, Spain, Switzerland, South Korea, China and Turkey (1990) signed a new agreement on encouragement and mutual protection of investments with an independent Kazakhstan. The exception was just Canada.

By the way, if we talk about Kazakhstan’s intention to sign a new contract, during his visit to Ottawa, Prime Minister of the Republic of Kazakhstan in March 1995 adopted a memorandum of intent in which the parties undertook to conduct additional negotiations on the expert level of the two countries to prepare for «the promotion of the Agreement and mutual protection of investments».

However, due to the non-arrival of Canadian experts at a planned meeting to discuss the draft agreement, the text was not completed.

However, the memorandum was signed and entered into the legal framework between the two countries. Kazakhstan, thus, made it known and clearly marked that it did not intend to fulfill the contract  inherited from the Soviet Union.

Note that according to the above-mentioned Vienna Convention 1978 “On succession of States in respect of contracts” in section 1 of the “general rule”, article 16 clearly explains that Kazakhstan does not have to fulfill the obligations of the USSR.

The document states that: “The new independent state is not obliged to maintain any contract or becomes a party by reason only of the fact that at the time of the succession of States the treaty was in force in respect of the territory to which the succession of States” .

Interestingly another fact that was ignored. The Vienna Convention in 1978 was put into force on 6 November 1996 and was by far its signatories are 19 states.

Kazakhstan, for example, this document didn’t sign. So it seems to be very controversial, that it is the Vienna Convention 78 is a generally accepted international law, clearly tract binding on all principles of inheritance of the commitments made already non-existent countries.

There could be put an end, but there is another legal point on which attention should be paid. Actions of Kazakhstan in relations with the World Wide Minerals investor focused on the protection of national security. And in this case, this aspect has a distinct advantage over any treaties.

After all, the issues of national security were motivated by US actions to resolve the uranium market. It acts as any other self-respecting state.

Failure to comply with the Canadian World Wide Minerals campaign of its obligations gave a rise to a complex situation. Non-payment of wages, easy to use, has led to the fact that people found themselves in a difficult situation, requiring authorities to restore order. A budget didn’t not receive funds necessary for development. Realizing that investors do not fulfill their obligations, hinder economic development and undermine the stability Kazakhstan was forced to take such an unpopular decision.

In conclusion, would like to say that in this hard-hitting stories, surprises even the persistence of the former investor who continues to plead with Kazakhstan. Frustrating position of the Government of Canada, which, instead of thoroughly understand this complicated issue, selects, as seen towards the adventurers who want to rob partner country.

I do not think it would benefit someone else. By their actions, World Wide Minerals can put in the awkward position other Canadian investors working in Kazakhstan. After all, let me remind you that the agreement on encouragement and mutual protection of investments has not been signed so far.

 

by Gregory O’Brian

, , ,