Arbitrator grants some protective relief for Centerra in ongoing Kyrgyz legal saga

VANCOUVER (miningweekly.com) – Canadian gold producer Centerra Gold has been granted some interim relief in its rolling arbitration against the Kyrgyz Republic and State miner Kyrgyzaltyn, regarding the Kumtor project.

The TSX-listed miner reported on Wednesday that the arbitrator sided with the company, finding prima facie evidence that Centerra had both made out a case for the arbitrator to take jurisdiction over the arbitration proceeding and been convincing regarding the merits of the case.

The arbitrator also granted interim relief, ordering the Kyrgyz Republic to give 30 days' prior notice to the arbitrator and Centerra in the event that it will resume claims brought by Kyrgyz government entities in Kyrgyz courts relating to alleged environmental harm, dividend payments and land use. This will allow Centerra to seek appropriate relief from the arbitrator.

The arbitrator also directed the Central Asian country to give immediate notice to the arbitrator and Centerra if any procedural action is taken in the Kyrgyz court proceedings and further ordered the Kyrgyz Republic to use its best efforts to ensure that public officials, authorities, agencies and government instruments comply with the arbitrator’s decision.

Centerra commented that the arbitrator’s findings relating to jurisdiction and merits support the company’s long-standing view that the Kyrgyz court proceedings are disputes that should be brought in international arbitration and may not be brought before the courts of the Kyrgyz Republic. Centerra further stated its belief that the court claims are without foundation or substance on the merits.

The company filed a request with the Permanent Court of Arbitration for a partial award or, alternatively, interim measures against the Kyrgyz Republic on January 12, seeking an award ordering that the Kyrgyz Republic withdraw or stay the Kyrgyz court proceedings and related decisions, court orders and judgments, the proceedings of which have been continuously postponed for several months.

One consequence of the Kyrgyz court proceedings is a freezing order from a Kyrgyz court blocking Centerra's subsidiary, Kumtor Gold Company (KGC), from distributing cash it currently holds to Centerra. The interim relief Centerra sought included a declaration that the freezing order was invalid.

However, the arbitrator's order does not grant the interim relief requested by Centerra, because she did not find an imminent threat of irreparable or substantial harm to Centerra's rights if the Kyrgyz court order remained in place while the main arbitration proceeding continues.

However, Centerra advised that the arbitrator’s order effectively interdicts the Kyrgyz Republic from taking further action in the Kyrgyz court proceedings without providing Centerra the opportunity to object to such action, and preserves for the arbitrator the authority to order the Kyrgyz Republic to refrain from taking any proposed action.

"To avoid the aggravation of the dispute … it appears necessary to ensure that the Kyrgyz court claims will not proceed to final judgments or enforceable orders during the pendency of these arbitrations, or at least that they do not so proceed without [Centerra and its Kyrgyz Republic subsidiaries] having adequate notice allowing them to take any action they deem appropriate to avoid incurring substantial harm,” Centerra quoted the arbitrator’s interim relief decision.

The company vowed Wednesday to continue to pursue its claims in its main arbitration proceeding, which was started in May 2016, and remains ongoing. Responses to Centerra's statement of claim are expected to be submitted by the Kyrgyz Republic and Kyrgyzaltyn in September 2017.

In the meantime, Centerra and the Kyrgyz government continue discussions in the hope of settling all outstanding matters relating to the Kumtor project.