Centerra Gold delivers notice of arbitration to Kyrgyz government

JOHANNESBURG (miningweekly.com) – After receiving two court rulings from Kyrgyz courts last week against its wholly owned subsidiary Kumtor Operating Company (KOC) for alleged environmental infractions at its eponymous mine, TSX-listed Centerra Gold this week delivered a notice of arbitration to the Kyrgyz government in relation to the disputes.

Centerra has proposed the name of an arbitrator and, failing agreement, said it would apply to the Permanent Court of Arbitration in The Hague, in the Netherlands, to appoint an arbitrator. The arbitration proceedings would be held in Stockholm, Sweden and would be conducted under the United Nations Commission on International Trade Law Arbitration, or UNCITRAL, rules, while the governing law would be that of the US state of New York.

Despite commencing with arbitration proceedings, Centerra remained open to receive and discuss proposals from the Kyrgyz government to resolve the matters in dispute.

Centerra reiterated its belief that the Kumtor project had always been operated in accordance with the provisions of the 2009 project agreements governing the Kumtor project, including the 2009 restated investment agreement, which provided a complete code of all taxes, fees and other charges applicable to the Kumtor project.

The company also believed that all disputes relating to Kumtor would be resolved through international arbitration.
The Bishkek Inter-District Court, in Kyrgyzstan, last week ruled against KOC on an environmental claim brought by the State Inspectorate Office for Environmental and Technical Safety of the Kyrgyz Republic (SIETS) and awarded damages of 6.7-billion Kyrgyz soms, or $98.4-million. The SIETS alleged that the placement of waste rock on Kumtor’s waste dumps was subject to tariffs that were normally applicable to industrial or domestic waste.

The ruling came on the heels of a ruling issued by the same court against KOC in a claim brought by SIETS regarding unrecorded waste from Kumtor’s effluent and sewage treatment plants, which awarded 663 839 Kyrgyz soms, or $10 000.
There remained two outstanding environmental claims made by the SIETS before the Inter-District Court, including alleged land damage and failure to pay for water use. Centerra advised that the two remaining SIETS claims totalled about $5-million.