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Kyrgyzstan quashes CIS treaty award in Russia

Douglas Thomson • Tuesday, 25 November 2014(3 hours ago)
A Russian court has set aside the first of three arbitral awards rendered against Kyrgyzstan under a regional treaty between members of the Commonwealth of Independent States.
The hotel Aurora near Lake Issyk-Kull, site of OKKV's investment

In a decision on 18 November, the Moscow Commercial Court set aside a US$2 million award issued last year in favour of Kazakh-Kyrgyz building company OKKV

The award had compensated OKKV for the expropriation in 2010 of a project to build a cultural centre and accommodation on the shores of Issyk Kul, the world’s second largest salt lake.

OKKV’s award was one of three awards obtained by foreign investors against Kyrgyzstan in arbitrations administered by a little-known institution, the Arbitration Court of the Moscow Chamber of Commerce and Industry (MCCI). In all three cases, a tribunal upheld claims under the Moscow Convention for the Protection of Investors, a previously obscure treaty that is in force in six CIS states

The treaty provides that investment disputes shall be considered by forums including “international courts of arbitration”, which the MCCI tribunals interpreted as a freestanding consent to arbitrate investor-state disputes at an institution of the claimant’s choice.

Kyrgyzstan denied that it had given such consent in the treaty and applied for an authoritative interpretation from the CIS Economic Court in Belarus, which is designated to resolve disputes over the treaty’s meaning. In September, that court affirmed Kyrgyzstan’s reading that the treaty does not contain a standing offer to arbitrate investor-state disputes

In setting aside the OKKV award, the Moscow Commercial Court expressly relied on the CIS Economic Court’s September opinion, concluding that the MCCI tribunal had exceeded its jurisdiction with respect to the Moscow Convention claims.

The Russian court also found that the MCCI tribunal had erred in upholding jurisdiction under a Kyrgyz law on foreign investment; the judge said the arbitrators’ finding had been based on an erroneous use of the Russian text of the law over the Kyrgyz text, which should prevail where there is any divergence in meaning between the two language versions. http://globalarbitrationreview.com/news/article/33203/kyrgyzstan-quashes-cis-treaty-a

Kyrgyzstan’s challenges against the two other Moscow Convention awards – a US$118 million award in favour of Canada’s Stans Energy and a US$23 million award in favour of Korean property developer John Lee Beck – are still pending before the same Russian court. A hearing is scheduled for 10 December in the Beck case and 17 December in the Stans case.

The Commercial Court confirmed an interim award on jurisdiction in the Stans case and the Beck final award earlier this year but those decisions were quashed by Russia’s Court of Cassation in September in the wake of the CIS Economic Court’s opinion, and remanded for reconsideration.

In all three Russian set-aside proceedings, Kyrgyzstan is represented by Anvar Askarov and Ulan Satarov of Satarov Askarov & Partners in Bishkek. Andrei Yakovlev of King & Wood Mallesons also acted alongside Askarov in the treaty interpretation proceedings at the CIS Economic Court.

Askarov says, “We are pleased to have achieved the first milestone by having the first of the three MCCI arbitration awards set aside by the Russian court. We fully expect the court to follow suit next month in respect of the Beck and Stans awards.”

He adds, “It is possible that the investors will appeal the set aside judgments, but that will simply delay the inevitable.”

OKKV, Stans and Beck are all represented by the same counsel, Igor Zenkin of Interlex. He did not respond to requests for comment.

Stans, holder of the largest of the three awards, said in July that any ruling from the CIS Economic Court would be only advisory and not enforceable even within the CIS. Last month, the company won an injunction against Kyrgyzstan from the Ontario Superior Court of Justice. The injunction prevents Kyrgyzstan from disposing of its shares in a Toronto-based mining company, Centerra Gold, while the court considers Stans’ application to enforce the award.

OKKV v Kyrgyzstan

Before the Moscow Arbitrazh Court

Judicial Panel

  • Judge Galina Komarova

Counsel to Kyrgyzstan

  • Satarov Askarov & Partners

Partners Anvar Askarov and Ulan Satarov in Moscow

Counsel to OKKV

  • Interlex

Partner Igor Zenkin in Moscow

Before the CIS Economic Court

Judicial bench

  • LA Kamenkova (president)
  • EN Nagornaya
  • VH Seytimova

Counsel to Kyrgyzstan

  • Partners Anvar Askarov and Ulan Satarov in Bishkek
  • King & Wood Mallesons
  • Partner Andrei Yakovlev in London
  • Centre for Legal Representation of the Kyrgyz Republic
Mirlan Dordoyev in Bishkek In the MCCI arbitration OKKV v Kyrgyzstan (MCCI arbitration)
  • Nina Vilkova (Russian) (Chair)
  • Alexey Stanislavovich Avtonomov (Russia)
  • Mikhail Yurievich Savranskiy (Russia)

Counsel to OKKV

  • Interlex

Igor Zenkin in Moscow

  • Partner Law Firm

Temirbek Kenenbaev in Bishkek

Counsel to Kyrgyzstan

The state did not participate in the arbitration Copyright © 2014 Law Business Research Ltd. All rights reserved. | http://www.lbresearch.com 87 Lancaster Road, London, W11 1QQ, UK | Tel: +44 207 908 1188 / Fax: +44 207 229 6910 http://www.globalarbitrationreview.com | editorial@globalarbitrationreview.com