Investment Arbitration Reporter reports on CIS Economic Court case in which Satarov, Askarov & Partners act for Kyrgyz GovernmentKyrgyz Republic seeks authoritative interpretation of obscure C.I.S. treaty that multiple foreign investors are invoking publication date: Jun 6, 2014
By Luke Eric Peterson
Kyrgyz Republic seeks authoritative interpretation of obscure C.I.S. treaty that multiple foreign investors are invoking publication date: Jun 6, 2014
By Luke Eric Peterson
Beset by at least three arbitration claims launched pursuant to a long-obscure treaty that binds members of the Commonwealth of Independent States (C.I.S.), the Kyrgyz Republic has sought an authoritative interpretation of its treaty obligations from the so-called C.I.S. Economic Court.
The Court, while little used for foreign investment disputes, is the body charged with interpreting the provisions of the C.I.S. Convention on Protection of Investor Rights (AKA the Moscow Convention on 1997).
Lawyers for the Kyrgyz Republic, in response to inquiries by IAReporter, assert that Article 11 of the C.I.S. Convention does not contain a standing offer to arbitrate with foreign investors. In an application lodged in April of this year with the C.I.S. Economic Court, the Republic requested that the Court confirm the Krygyz Republic's reading of Article 11, specifically that the vaguely-worded Article 11 merely confirms that international arbitration is available, in principle, if parties to a given dispute are so inclined.
Kyrgyzstan maintains that the provision is a mere "framework" provision, and its failure to specify specific arbitration rules or procedures is a further sign that the clause is not an open invitation for would-be claimants to choose any arbitral institution in the world.
Any ruling by the C.I.S. Economic Court could have repercussions for other C.I.S. states have ratified the investment treaty. More immediately, any such ruling could bear upon the arbitrations brought to date by foreign investors against Kyrgyzstan.
Set-aside proceedings also pending in Russia in relation to three arbitrations under C.I.S. treaty
While Kyrgyzstan waits to see if the C.I.S. Economic Court will agree to issue an interpretation of Article 11, the government has also taken steps to set aside arbitral awards rendered in proceedings that have been launched pursuant to Article 11.
We've reported several times on the best-known of these cases: a claim brought by a Canadian investor in a Kyrgyz rare earths mining operation, Stans Energy. The Canadian firm has reported that arbitrators operating under the rules of the Moscow Chamber of Commerce have upheld jurisdiction over claims against Kyrgyzstan, and subsequently sided in an oral ruling with the claimants on the merits on April 30, 2014.
According to the company, the arbitrators have said that they will issue a final damages ruling on the $117.8 million claim by the end of July. In recent statement, Stans Energy has criticized Kyrgyzstan's efforts to thwart the arbitral process.
In addition to the Stans Energy case, lawyers for Kyrgyzstan tell IAReporter that two earlier claims have been arbitrated on the basis of Article 11 of the C.I.S. Convention, and the rules of the Moscow Chamber of Commerce:"...
a US $23 million award in favour of a Korean investor Lee John Beck and his company Central Asian Development Corporation, and a US $2.2 million award made in favour of 17 CIS individual investors and their company OsOO OKKV.
"Both the Beck and OKKV cases arise out of the investors’ operations in a Bishkek "free economic zone."
The Kyrgyz Republic has commenced set-aside proceedings in the Moscow Arbitrazh Court (or Moscow Commercial Court) in relation to the initial jurisdictional award in the Stans Energy case, as well as the final awards rendered in the Beck and OKKV cases.
Lawyers for Kyrgyzstan are seeking to have the set-aside proceedings suspended pending a decision by the C.I.S. Economic Court to rule on the meaning of Article 11 of the C.I.S. Convention.
Sergey Usoskin, a Moscow-based lawyer, who is not involved in the litigation, but who has monitored developments in the courts there, tells IAReporter that no decisions have been taken as yet on Kyrgyzstan's request for suspension of the set-aside proceedings. However, hearings in all three cases are scheduled for this month.
Kyrgyzstan's lawyers point to the fact that the country's BITs have long deemed only three arbitral venues to be appropriate for disputes
In their recent statement to IAReporter, lawyers for Kyrgyzstan insist that the recent jurisdictional findings in the aforementioned cases are at odds with the Republic's practice of agreeing in its many bilateral investment treaties, as well as in a domestic investment law, to only a handful of international arbitration options (including ICSID and UNCITRAL) that are deemed appropriate for resolution of foreign investment disputes.
In that statement, the lawyers add that the choices designated in such treaties and legislation are effectively robbed of any relevance if the C.I.S. Investment Convention is to be construed as an open-offer to investors from any country to choose on a unilateral basis any arbitral institution in the world.
Challenges of the OKKV and Beck awards are handled on behalf of the Government by the Satarov, Askarov& Partners in Bishkek. The Satarov, Askarov firm also advises Kyrgystan on its application to the CIS Economic Court, along with another C.I.S. arbitration expert, Andrei Yakovlev.
The third challenge in the Russian Courts, related to the Stans Energy case, is being handled by a newly-created Governmental centre for legal representation of the Kyrgyz Republic.
The various claimants in the proceedings against Kyrgyzstan have been represented by a pair of Russian practitioners at the Interlex boutique firm, as well as Temirbek Kenenbaev, a Kyrgyzstan-based lawyer.
Investment Arbitration Reporter is a specialized news publication tracking developments in the area of international investment law and policy.
The publication does not offer legal or financial advice or recommendations of any kind.
To offer news-tips or comments, email the Editor, Luke Eric Peterson, at: firstname.lastname@example.org