It can cause a wave of similar lawsuits around the world

It can cause a wave of similar lawsuits around the world

By Kim Shtern

It seems that the prolonged lawsuit of the Canadian company to Kazakhstan will go down in the annals of history. The fact is that World Wide Minerals Ltd (WWM) bases its claims, referring to the agreement that Canada has already concluded with the Soviet Union.

In 1995, shortly after the collapse of the USSR, the Canadian company World Wide Minerals Ltd turned to the government of Kazakhstan with a business proposal. The republic was supposed to give it in development uranium deposits together with the uranium mining complex and the mining and chemical combine. In exchange, "WWM" promised to invest at least $ 100 million in development of the industry (that is, the complex and the plant) for several years. Attract strategic financial and industrial partners and investors. And at the same time keep in proper form all the social infrastructure around the complex (kindergartens, heating systems of the neighboring city, etc.). And, by the way, six months after the contract was signed, I undertook to submit a restructuring plan for the enterprises received for management. At the same time, WWM managers assured that Kazakhstani workers will not be dismissed, they promised to retrain them and even send them for advanced training to Canada. A year later such a contract was signed. WWM received, like many foreign investors who came to Kazakhstan at that time, the most favored nation treatment. That is, it received maximum tax benefits and attract foreign labor. Moreover, Kazakhstan has given guarantees that the Canadian company will receive a license for exporting uranium on the international market. However, it should have been done on the basis of the laws of Kazakhstan, the Treaty on the Non-Proliferation of Nuclear Weapons and other equally important treaties.

At the time of the contract with the Canadians, the United States of America for Kazakhstan was set a quota for the sale of uranium. And this quota belonged to the American company Newcom, which cooperated with the Kazakhstan National Joint Stock Company for Atomic Energy and Industry KATEP. And "WWM" could not know about it. But in December 1996, just two months after the conclusion of the contract with Kazakhstan on the management of uranium assets, the Canadians began to demand from the government of Kazakhstan to give them a quota for trade with the United States. Naturally, KATEP was not going to give up the quota. And he suggested that WWM conduct joint development of uranium deposits in the south of the country. Like, from there and go to the US joint uranium. There was even a strategic agreement between the two companies. But "WWM" did not hurry to join financially in the joint venture with the Kazakh state company. After that, KATEP simply broke the agreement. Canadians from World Wide Minerals Ltd were not going to invest in the development of the Kazakhstani uranium sector and even those enterprises that they received in management. In just six months of WWM's presence, the Tselinny Mining and Chemical Combine was at a loss of $ 9 million, and the production level fell by almost 60 percent. Workers for more than half a year did not receive wages, and all the social facilities that the Canadians undertook to keep were abandoned. That is, the profitable uranium combine, thanks to the Canadians, has come to a pre-bankruptcy state. Against this background, the Kazakh side took advantage of one of the terms of the agreement. And, accusing World Wide Minerals Ltd of violating Kazakh legislation and causing significant damage to the company and the environment, broke the contract with the Canadians. The Canadian company that expected to "climb" on Kazakhstan's uranium quickly went bankrupt, and its property was sold. But lawsuits against Kazakhstan continue until now.

In the early 2000s, World Wide Minerals Ltd filed lawsuits in the national courts of the United States. Contrary, by the way, to the Treaty, which provides for an appeal to the arbitration court, which is located in Stockholm. The American Femida refused the Canadians with the wording that "the decision to issue or not to issue an export license is a sovereign act of Kazakhstan based on internal laws." And, by the way, admitted that Astana issued the license. But not on trade with the US. At the same time, the United States rejected the claims for payment of damages in the amount of one billion US dollars incurred by World Wide Minerals Ltd. Further, during multi-year trials in different courts, the amount of "damage" to WWM only grew. Canadian lawyers discovered what they considered a loophole in the law. And referred to the bilateral agreement on investment between Canada and the USSR from 1989. This treaty guaranteed the protection of Canadian investments. According to the Canadian side, Kazakhstan is the legal successor of the USSR. At least in terms of the implementation of this treaty. And this despite the fact that in 1991-1993 it was announced that the successor of the USSR is Russia. About which, by the way, numerous international treaties were concluded. Including the Agreement between the Russian Federation and the Republic of Kazakhstan. And also the Agreement of the CIS members on the property of the former USSR of 1991, the Agreement on the distribution of all property of the former USSR abroad from 1992, the Agreement with a number of foreign countries on the settlement of Russia's payment obligations under the external debt of the USSR. That is, the world, including all members of the Paris Club, which includes Canada, recognized that the Russian Federation is responsible for all the obligations of the USSR. So the claims of World Wide Minerals Ltd are simply not justified. The tribunal in October 2015 recognized Astana as the legal successor under the investment treaty of Canada and the USSR. Nonsense, but it's a fact. And, by the way, the representative of the Canadian company, taking advantage of the opportunity, sharply increased the amount of the claim to Astana. Now the damage and lost profit are estimated at $2 billion . The next trial on the suit of WWM is scheduled for the end of this year. 

What will end this precedent in international law is not yet clear. But if the Tribunal recognizes it is Kazakhstan's successor to the collapsed Soviet Union, it can cause a wave of similar lawsuits around the world. After all, the countries that were formed quite recently, separated from such metropolises as Great Britain, France, Germany are more than enough. And the lost profit of local companies can significantly exceed, if desired, the ten-year budgets of these countries.


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