By Kim Shtern

For about 20 years, one Canadian company is in fact the judicial war with the Republic of Kazakhstan. And contrary to common sense. The next round of confrontation fell in 2016, when in January, the Arbitration Tribunal of Canada reviewed and upheld the claim «WWM» in Kazakhstan.


What is the crux of the matter? Briefly, in Kazakhstan came to an investor who has not fulfilled its obligations, and for that reason very soon failed. However, the company «WWM» is guided by its own logic, he saw the incident differently. According to them, the cause of the problems that prevented the normal operation of the Kazakhstan investor.


The story began in 1996, when the Canadian campaign of World Wide Minerals signed an agreement with Kazakhstan, an agreement on the management of the northern uranium mining complex of virgin and Mining and Chemical Combine. And everything was clear and fine. The new independent republic has provided all possible working conditions. It was a question of survival of the young Kazakhstan which has rich resources, but had neither the means nor the technologies for their development. That is the reason for the conflict was not. However, an event occurred that, and turned investors to the plaintiff.


What happened? In 1997 the company «WWM» appealed to the Government of Kazakhstan for export of uranium license for sale in the United States. But he was refused. As it turned out, the exclusive right to supply uranium to the United States was granted the American company Nukem Inc. While the United States have been active aggressive policy. They feared that cheap uranium from the former Soviet republics, including from dismantled nuclear warheads, will lead to loss of control over the market. Uranus is indeed traded at dumping prices.


Therefore, the US Department of Commerce and representatives of the six countries of CIS in 1992 signed agreements. They provided for quotas on imports of uranium products in the United States. Among them are Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Under the terms of the US agreements we were given the right to restrict imports for eight years and monitor transition from quota to unlimited imports of two more years. In these documents, there were strong political motivation. And Canadians, when they came in 1996 on the market of Kazakhstan could not have been unaware of the situation. It was an overall impression that they are acting on an elaborated plan for the future with expectation. After just three years after their arrival in Kazakhstan has begun the development of a powerful industry.


In 1999 Kazakhstan won antidumping process in the United States. In 2001, the country first entered the uranium market of China, and the next year - South Korea. In 2002, Kazakhstan took the 5th place in the world in production of natural uranium (compared to 13th place in 1997).


However, the company «WWM» missed his chance. Making sure that the export license for trade with the United States they will not give Canadians stopped production and stop any work, referring to the impossibility of sales than literally blew up the social situation in the region. Without trying to find new markets, or some other solution to the problem, they chose the worst case scenario.


And Kazakhstan was forced to take over the management control of the northern uranium mining complex. The contract was terminated due to failure to WWM commitments and the heavy financial and economic situation of the plant. Government Resolution of 30 July 1997, the right of operational management holding company "Tselinny Mining and Chemical Combine" was handled by JSC "NAC" Kazatomprom ".


But Canadians do not give up. One year later, WWM filed a lawsuit in US District Court against Kazakhstan, presenting complaints, which mainly concerned the unlawful refusal to grant a license for the export of uranium to the United States. However, the court pointed out that the decision to issue or not issue an export license is a sovereign action of Kazakhstan, based on domestic laws and decrees of the Republic.


August 8, 2002 US Court of Appeals issued a final decision to stop the trial in favor of Kazakhstan and NAC "Kazatomprom".


The story is not over. Increased demand for uranium in the world even further aroused former investors who lost their benefits. And the amount of claims increased from the initial 29 million dollars to a billion.


It entered a new round of confrontation, which began in 2016. In January of this year, the Canadian court upheld a lawsuit against a Canadian mining company in Kazakhstan. And thus cause a sharp cooling in relations between the two countries.


Astana are in complete surprise and lack of understanding of this decision. After the tribunal, oddly enough, I was referring to the regulatory framework of the Soviet Union. The fact that the Soviet Union and Canada in the zenith adjustment signed an agreement on encouragement and mutual protection of investments on June 20, 1989 And now for the deeds of Soviet times must meet the new independent state. Naturally, Kazakhstan is trying to explain that the country has been living in a new geopolitical reality and the old contract is illegitimate.


However, objections can not be accepted. Furthermore, UNCITRAL Tribunal (United Nations Commission on International Trade Law) declared Kazakhstan a legal successor of the bilateral investment treaty of 1989 between Canada and the USSR. Arbitration decision established that the said agreement is valid for Canada and the modern Kazakhstan economic relations. The decision of the international Themis looks very strange and is beyond any criticism. To understand the logic of the Tribunal decision is necessary to get acquainted with the 1978 Vienna Convention "On State succession in respect of treaties", on which it relies in its conclusions.


The study of this international instrument shows the following. In accordance with section 3 "Bilateral agreements", paragraph 1 of Article 24, a bilateral treaty which at the date of the succession of States was in force in respect of the territory to which the succession of States, it is considered as being in force between a newly independent State and the other State party when:


a) they are clearly agreed on this;


b) by virtue of their behavior, they must be considered as having so agreed.


What also agreed to Kazakhstan and Canada? Yes, nothing. At first relations were built by inertia. Indeed, in the early '90s, the new-born republic lived, in fact, under the legislation of the USSR. This is indicated by the following facts: Kazakhstan instead of national currency monetary units operated the Soviet Union, the population had passports defunct by the time of the country, all legislative acts adopted some time in the Soviet era continued to operate, although they did not meet the national interests.


To understand the processes occurring in society, we recall that the national currency tenge - appeared only in Kazakhstan in 1993. The first Constitution was adopted on 28 January of the same year. That is all that happened before, it should be seen as a transition period, when sovereignty was not filled with real legal content.


Only by 1995, legal and economic reforms have allowed Kazakhstan to carry out de facto and jure real independent policy. In this year the Constitution was adopted a new sample, which laid the foundations of the state.


It is not surprising that many of the bilateral agreements of the USSR disappeared immediately, but were revised. This is evidenced by the fact that all the countries with which the Soviet Union in the years 1989-1990 entered into bilateral investment treaty - and that Finland, Great Britain, Germany, Italy (1989), Austria, Spain, Switzerland, South Korea, China and Turkey (1990) signed a new agreement on encouragement and mutual protection of investments with an independent Kazakhstan. The exception was only Canada.


During his visit to Ottawa, Prime Minister of the Republic of Kazakhstan was adopted by the Memorandum of Intent, in which the parties committed themselves to further negotiations of experts of the two countries in March 1995 to prepare the "Agreement on promotion and mutual protection of investments". However, due to the lack of Canadian experts on the planned meeting to discuss the draft agreement on the text was not completed.


However, the memorandum was signed and entered into the legal framework between the two countries. Kazakhstan, thus, made it known and clearly stated that he would not perform the contract, inherited from the Soviet Union.


According to the said Vienna Convention 1978 "On succession of States in respect of contracts" in section 1 of the "general rule", article 16 clearly explains that Kazakhstan is not obliged to fulfill the obligations of the USSR.


The document states that: "The new independent state is not obliged to maintain any contract or becomes a party by reason only of the fact that at the time of the succession of States the treaty was in force in respect of the territory to which the succession of States" .


Interestingly, and another fact that was ignored. The Vienna Convention in 1978 was put into force on 6 November 1996 and to date it was signed by 19 states. Kazakhstan, for example, this document is not signed. So it seems to be very controversial, that it is the Vienna Convention, 78 is a generally accepted international law, clearly tract binding on all principles of inheritance of the commitments made already non-existent countries. And this means that the solution does not cost anything Tribunal.


However, there is another legal point on which attention should be paid. Actions of Kazakhstan in relations with the World Wide Minerals investor focused on the protection of national security. And in this case, this aspect has a distinct advantage over any treaties. After all, the issues of national security were motivated by US actions to resolve the uranium market. It acts as any other sovereign state.


Failure to comply with the Canadian World Wide Minerals campaign of its obligations gave rise to a complex situation. Non-payment of wages, easy to use, has led to the fact that people are in a difficult situation, requiring authorities to restore order. A budget does not receive funds necessary for development. Realizing that investors do not fulfill their obligations, hinder economic development and undermine the stability of Kazakhstan was forced to take such an unpopular decision.


In this unpleasant uranium stories, surprises even the persistence of the former investor who continues to plead with Kazakhstan. Do not understand the position of the Government of Canada, which, instead of a detailed understanding of this intricate problem, selects, as seen towards the adventurers who want to rob the partner country. It is unlikely that it will benefit someone else. World Wide Minerals His actions may put in a difficult position of other Canadian investors working in Kazakhstan. An agreement on encouragement and mutual protection of investments has not been signed so far.






Bookmark/Search this post with