Oxus Gold plc v. Republic of Uzbekistan, the State Committee of Uzbekistan for Geology & Mineral Resources, and Navoi Mining & Metallurgical Kombinat

At a glance

Parties

Oxus Gold plc (United Kingdom) v. Republic of Uzbekistan (claims against the State Committee for Geology & Mineral Resources and Navoi Mining & Metallurgical Kombinat withdrawn in March 2012)

Case no.

UNCITRAL ad hoc arbitration (Paris Court of Appeal RG 16/16502; Swiss Federal Tribunal 5A_942/2017; D.D.C. Civil Action No. 18-1755 (JEB))

Forum and rules

Ad hoc arbitration under the UNCITRAL Arbitration Rules 2010; seat Paris

Treaty

UK–Uzbekistan BIT of 24 November 1993

Tribunal

Prof. Pierre Tercier (Chairman), Prof. Brigitte Stern, Hon. Marc Lalonde (partial dissent)

Sector

Gold and polymetallic mining

Outcome

Final Award of 17 December 2015: one breach of fair and equitable treatment found (the 2006 and 2009 tax changes); all other claims dismissed; no jurisdiction over Uzbekistan's counterclaims. The Paris Court of Appeal rejected Oxus's annulment action on 14 May 2019.

Amount

Claimed: up to USD 588.7 million for Khandiza and up to USD 431.8 million for AGF, among other heads (the US court records the claim as USD 1.2 billion). Awarded: USD 10,299,572 plus interest at LIBOR + 2%, compounded annually. Counterclaim of USD 117.54 million dismissed for lack of jurisdiction. Each party pays half of the Tribunal's fees (USD 2,297,768.70) and bears its own costs.

The dispute

Oxus Gold plc, an English mining company, invested in Uzbekistan through its subsidiaries in two projects. The first was the Khandiza polymetallic deposit, explored under a 1996 Primary Exploration Agreement with Goskomgeology. The second was a 50% interest, held through Oxus Resources Corporation, in Amantaytau Goldfields AO (AGF), a joint venture with Goskomgeology and the State-owned NMMC to mine the Amantaytau goldfields. Oxus claimed that Uzbekistan expropriated both investments and breached fair and equitable treatment, full protection and security and the umbrella clause of the BIT. It relied on, among other things: the transfer of Khandiza to another State company; the revocation of AGF's tax privileges and stabilisation clause in 2006; VAT changes in 2009 and 2011; the refusal to renew licences and to approve the Phase 2 feasibility study; the Special Dividend Agreement; tax audits; criminal investigations; and the liquidation of AGF. Uzbekistan argued that AGF's failures came from Oxus's own mismanagement, self-dealing and breaches of currency law. It raised jurisdiction and admissibility objections and brought counterclaims of USD 117.54 million.

Key holdings

1. No expropriation of the AGF investment under Article 5 of the BIT. Oxus failed to prove that the State destroyed the value of the investment, or that the loss of value was caused by acts attributable to the State. The drill-rig claim also failed. Award ¶¶ 754–758
2. Uzbekistan breached the fair and equitable treatment standard of Article 2(2) by revoking AGF's tax privileges and stabilisation clause through Decrees No. 74 and 133 in 2006, and by changing the VAT regime in 2009. Stabilisation clauses in decrees directed specifically at the investment had to be honoured, and disappointing project performance did not justify the revocation. The 2011 VAT changes came after the stabilisation clause had expired and were not a breach. Award ¶¶ 823–827
3. The other fair and equitable treatment claims were rejected. These covered the Special Dividend Agreement, the 2006 audit, silver refining, licences, the Phase 2 feasibility study and the events after 2011. The full protection and security claim failed because it concerns protection against third parties. The umbrella clause claims failed for lack of privity, since the relevant obligations were owed to AGF and not to Oxus. The MFN claim was also rejected. Award ¶¶ 828, 842, 859–860, 864
4. Damages of USD 10,299,572. The Tribunal rejected the DCF approach of Oxus's expert as unsuited to a breach that concerns taxes only. It adopted the respondent's expert's method: Oxus's 50% share of the difference between the taxes AGF actually paid and the taxes it could legitimately expect to pay. Interest runs at LIBOR + 2%, compounded annually, from 31 December of each year from 2004 to 2010. Moral damages of USD 2 million were refused. Award ¶¶ 884–890, 905, 991
5. No jurisdiction over Uzbekistan's counterclaims. Article 8(1) of the BIT covers only disputes about the State's obligations, and the counterclaims lacked a close connection with Oxus's claims. The Special Dividend Agreement counterclaim fell under that agreement's clause referring disputes to the Uzbek courts. Set-off was refused under Article 21(3) of the UNCITRAL Rules 2010. Award ¶¶ 956–959, 972–974
6. Success and defeat were equally distributed, so each party pays half of the Tribunal's fees and bears its own costs. Award ¶¶ 1043–1046
7. Marc Lalonde dissented in part. He would have found Uzbekistan in breach of fair and equitable treatment over the failure of the CITIC financing, and would have awarded 50% of the resulting damages on the basis of contributory fault. Partially Dissenting Opinion

Procedural history

1. 31 August 2011Oxus files its Notice of Arbitration against Uzbekistan, Goskomgeology and NMMC. The claims against the latter two are withdrawn in March 2012.
2. 20 December 2011The Tribunal is constituted.
3. 9 August 2012Decision on Jurisdiction (partial award): Uzbekistan's objection to Oxus's standing is dismissed.
4. 14 September 2012Procedural Order No. 5: Oxus's application to disqualify White & Case as Uzbekistan's counsel is denied.
5. 28 April – 3 May 2014Hearing in Paris.
6. 17 December 2015Final Award: USD 10,299,572 plus interest awarded for the 2006 and 2009 tax changes; Marc Lalonde dissents in part.
7. 27 July 2018Gretton Limited, as Oxus's assignee, petitions the US District Court for the District of Columbia to enforce the award for USD 13,026,908.12.
8. 7 September 2018The Swiss Federal Tribunal dismisses an appeal by the assignee seeking to attach Uzbek property in Switzerland. The award could not be enforced there because the claim lacked a sufficient domestic connection with Switzerland.
9. 6 February 2019The D.C. District Court stays the enforcement proceedings until the Paris Court of Appeal rules.
10. 14 May 2019The Paris Court of Appeal rejects Oxus's action for partial annulment, which alleged breaches of due process and equality of arms. Oxus is ordered to pay EUR 300,000.
11. 30 July 2019The D.C. District Court upholds subject-matter jurisdiction under the FSIA arbitration exception and rejects forum non conveniens. It orders a hearing on whether Uzbekistan was properly served.

Tribunal, counsel and experts

Decided by

• Pierre Tercier President — chosen by the co-arbitrators
• Brigitte Stern Co-arbitrator — appointed by the respondent
• Marc Lalonde Co-arbitrator — appointed by the claimant (dissented in part)
• von Werdt Judge, Swiss Federal Tribunal (presiding)
• Dominique Guihal Judge, Paris Court of Appeal (presiding)
• Anne Beauvois Judge, Paris Court of Appeal
• Jean Lecaroz Judge, Paris Court of Appeal
• James E. Boasberg Judge, US District Court for the District of Columbia

For the claimant

Derains & Gharavi · Amsterdam & Peroff · SELARL Guizard et Associés

For the respondent

White & Case LLP · Dewey & LeBoeuf LLP · SELARL Lexavoue Paris-Versailles · Georg Friedli

For other participants

Mintz Levin Cohn Ferris Glovsky and Popeo · Martin Bernet · Urs Hoffmann-Nowotny

Experts

Philip Haberman (claimant) · Pierre Larroque (claimant) · Phil Newall (claimant) · Mavlyuda Kulikova (claimant) · Crowe Clarke Whitehill LLP (claimant) · Timothy Hart (respondent) · Rex E. Pringle (respondent) · Neal Rigby (respondent) · Daniel Nardello (respondent)

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Keywords

• UK–Uzbekistan BIT
• gold mining
• Amantaytau Goldfields
• Khandiza
• tax stabilisation clause
• fair and equitable treatment
• indirect expropriation
• umbrella clause
• privity
• full protection and security
• counterclaims
• set-off
• moral damages
• compound interest
• annulment
• equality of arms
• domestic connection
• FSIA arbitration exception
• forum non conveniens
• third-party funding

Summary generated with AI from the published documents — refer to the award for the authoritative text.