Recent Investment Arbitration Cases involving CIS States

kazakhstan-mapLWhile the spotlight of the CIS arbitration community is currently focused on investment disputes between Ukrainian claimants and the Russian Federation, moving to jurisdictional phase in mid-July 2016, other CIS states have also provided some noteworthy developments.

This post highlights general trends identified in CIS-related Investor-State Dispute Settlement (“ISDS“) since 2015, and addresses certain cases that seem to be of particular interest.

General trends of ISDS in the CIS Region

2015 and the first half of 2016 have been quite intense in terms of investment arbitration in the CIS region. The number of publicly available investment arbitrations initiated during this period reached 20. Most of them invoked as the basis for jurisdiction post-Soviet BITs (16 cases), as well as multilateral treaties – the Energy Charter Treaty (4 cases) and the CIS Investors Rights Convention (1 case).

The Russian Federation has been the most frequent Respondent State, due to the numerous arbitral proceedings initiated by Ukrainian claimants, followed by Kazakhstan, Moldova, Ukraine and Kyrgyzstan. Non-CIS investors bringing claims against CIS states are mostly from Canada, the Netherlands and the United Kingdom.

Deviating from the global trend reflected in the latest UNCTAD IIA Issues Note, most CIS investment arbitrations were filed under the UNCITRAL Arbitration Rules (12 cases), rather than with the ICSID (5 cases), owing to the non-ratification of the ICSID Convention by many CIS states. The Stockholm Chamber of Commerce Arbitration Rules traditionally remains among three of the most frequently invoked in ISDS.

Oil & gas and mining continue to dominate among economic sectors attracting investment disputes in the CIS, particularly in resource-based economies (Alhambra Resources v Kazakhstan, Aktau Petrol v Kazakhstan). The number of disputes arisen in banking sector has increased, particularly with the proceedings initiated against Russia (Privatbank and Finance Company Finilon LLC v The Russian Federation, JSC Oschadbank v The Russian Federation) and Moldova (e.g. below). There are also several pending cases related to air transportation against Russia and Ukraine (Gilward Investments BV v Ukraine), as well as one case against Kazakhstan in the pharmaceutical industry (Hourani brothers v Kazakhstan).

Foreign investors most commonly challenged the following governmental actions of CIS respondent states: revocation/withholding of permits for industry operations (at least 5 cases, particularly in the oil & gas sector), seizure of land plots and other assets (at least 8 cases, mostly initiated against the Russian Federation in relation to Crimea) and discriminatory treatment (at least 3 cases).

The amounts of compensation requested by claimants, according to publicly available sources, range from the minimum of 15 mln USD in Aeroport Belbek LLC and Mr Igor Valerievich Kolomoisky v The Russian Federation to the maximum of 5 bln USD in Littop Enterprises Limited, Bridgemont Ventures Limited and Bordo Management Limited v Ukraine and 12 bln USD in Mr Sergei Viktorovich Pugachev v The Russian Federation.

Particular cases initiated since 2015

The following recent CIS-related Investor-State disputes seem to be of particular interest. Two of them open new chapters of long-running disputes in the mining sector between foreign investors and the Government of Kyrgyzstan, and another two involve an investor’s attempts to seek emergency relief against a host state.

The Kyrgyz Republic

Centerra Gold Inc v The Kyrgyz Republic

In May 2016 Canadian gold mining corporation Centerra Gold Inc announced that it had initiated arbitration against the Kyrgyz Republic. These proceedings represent another stage of controversies between the Kyrgyz Government and Centerra in relation to the Kumtor gold deposit that started after the forced resignation of former Kyrgyz president Kurmanbek Bakiyev.

Centerra now challenges the following actions of the Kyrgyz authorities: environmental claims of the environmental regulator; claims of the Attorney General to unwind dividends paid to Centerra and search its Bishkek office; and the withholding of environmental approvals and operation permits. Centerra’s claim is based on a 2009 Restated Investment Agreement that provides for the sole arbitrator clause. The proceedings will be conducted under the UNCITRAL Arbitration Rules with a seat in Sweden.

 Stans Energy Corp and Kutisay Mining LLC v The Kyrgyz Republic (II)

In May 2015 Stans Energy Corp (Canada) initiated another round of arbitral proceedings as the second attempt to seek compensation for damages incurred due to the revocation of a mining licence in relation to the rare-earth mineral deposit Kutessay II. The previous arbitration under the Moscow Chamber of Commerce and Industry Arbitration Rules ended up with an award in favour of a Canadian investor. However, the Arbitrazh Court of Moscow set it aside (confirmed by the Supreme Court of the Russian Federation earlier in 2016), as was previously reported.

This time Stans Energy Corp added another basis for the jurisdiction of the arbitral tribunal – the Law on Investments in the Kyrgyz Republic. The arbitration will be administered by the PCA and conducted under the UNCITRAL Arbitration Rules with a seat in the United Kingdom. According to the procedural schedule, the jurisdictional hearing will take place at the end of September, with the decision on jurisdiction to be rendered by the end of 2016.

Stans Energy Corp requests approximately 219 mln USD, with 128.3 mln USD claimed for lost investment and 91 mln USD for lost profits. The claimant disclosed third-party funding of these proceedings by the Calunius Litigation Risk Fund 2 LP.

The Republic of Moldova

Evrobalt LLC v The Republic of Moldova, Kompozit LLC v The Republic of Moldova

In May-June 2016 two Russian shareholders of JSC Moldova Agroindbank (MAIB), Evrobalt LLC and Kompozit LLC, initiated separate arbitration proceedings against the Republic of Moldova in the Arbitration Institute of Stockholm Chamber of Commerce. As disclosed by the Government of Moldova, both claims are based on a similar legal and factual background: they allege the violations of 1998 Russian-Moldovan BIT provisions on fair and equitable treatment (Article 3) and expropriation (Article 6).

The disputes arose out of the March 2016 actions of the National Bank of Moldova in relation to the claimants’ shareholding in MAIB. Evrobalt, Kompozit and other 18 shareholders were found to obtain a substantive shareholding in MAIB without prior approval by the National Bank. As a result, the National Bank blocked the shareholders’ rights of the claimants and required them to sell the shares within a three-month period. Failing this, Moldovan banking law provides for the cancellation of shares.

With the deadline for the cancellation approaching in the beginning of June 2016, to prevent this, each claimant initiated emergency arbitration proceedings under the Stockholm Chamber of Commerce Arbitration Rules. They requested that the Moldovan authorities refrain from any further steps leading to the cancellation of their shareholdings in MAIB, pending the final resolution of the dispute.

The two emergency proceedings ended with different outcomes: Evrobalt’s application was dismissed by Mr Georgios Petrochilos acting as Emergency Arbitrator (the Award was provided by IA Reporter). Emergency Arbitrator Mr José Rosell subsequently granted Kompozit’s application. The emergency arbitrators in these proceedings came to different conclusions regarding the risk of non-compensable harm resultant from the cancellation of the claimants’ shareholding in MAIB.

Applying for emergency relief against a host state is apparently becoming another feature of ISDS in the CIS Region. In 2015 an investor also obtained SCC emergency relief in JKX Oil & Gas plc, Poltava Gas BV and Poltava Petroleum Company v Ukraine. Recently the Supreme Court of Ukraine disagreed with the appellate court decision previously denying the enforcement of an emergency arbitrator award issued by Prof Rudolf Dolzer. It remitted the case to a new consideration by the appellate instance.


From 2015 to mid-2016 the CIS has remained one of the busiest regions as regards ISDS. While several long-standing controversies between investors and host states reappeared on the agenda, the politically and economically complicated situation in the region has provided a breeding ground for new investment disputes. New issues to be addressed by arbitral tribunals have arisen, pertaining both to jurisdiction and merits, which makes the CIS arbitration traditionally interesting to monitor.

About the Author:

Elena Burova is a regular contributor to the CIS Arbitration Forum. She holds an LL.M. degree in Investment Treaty Arbitration from Uppsala University (Swedish Institute scholar 2015-2016) and graduated with honours from Moscow State Institute of International Relations (MGIMO University) in 2015. Elena focuses on international commercial and investment arbitration and worked/trained in international law firms in Stockholm and Moscow.

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