Investor-State Disputes against the Kyrgyz Republic: new developments

This year has presented itself as an economically and socially turbulent year for both states and the private sector. Yet investor-state disputes still arise and continue to proceed during this period, particularly against the Kyrgyz Republic.

The following trends can be observed from current cases: the majority of proceedings are brought by investors from the CIS region and relate to the construction sector. Moreover, most investors rely on the 2003 Kyrgyz Law on Investments or a BIT concluded with the Kyrgyz Republic to substantiate their claims.

This contribution outlines new and pending arbitration proceedings. Each case summary contains a relevant set of facts and includes any procedural developments that occurred since August 2019.

National Center on Complex Processing of Mineral Raw Materials of the Republic of Kazakhstan v. Kyrgyz Republic (2019)

These proceedings were initiated in 2019, yet only became known to the public after a press release by the Center for Court Representation of the Kyrgyz Republic. The state-owned National Center on Complex Processing of Mineral Raw Materials of the Republic of Kazakhstan commenced proceedings under the UNCITRAL Arbitration Rules.

It claims compensation of over $49.9 million regarding the construction of a metallurgical plant in the Kyrgyz Republic and rests its claim on the 1997 Kazakhstan – Kyrgyzstan BIT. The Kyrgyz Republic is due to submit its Statement of Defense by late July 2020 and no hearing dates are scheduled at this point in time.

VIP Kyrgyzstan Holding AG and MENACREST AG v. Kyrgyzstan (2018)

The claimants in this case are two Swiss subsidiaries of VEON, a multinational telecommunications services company. The companies initiated arbitration proceedings under the UNCITRAL Arbitration Rules in November 2018 and seek $58 million in compensation regarding, inter alia, tax measures taken against Sky Mobile. Sky Mobile is a Kyrgyz mobile operator in which VEON holds a majority interest.

The claimants base their arguments on two instruments, namely the 1997 Moscow Convention on the Protection of the Rights of the Investor and the 2003 Kyrgyz Law on Investments. The Kyrgyz Republic must file its Statement of Defense by mid-August 2020 and the first hearing is scheduled for January 2022.

RusHydro v. Kyrgyzstan (2018)

In 2012, the Russian and Kyrgyz governments concluded an agreement regarding the construction and exploitation of four hydroelectric power plants in the Upper-Naryn region. RusHydro, a Russian hydroelectric company, and OJSC Electric Power Plants, a Kyrgyz state-owned company, formed a 50:50 joint venture to build these four power plants. The project was expected to run for a duration of six years and its estimated worth amounted to $727 million by the end of 2013. As part of the joint venture, RusHydro funded the project whereas the Kyrgyz counterpart provided land resources.

The dispute arose as a result of the Kyrgyz Republic’s termination of this intergovernmental agreement in 2016 and RusHydro consequently filed international arbitration proceedings. The Kyrgyz Republic maintains that the termination related to issues with funding resources and ensuing construction delays. RusHydro demands that OJSC acquire its shares in the joint venture and claims $37 million in compensation for costs allegedly incurred for the project. It bases these claims on the 2008 Eurasian Investment Agreement, a Protocol to the 2014 Treaty on the Eurasian Economic Union, and the 2012 intergovernmental agreement.

The Kyrgyz Republic was due to file its Rejoinder in May 2020 and a first hearing date is currently not scheduled.
online pharmacy no prescription drugstore

Penwell v. Kyrgyz Republic (2017)

In 2017, the Russian company Penwell initiated arbitration proceedings against the Kyrgyz Republic. It claims $298 million in compensation for the alleged expropriation of its majority interest of 51% in the Kyrgyz state-owned mobile operator Megacom.

The investor asserts that this alleged expropriation took place as a result of a politicised forced take-over of its investment as well as the nationalisation of Megacom. Since any attempts to enforce its rights in domestic courts were unsuccessful, Penwell brings its claim under the 2003 Kyrgyz Law on Investments. A hearing was scheduled for late May 2020, yet no publications have been made in this regard.
online pharmacy no prescription drugstore

JSC Tashkent Mechanical Plant v. Kyrgyzstan (2016)

These proceedings were initiated by four Uzbek state-owned companies and banks that managed and operated four resorts at Lake Issyk-Kul. According to local sources, the resorts were owned by the Kyrgyz Republic after the end of the Soviet Union, yet foreign legal entities were still permitted to use them. The claimants registered the claim at the ICSID in 2016 on the basis of an alleged expropriation of the hotel properties. They invoke the 1996 Kyrgyzstan – Uzbekistan BIT as well as the 2003 Kyrgyz Law on Investments.

The Kyrgyz Republic filed preliminary objections to jurisdiction, which the tribunal rejected in May 2019. Although this decision remains unpublished, IA Reporter indicated that the Kyrgyz Republic unsuccessfully argued for the BIT’s exclusive provision of arbitration proceedings under the ICSID Additional Facility Rules, to which it is not a party. More recently, the claimants filed a request for provisional measures in May 2020, which likely relates to the Kyrgyz Republic’s intention to sell the properties.

Stans Energy Corp. v. Kyrgyz Republic (2) (2015)

As previously reported, this case involves an extensive procedural history dating back to 2013 when the Canadian mining company Stans Energy initiated its first round of arbitration proceedings. The company sought $118 million in damages for the termination of a mining license regarding the heavy rare-earth mineral deposit Kutessay II. It claims that this measure amounts to an expropriation of its investments.

Stans Energy previously obtained an award by the Moscow Chamber of Commerce and Industry, however, the Moscow Regional Arbitrazh Court and Supreme Court of the Russian Federation set it aside. As a result of experiencing difficulties in enforcing the 2014 arbitral award, Stans Energy initiated a new set of arbitration proceedings under the UNCITRAL Arbitration Rules in 2015.

The Kyrgyz Republic filed objections to jurisdiction, which focused on the interpretation of the Kyrgyz language version of the 2003 Kyrgyz Law on Investments as a jurisdictional basis for the new tribunal.
online pharmacy no prescription drugstore

The tribunal partially rejected these objections as a too literal interpretation of the dispute settlement provision in question and confirmed its jurisdiction in light of a contextual reading of this legislation. The High Court of Justice of England and Wales agreed with the tribunal’s contextual interpretation and dismissed the Kyrgyz Republic’s claim to set aside the award on jurisdiction.

Most recently, the tribunal issued an award in favour of the claimant in August 2019 and awarded $24 million in compensation. The award is currently not published.


The above cases demonstrate that the Kyrgyz Republic continues to be preoccupied with a great variety of arbitration proceedings brought by foreign investors. Although many cases cover traditional industries, such as construction and mining projects, some also pertain to the more modern telecommunications sector. Several procedural developments are scheduled for the remaining part of this year and it is worthwhile to further monitor any progress of these cases.

About the Author:

Annabelle Pröpstl holds a Bachelor’s degree in European Law from Maastricht University and a Master’s degree in International Law from University College London. She specialises in public international law, with a particular focus on trade matters and the law of treaties. She currently seeks to qualify as a solicitor in London and intends to work in the area of international arbitration.

Post a Comment