Canadian Speculators Flout International Protocol In Kazakh Legal Case
July 11th, 2017. \\ World. \\ Tags: Kazakhstan, Canada, Russia.

An ongoing international case that seems to fly in the face of both national laws and international convention continues to vex the government of Kazakhstan, and to threaten the legal position of post-colonial, and especially post-Soviet, states around the world.

The problem began in 1995 when the newly independent republic of Kazakhstan was approached by a Canadian company with an interesting business proposal.

The Central Asian country is blessed with no less than 20% of the world’s uranium reserves, and the company concerned, World Wide Minerals Ltd (WWM) wanted to take over management rights in the development of the fledgling nation’s substantial deposits together with the state owned uranium-mining complex and the mining and chemical combine.

This was very important at the time, as Kazakh president Nazarbayev had prioritised the nuclear sector as one in which the country would be able to take a lead at global level.

In return, WWM had pledged to invest at least $100 million in the development of the sector whilst also attracting strategic financial and industrial partners and investors.

In addition, at the same time it also undertook to maintain the social infrastructure around the complex (kindergartens, heating systems of a neighbouring city, etc.).

Importantly, WWM also pledged to submit a restructuring plan for the managed enterprises within six months of the contract being signed. At the same time, the company’s managers assured the local workforce that their jobs were secure, even promising to retrain them, and to send them for advanced training to Canada.

Once the contract was signed, WWM received, as important foreign investors, numerous advantages including maximum tax privileges and benefits under labour laws.

Moreover, Kazakhstan gave guarantees that the Canadian company would receive a licence for exporting uranium on the international market in line with the laws of Kazakhstan, the Treaty on the Non-Proliferation of Nuclear Weapons and other equally important treaties.

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 a quota for trade with the United States.

This however was not possible as at the time of signing the contract with the Canadians, Kazakhstan, along with Russia, Ukraine, Uzbekistan, Kyrgyzstan and Tajikistan, had signed an agreement imposing quotas on imports of Uranium products into the US.

The available quota had already been assigned to US based company Nukem, and the Kazakhstan National Joint-Stock Company of Atomic Energy and Industry “KATEP”. It is impossible that WWM could have been unaware of this situation.

Of course, KATEP was hardly likely to relinquish its own quota, and so suggested that WWM carry out joint development of uranium deposits in the south of the country, from where uranium could be exported to the US.

Following the signing of a strategic agreement between the two companies, however, WWM failed in its financial obligations towards the Kazakh state company, at which point KATEP dissolved the agreement.

Actually, it appears that WWM never intended to invest money in the development of the Kazakhstani uranium sector; not even those enterprises over which they acquired management rights.

After just six months of WWM’s presence, the Tselinny Mining and Chemical Combine reported a loss of $9 million, with production levels falling by almost 60 percent.

For more than half a year workers did not receive their wages, and all the social facilities that the Canadians pledged to maintain were abandoned. This previously profitable uranium combine, thanks to the Canadians, came to a pre-bankruptcy state.

On that basis, the Kazakh side took advantage of one of the terms of the agreement, and, accusing WWM of violating Kazakh law and causing significant damage to the company and the environment, dissolved the contract with the Canadians.

The Canadian company that expected to “level up” on Kazakhstan’s uranium sector quickly went bankrupt, and its property was sold. But lawsuits against Kazakhstan continue to this day.

In the early 2000’s WWM filed lawsuits in the national courts of the United States, contrary to the Treaty which provides for an appeal to the arbitration court, which is located in Stockholm.

American Femida refused the Canadians stating that “the decision to grant or not to issue an export licence is a sovereign act of Kazakhstan which is based on internal laws”, thus confirming that competence in this area lay with Astana, not the US. At the same time, the United States rejected the claims for payment of damages for one billion US dollars that WWM allegedly incurred.

Furthermore, during ongoing trials in different courts, the amount of “damage” to WWM grew.

And here is why.

The Canadian lawyers discovered what they considered to be a loophole in the law, and referred to a bilateral agreement on investment between Canada and the USSR from 1989. This treaty guaranteed the protection of Canadian investments

According to the Canadian side (in all disputes the interests of the bankrupt WWM are currently represented by “Jones Day LLP”), Kazakhstan is the legal successor to the USSR, at least in terms of the implementation of this particular treaty.

This is despite the fact that the legal successor to the USSR is Russia.

In 1991 Russia declared itself to be “the continuator state of the USSR” on the grounds that it contained 51% of the population of the USSR and 77% of its territory.

It is widely accepted that this move was to ensure that Russia would acquire the USSR’s seat as a permanent member of the United Nations Security Council. This agreement was unanimously accepted by all former states of the USSR, including Kazakhstan.

In acknowledgement of this fact, numerous international treaties have subsequently been satisfactorily concluded, including the Agreement between the Russian Federation and the Republic of Kazakhstan, 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, as well as numerous agreements with various foreign countries on the settlement of Russia’s payment obligations concerning the external debt of the USSR.

The international community, including all the members of the Paris Club, which includes Canada, accepts that the Russian Federation is responsible for all the obligations of the USSR, making the claims of World Wide Minerals Ltd difficult to justify.

More importantly, the Vienna Convention on Succession of States in respect of Treaties (1978), which is respected by the United Nations, acknowledges Russia’s responsibilities in this regard.

Nevertheless, a Canadian tribunal in October 2015 apparently “recognised” Astana as the legal successor under the investment treaty of Canada and the USSR.

At this point, the representative of the Canadian company, taking advantage of the opportunity, sharply increased the amount of the claim to Astana. Now the estimate of damages and lost profit have grown to $2 billion.

The next hearing on the suit of Canada (represented by World Wide Minerals Ltd) against the USSR (represented by Kazakhstan) is scheduled for the end of this year.

How this precedent in international law will end is not yet clear.

However, if the United Nations Commission on International Trade Law (UNCITRAL) recognises Kazakhstan as a successor of the collapsed Soviet Union, as appears to be the case at the time of writing, this has the potential to cause a wave of similar lawsuits around the world, affecting countries that have distanced themselves from former masters. It may even have implications for the UK, following its impending separation from the EU.

Follow EU Today on Social media:


Gary Cartwright writes for EU today, with a focus on Environmental issues, and also on energy and defence.

A published author, he has many years of experience working in the EU institutions, and is a former consulting editor of the long established and highly respected journal EU Reporter.

blog comments powered by Disqus