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The case of Canadian ‘World Wide Minerals Ltd’ vs Kazakhstan

(Letter to the editor) :-

Many of us have probably heard about the ‘amusing’ legal processes taking place in the courts of some countries. On the processes in which completely, at best – in part, there was no common sense. Well, for example, the robber got into the house in the absence of the owners, collected everything valuable there, but could not get out. He stayed for several days, at that time he ate all the supplies and switched to dog food. From such food, he began to have stomach problems. And when the owners found him crouched on the floor, the robber first declared that he would sue them for what he had to eat. He said: ‘he did’. The court won and got compensation. True, to spend a couple of months behind bars, he still had to.

Such absurd cases in world judicial practice, alas, a lot. Some ‘lucky’ citizens managed to get rich on this, and more savvy – even regularly earn their living by legal litigation. In this case, the amount of claims is often estimated at millions of dollars. The same situation, in addition to household, is observed in the business environment. Only there the rates increase by an order of magnitude and amount to billions of dollars.

An example of such an absurd trial was the litigation between Kazakhstan and Canada under the terms of the agreement on the development of the uranium deposit, concluded by official Ottawa back with the Soviet Union almost 30 years ago. To understand the whole background of this story, its retelling should begin with later events.

Already after the collapse of the USSR, in particular 1996, the Canadian company ‘World Wide Minerals Ltd’ concluded an agreement with the government of the already independent Republic of Kazakhstan on the development of uranium deposits, the exploitation of the uranium mining complex and the mining and chemical combine. In exchange, the Canadians promised to invest at least 100 million USD in the development of the industry, promised new contracts in the future and assured that they would restore and maintain in due form the entire social infrastructure around the complex, including kindergartens and heating systems of the neighbouring city. In addition, the company’s representatives undertook to quickly develop a restructuring plan for the enterprises received for management and assured that at the same time, Kazakh employees not only will not lose their jobs, but will also be sent to improve their skills in Canada.

For Kazakhstan, then still recovering from the collapse of the previous economic system and not having the financial capacity to independently develop a strategically important sector of the country, the proposal seemed very tempting. The agreement was signed and the Canadian company, as a priority investor, received maximum tax benefits and opportunities to attract foreign labour.

After only six months, it became clear that Canadian investors are not going to fulfil their promises. Production volumes of the mining and chemical combine were reduced by 60%. The enterprise incurred colossal losses. The sum for those times was astronomical – 9 million USD. Workers did not receive salaries for months, and all the social facilities that the Canadians took under their care were simply abandoned. Here it is important to note that before the arrival of investors, the combine made a profit. Not the greatest profit, given the reserve of opportunities, but still brought. And then it suddenly became unprofitable. And for a record short term. The explanation for this is very simple. Canadians did not intend to invest in the development of the Kazakh uranium industry and even those enterprises that they received in management. The company’s activities were aimed corny for the resale of raw materials and the extraction of profits.

The Kazakh authorities after that, for obvious reasons, cancelled the agreement. ‘World Wide Minerals Ltd’ was ruined, and its property was sold. The logical outcome of the case, it would seem. But the Canadians for some reason offended and filed a petition with the court demanding to recover from Kazakhstan compensation of 1 billion USD.

On what grounds, ask? The basis was not easily found by Canadian lawyers in a bilateral agreement on investment between Canada and the USSR of 1989. This treaty guaranteed the protection of Canadian investments. And in Ottawa it was felt that Kazakhstan, being, in their opinion, the legal successor of the USSR, had to provide such a guarantee. And if I did not, I must pay.

But after all, the legal successor of the Soviet Union was officially Russia. As evidenced by numerous international treaties. Including the agreement between Russia and Kazakhstan. And up to the present moment, none of the countries of the world has officially challenged this rule.

Canada was the first, and so far the case, despite all its absurdity, has been very successful for Ottawa. The arbitration tribunal of Canada in October 2015 considered and granted the claim of ‘WWM’ to Kazakhstan and still recognized Astana as the legal successor under the investment treaty of Canada and the USSR. Well, what other decision on the Canadian lawsuit could the Canadian tribunal have? Representatives of ‘WWM’, taking advantage of the case, increased the amount of the claim by another billion dollars and assessed their losses and lost profits already in two billion.

The next hearing should take place in the coming months. The case will already be considered by the International Court of Arbitration of London. Time will tell whether it enters into the history of judicial precedents. So far, one thing is clear: the degree of absurdity of this case goes off scale and puts it on a par with the aforementioned case about the hapless robber who ate canned food.

The Canadian side probably should be reminded that the poor fellow – the burglar in the end still had to be punished and serve time in prison. Because the world is not completely crazy yet.

Disclaimer: Views expressed are not of The London Post

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