Centerra dispute intensifies as Kyrgyzstan launches more legal proceedings

By bne IntelliNews June 7, 2016

The dispute between Centerra Gold and Kyrgyz authorities escalated further as more legal proceedings were launched against the Canadian company and several of its senior managers were barred from leaving the country. The move is the latest in an ongoing row involving Kyrgyzstan's flagship gold mine Kumtor, which is operated by Centerra.

Kyrgyzstan’s Bishkek Inter-District Court has effectively set limits on financial transactions of Centerra's unit, Kumtor Gold Company (KGC), Centerra said in a statement on June 6. KGC, which operates Kumtor, now finds itself unable to transfer property or assets, declare or pay dividends and make loans. The decision is related to environmental claims by Kyrgyz ecology authorities, which currently amounts to $220, the statement read. KGC is 100%-owned by Centerra Gold, while the Kyrgyz government has a 32.7% stake.

“The decision of the court is a clear violation of the fundamental investment protections contained in the 2009 agreements governing the Kumtor Project, including the 2009 Restated Investment Agreement, as the injunction appears to deprive Centerra of the fundamental economic benefits of ownership of the Kumtor Project,” the statement reads.

KGC will now appeal the Bishkek court’s order to higher courts in the country, while Centerra will add the dispute to international arbitration proceedings against the country.

Adding fuel to the fire, the Kyrgyz General-Prosecutor’s Office (GPO), which is currently investigating KGC’s alleged financial violations, has opened a new criminal case against KGC’s unnamed managers for supposedly depriving Kumtor of its assets, abusing their authority and causing damage to the country. The managers are currently not permitted to leave Kyrgyzstan.

GPO conducted a search of KGC’s headquarters at the end of April, where they seized documents and records that likely lead to the new criminal case.

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