The Republic of Uzbekistan won a significant victory in the longstanding dispute with Oxus Gold plc Great Britain) in the amount of 1.3 billion US dollars.

Oxus Gold plc specializes in the field of precious metals and began its activity in the Republic of Uzbekistan in 1997, through its subsidiaries «Oxus Resources Corporation Ltd. » and «Marakand Minerals Ltd. ».

The company worked primarily on the projects “Amantaytau Goldfields” and “Khandiza” and in 2011 filed a claim against the Republic of Uzbekistan in the amount of 1.3 billion US dollars for alleged breach by Uzbekistan of the Agreement between the Government of the Republic of Uzbekistan and the Government of the United Kingdom of Great Britain and Northern Ireland on mutual protection and encouragement of investments in the framework of abovementioned projects.

Following a lengthy arbitration proceeding, the ad hoc Tribunal, applying the UNCITRAL Arbitration Rules and composed of Professor Pierre Tercier (Chairman), Professor Brigitte Stern, and the Honorable Marc Lalonde, issued its Award dated December 17, 2015, dismissing more than 99 percent of the US$ 1.33 billion in damages claimed by Oxus and confirmed the legitimacy of the actions of the Republic of Uzbekistan.

In particular, in its Award, the Tribunal unanimously rejected all of Oxus’s claims pertaining to the polymetallic Khandiza deposit, totaling approximately US$ 780 million in alleged damages and lost profits.

The Tribunal agreed with Uzbekistan that Oxus never obtained the right to develop Khandiza; rather, Oxus secured only a right to formal, exclusive, and good faith negotiations to develop the Khandiza Deposit jointly with the Uzbek Parties on mutually acceptable terms.

The Tribunal concluded that Oxus – not the Government of Uzbekistan – was at fault for the failure of the negotiations, as the Uzbek Government made it sufficiently clear that it did not consider the capital distribution proposed by Claimant as sufficient and/or mutually beneficial. Oxus was not entitled, and did not have a legitimate expectation to, any further extension of its exploration rights in the territory, and it contractually agreed that it would not claim for sunk costs.

Moreover, the Tribunal’s Award fully rejected Oxus’s more than US$ 550 million, claim regarding alleged expropriation of the company’s investment in the Amantaytau Goldfields (“AGF”) Joint Venture between Oxus, the State Committee of the Republic of Uzbekistan on Geology and Mineral Resources, and Navoi Mining and Metallurgical Kombinat, a State- owned mining company.

The Tribunal found that Claimant had failed to establish the necessary causal link between the incriminated actions of Respondent and Claimant’s alleged deprivation of its investment, and that its claims for expropriation therefore baseless. In fact, AGF suffered from internal management problems and incurred substantial operational delays for which AGF, and thereby Claimant, bore responsibility

In addition, a majority of the Tribunal also rejected Oxus’s claim that Uzbekistan was responsible for Oxus’s failure to obtain financing for AGF’s failure to begin the underground mining of sulphide ores (“Phase 2”).

The Tribunal likewise rejected as meritless multiple other claims of alleged violations of the Agreement between the Government of the Republic of Uzbekistan and the Government of the United Kingdom of Great Britain and Northern Ireland on mutual protection and encouragement of investments, including in connection with the validity of the Agreement on Special Dividends between Oxus and the Ministry of Finance of the Republic of Uzbekistan, This arbitration is a clear example of what will result when investors do not respect the legislation of Uzbekistan, including the requirements of the Foreign Investment Law, and do not conscientiously perform their own investment, tax and other obligations to the State.

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