Summary

Circumstances of the case

On October 30, 2013 the companies "Stans Energy Corp." (the Province of Ontario, Canada) and "Kutisay Mining" LLC (Kyrgyz Republic) (hereinafter referred to as the Claimants) filed with the Arbitration at the Moscow Chamber of Commerce and Industry (hereinafter referred to as the MCCI Arbitration) the Statement of Claim against the Kyrgyz Republic (hereinafter referred to as the Respondent), which stated the following.

The dispute between the Claimants and the Respondent is an investment dispute; it arose out of the Convention for the Protection of Investor's Rights signed on March 28, 1997 in Moscow, and in accordance with Article 11 of the said Convention it is a dispute related to investments made under this Convention; the dispute is also based on the Law of the Kyrgyz Republic "On Investments in the Kyrgyz Republic".

Since 2010, the company "Stans Energy Corp." had been making investments into research of potential and development of reserves of rare and rare-earth metals in Kemin region of Chui Oblast of the Kyrgyz Republic. Investments are made through two of its subsidiaries registered as legal entities of the Kyrgyz Republic "Stans Energy KG" LLC and "Kutisay Mining" LLC (earlier JSC "Kutisay Mining").

JSC "Kutisay Mining" was set up on December 9, 2009 as a joint-stock company which sole founder was the company "Vesatel United Limited" (New Zealand).

According to the Resolution of the Government of the Kyrgyz Republic dated December 30, 2008 ¹ 736, "Kutessay II" deposit was included into the List of mineral deposits allocated on a competitive basis. On December 01, 2009 the Resolution of the Government of the Kyrgyz Republic ¹ 725 (hereinafter referred to as the Resolution ¹ 725) was adopted amending this procedure. With para.1 of the Resolution ¹ 725 competitive procedures for granting rights to certain objects of subsoil use (including "Kutessay II" deposit) were modified into the auction stock-exchange procedures. With para.2 of the Resolution ¹ 725 the Ministry of Natural Resources was authorized to issue licenses for the objects of subsoil use to legal entities, whose 100% of shares were managed by ZAO "Fund of Development of the Kyrgyz Republic" (without holding a tender for a further auction sale of shares of the mentioned legal entities).

On December 10, 2009 by Decision of the State Service for Regulation and Supervision of Financial Markets under the Government of the Kyrgyz Republic state registration of the inaugural issue of 19 million ordinary registered shares of JSC "Kutisay Mining" at a face value of 1 som per share under No.

KG 0101202214 was made. The authorized capital stock of the company made up 19 million som. The owner placed the said shares into trust of ZAO "Fund of Development of the Kyrgyz Republic".

On December 21, 2009 the State Agency for Geology and Mineral Resources under the Government of the Kyrgyz Republic and JSC "Kutisay Mining" held negotiations formalized by the Minutes ¹ 1736-N-09 and the decision was made to grant to JSC "Kutisay Mining" the License ¹ 2488 ME for "Kutessay II" deposit.

On December 29, 2009 the company "Stans Energy KG" LLC - a subsidiary which sole participant is the company "Stans Energy Corp" - purchased from a public auction (held at the instruction of ZAO "Fund of Development of the Kyrgyz Republic" by the stock exchange "Central Asia Stock Exchange") 100% of shares of JSC "Kutisay Mining" (Contract ¹ I 194), thus becoming its sole shareholder.

On January 25, 2010 the said sole shareholder of JSC "Kutisay Mining" made a decision on reorganization by way of transformation into a limited liability company ("Kutisay Mining" LLC). Reorganization took place and the certificate was issued. "Kutisay Mining" LLC became a legal successor of JSC "Kutisay Mining".

On June 26, 2012 the Committee for Development of Economic Industries of the Parliament of the Kyrgyz Republic (Zhogorku Kenesh) passed a resolution obligating the State Agency for Geology and Mineral Resources under the Government of the Kyrgyz Republic to cancel the license agreement with "Kutisay Mining" LLC in respect of "Kutessay II" deposit. This resulted into the following acts of the State Agency and the General Prosecutor's Office.

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