Arbitration over Amulsar Case Begins, Government Keeps Contract Price Secret: Hetq

The Permanent Court of Arbitration (PCA) has informed the Armenian side in late January that it is conducting a case against the Republic of Armenia by the Amulsar Investor Ventures LLC, registered in the United States. According to available information, this arbitration case pertains to the Amulsar mining project's operations.

In addition to the Office of the Representative of Armenia on International Legal Issues, the law firm Foley Hoag is also involved in protecting Armenia's interests. However, the government is keeping the contract price with this American company secret, citing confidentiality reasons.

According to Global Arbitration Review, Case No. 2023-66 was initiated under the treaty for the reciprocal encouragement and protection of investments between the Republic of Armenia and the United States and the UNCITRAL Arbitration Rules adopted in 1976. This arbitration relates to the Amulsar mining project.

In March 2019, it became known that the company Lydian International, which owned the Amulsar gold extraction project at that time, had notified the Armenian authorities of beginning an international arbitration dispute based on Armenia's investment treaties with Canada and Great Britain. This possibility had not been ruled out by the company’s Vice President for Sustainable Development, Armen Stepanyan, who announced that due to the illegal closure of roads leading to Amulsar, the company would seek compensation from the government for their incurred losses. “All options are open. Anything is possible,” he told reporters.

It is worth noting that since June 2018, locals from the Vayots Dzor region initially closed roads to Amulsar, with environmentalists later joining them, demanding an end to all operations aimed at exploiting Amulsar.

However, in August 2019, this dispute seemed to be resolved as the Armenian government announced that mining operations would not harm the environment, and the Administrative Court obligated the police to cease incursions into real estate areas owned by Lydian Armenia, based on coordinates 39.740911, 45.609243 and 39.734013, 45.608475.

According to its financial reports, Lydian Armenia had failed to meet its contractual obligations to its senior creditors, cash flow financing providers, and equipment suppliers. As a result, in 2021, Lydian International was dissolved, and its Armenian subsidiary became Lydian Canada Ventures Corporation. Lydian Armenia is a closed joint-stock company, so ownership shares are not disclosed in public registry documents. Only the official company website notes that 100% of Lydian Armenia is owned by the Canada-American Lydian Canada Ventures Corporation, which is owned by American Orion Mine Finance and Canadian Osisko Gold Royalties companies.

In 2021, senior creditors signed a framework agreement with the Ministry of Economy of the Republic of Armenia, and subsequently, the company was granted permission to complete the project, while Lydian Armenia’s mining license was extended until March 2039. Consequently, on February 22, 2023, the Armenian government signed a package worth $250 million with Lydian Armenia. It was expected that $150 million would be invested from Lydian’s own resources, while $100 million would be borrowed from the Eurasian Development Bank.

In January 2024, it became known that 12.5% of Lydian Armenia's shares would be transferred to the Republic of Armenia. At that time, Acting Deputy Minister of Economy Ani Ispriaryan, who was dismissed on January 31, announced that under the memorandum of understanding signed between the Government of Armenia, the Eurasian Development Bank, and Lydian Armenia, Armenia would accept the 12.5% stake in ordinary shares worth 5000 drams issued by Lydian Armenia, totaling 120,503 shares.

“When we received answers to all these questions, we considered the continuation of the project feasible. It is also encouraging that the investors themselves, perhaps following this example, wanted the people of Armenia, represented by the government, to have a stake and participation in this project. In this case, 12.5% of the shares would be transferred to the Republic of Armenia, that is, to the people of Armenia,” added Prime Minister Nikol Pashinyan.

At first glance, this deal might seem advantageous, but the transfer of 12.5% of shares to the Armenian government also poses significant financial and legal risks for Armenia.

It remains unclear what connection the Amulsar Investor Ventures LLC, acting as the claimant in this arbitration case, has with the reorganized Lydian Armenia. This claimant company was registered in 2022 in the state of Delaware, USA. Specific demands from the claimant against the Republic of Armenia have not yet been disclosed.

A tribunal has already been established to discuss the arbitration proceedings, with Janet Walker as the president. She is an arbitrator representing Canada and is also involved in the case of Webuild against the Dominican Republic. The other two arbitrators proposed by the parties are Ian Laird (USA) and J. Christopher Thomas (UK). The interests of the claimant are represented by the American law firm Gibson, Dunn & Crutcher, as well as Christopher Harris from 3 Verulam Buildings. The interests of the Armenian government are represented by the American Foley Hoag law firm. In addition to this firm, the Office of the Representative of Armenia on International Legal Issues is also involved in the process, including representatives for international legal issues such as Yeghishe Kirakosyan, Liparit Drmeyan, Kristine Khanazadyan, Aram Aramyan, Mariam Tarverdyan, Parandzem Mikaelyan, and Maria Hovhannisyan. Recently, this American firm has been consistently representing Armenia's interests in arbitration cases. For example, Foley Hoag is also defending Armenia’s interests in the inter-state arbitration case against Azerbaijan regarding “destruction of biodiversity.” This firm is also involved in the case of Sanitek's investment dispute, which entered the International Centre for Settlement of Investment Disputes (ICSID) on April 6, 2021.

Thus, according to a contract signed between the Prime Minister's Office and the firm on June 17, 2021, for the arbitration case of Sanitek S.A.R.L., Sari Haddad, and Elias Doumet against the Republic of Armenia, the company was to provide legal services worth a total of 1,500,000 USD. Of that amount, 166,000 USD would be spent on the appointment of arbitrators, document reviews, procedural matters, and the first organizational meeting. Another 41,500 USD would be allocated for jurisdictional and substantive issues partitioning phase, while 249,000 USD was designated for the jurisdiction phase discussions (if the partition request is satisfied, preparing objections regarding jurisdiction, including gathering documents, drafting a claim regarding jurisdiction, and other responses to objections by the other party, etc.).

According to the electronic procurement system Armeps, it was not possible to find the contract with Foley Hoag regarding the protection of Armenia's interests in the case of Amulsar Investor Ventures LLC against the Republic of Armenia, which should indicate the service value of this American firm. The Press Secretary for the Office of the Representative on International Legal Issues, Hasmik Samvelyan, informed Hetq that the contract with Foley Hoag is not posted in the Armeps system due to the confidentiality of the ongoing case. “Due to the sensitive nature of the subject, the details of the case are kept confidential; therefore, the contract is not posted in the Armeps system,” noted Samvelyan. When asked how much the contract value is, the spokesperson declined to answer, stating that it is confidential.