S&C Leads Centerra Gold to Successful Resolution of Dispute with Kyrgyz RepublicAugust 12, 2022
S&C guided Canadian gold mining company Centerra Gold in a significant transaction with the Kyrgyz Republic and its state-owned gold refining company, Kyrgyzaltyn OJSC, among others, resolving a dispute over the government's seizure last year of the company's Kumtor mine.
The S&C team helped bring the Kyrgyzstan government to the bargaining table through a multi-jurisdictional approach in Canadian court, U.S. bankruptcy court and international arbitration, coordinating with counsel from six countries. The transaction, which was finalized on July 29, is a remarkably swift resolution of this conflict—reached just over a year after the government's seizure. This is rare in the world of investor-state disputes, which can drag on for years, if not decades, and where arbitral awards, if obtained, can be hard to enforce and monetize.
After Kyrgyzstan took control of the mine in May 2021, an S&C bankruptcy team filed Chapter 11 petitions that placed Centerra's Kyrgyz subsidiaries under U.S. bankruptcy protection in New York. The S&C arbitration team had previously responded quickly to the government's actions by initiating an UNCITRAL arbitration in Sweden the day before the mine was seized. S&C sought urgent interim measures to preserve the value of the property. On the eve of a hearing on the interim measures application, the Kyrgyz government and Centerra reached an agreement to resolve the dispute in April 2022.
Before the transaction was approved, legacy creditors of the Kyrgyz Republic unsuccessfully challenged the closing in the Chapter 11 proceedings and the Ontario court proceedings. U.S. Bankruptcy Judge Lisa Beckerman dismissed these attempts. The next day, an Ontario court approved the transaction.
Under the transaction, Centerra received and cancelled all of its common shares held by Kyrgyzaltyn, which represented 26 percent of Centerra's outstanding shares worth several hundreds of millions of dollars. In exchange, Kyrgyzaltyn received from Centerra a 100 percent equity interest in Centerra's Kyrgyz subsidiaries and a cash payment, with Kyrgyzaltyn and the Kyrgyz Republic assuming all responsibility for the Kumtor mine.
As part of the transaction, all legal proceedings involving the parties will be terminated with no admissions of liability. These include civil and criminal proceedings in the Kyrgyz Republic, the UNCITRAL arbitration, the Chapter 11 bankruptcy proceedings in the Southern District of New York and the Ontario court proceedings.
S&C has represented Centerra and its predecessor in matters connected to the Kumtor mine since the original project financing in 1994.
The London-based S&C team leading the negotiation and closing of the agreement consisted of Stewart Robertson, Sam Saunders and Gabriel Opris and Stephanie Taylor. The New York-based arbitration team included Joe Neuhaus, John Hardiman, Andrew Finn, Mevelyn Ong, Leanna Katz and Qingyang Song. The New York-based Chapter 11 team advising Kumtor Gold Company included Jim Bromley, Alexa Kranzley, Christian Jensen, Lauren Goldsmith, Julie Petiford, Michael Basse, Angela Zhu, Meng Yu, David Whalen and Andrew Kaufman. Presley Warner and Craig Jones in London provided English law assistance. Sharon Cohen Levin advised on related criminal matters.