US mining firm sues Armenian government, Armenia

U.S. Mining Firm Sues Armenian Government

By Emil Danielyan and Astghik Bedevian

20 March 2007

A U.S. company mining gold in Armenia has initiated an international arbitration of its bitter dispute with Environment Minister Vartan Ayvazian whom it accuses of corruption and other violations of the law.

A lawyer for Global Gold Corporation said on Tuesday that the Connecticut-based company has sued the Armenian government over Ayvazian’s controversial decision last year to revoke some of its operating licenses.

“Global Gold is alleging that the Armenian government, through the actions of its minister of environment, violated the bilateral investment treaty between the United States and Armenia in multiple respects,” Ken Fleuriet of the London-based law firm King & Spalding told RFE/RL by phone.

The dispute will be adjudicated by a panel of three arbiters to be appointed by the International Center for Settlement of Investment Disputes (ICSID), a Washington-based body affiliated with the World Bank. The treaty cited by Fleuriet enables U.S. firms doing business in Armenia to file lawsuits to ICSID tribunals, instead of going to Armenian courts.

The row broke out a year ago when Ayvazian’s ministry unilaterally terminated Global Gold’s licenses to carry out exploratory work at two small gold deposits, accusing it of failing to honor its investment commitments. The company rejected the accusations and argued that the ministry’s action contradicted an Armenian law on mining. An article of the law stipulates that local and foreign mining companies can be stripped of their licenses only by a court.

Top Global Gold executives claimed that Ayvazian turned on their company in retaliation for its refusal to pay a $3 million bribe allegedly demanded by him. The U.S. embassy in Yerevan expressed serious concern at the allegations, raising the matter with the Armenian government. Both Ayvazian and Prime Minister Andranik Markarian dismissed them as baseless.

Although the Armenian authorities seem to have refrained from enforcing the Environment Ministry decisions, Global Gold claims to have suffered considerable losses and is seeking compensatory damages from the government. “The damages or relief that Global Gold will be seeking will be determined in the course of the proceedings,” said Fleuriet.

“One the principal facts in the case is a request for a bribe that was made by Mr. Ayvazian to representatives of Global Gold and was refused by Global Gold,” the lawyer said. “That is when a lot of the various instances of misconduct in relation to the company began. That includes refusals to grant licenses and exploration permits, seizures and expropriations of various rights.”

“Our understanding is that some of the rights have been lost and others are in the process of being taken and sold to other companies,” he added.

Fleuriet also said that Armenia’s Ministry of Justice and embassy in the United States have already been notified of the lawsuit. Ayvazian confirmed this but refused to comment on possible consequences of the extraordinary legal action. “I can only regret that they never tried to use the legislation of the Republic of Armenia,” he told RFE/RL.

Incidentally, Ayvazian spoke shortly after a meeting with President Robert Kocharian. He said they did not speak about the Global Gold lawsuit and discussed other “current affairs” instead.