Hague tribunal dismissed complaint against Mongolian government www.montsame.mn

Ulaanbaatar /MONTSAME/ The Government of Mongolia won in the arbitration dispute with three Chinese investors to Tumurtein Khuder Company. The investors appealed to the permanent court of Arbitration at the Hague in February 2010, concerning the Government agency’s decision on cancellation of Tumurtei khuder company’s license of Tumurtei iron ore mine. On June 30, the arbitral tribunal made decision to dismiss the claimants’ requests in full.

Mongolia Aims To Boost Activity Amongst Foreign Mining Giants With Relaxed Laws www.esiasee.eu

Mining accounts for over 80% of Mongolian exports

Milbank Secures Significant Victory for Mongolia over Chinese SOEs in Treaty-Based Arbitration www.milbank.com

NEW YORK, July 5, 2017 – Mongolia, represented by Milbank, Tweed, Hadley & McCloy LLP, has prevailed in an arbitration brought by Chinese State-Operated Entities’ (SOEs) pursuant to the investment-protection treaty between the two countries following Mongolia’s revocation of a license for the Chinese entities to mine the vast Tumurtei iron ore deposit. The Tribunal’s award of June 30 dismissing all claims has potentially significant implications for Chinese foreign investment worldwide because the identical treaty language appears in the majority of China’s 110 bilateral investment protection treaties with other countries.

The Tribunal’s award parted ways with determinations by two tribunals in prior arbitrations brought by Chinese investors, one confirmed by the Singapore Supreme Court, that found the critical treaty language to be a broad submission to the jurisdiction of international tribunals. In contrast, the Tumurtei Award relied upon evidence of historic Chinese state practices not considered in the prior cases and held that only national courts in the host country of foreign investment, not arbitral tribunals constituted pursuant to the China-Mongolia treaty, were empowered to determine whether the host State had committed an unlawful expropriation.

The final award handed down on June 30, which was unanimous, puts an end to seven years of arbitration. The arbitration was presided over by the former President and current Judge of the International Court of Justice Peter Tomka. A week-long hearing was held at the Peace Palace in The Hague in late 2015. The other members of the arbitration tribunal were Yas Banifatemi, a member of the Shearman & Sterling team that secured the $50 billion arbitration award for Yukos against Russia (by nomination of the Chinese Claimants) and Mark Clodfelter, the former US State Department’s Assistant Legal Adviser for International Claims and Investment Disputes (by nomination of Mongolia).

At a time when Chinese outbound foreign investment has become enormous and is growing, the decision of the arbitral Tribunal has potentially significant implications for Chinese foreign investments around the world. Out of 110 bilateral investment treaties entered into by China and still in force, 70 are treaties of the “1st generation” – that is, early treaties concluded in the 1980’s and 1990’s almost all of which contain the same sort of language restricting access to arbitration to disputes involving the amount of compensation for expropriation. These early treaties reflect China’s distrust of arbitration as a mechanism to resolve disputes with foreign investors at a time when China was predominantly a capital importer hosting foreign investments. It is only around the time that China adopted its so-called “going out” strategy in 2001, shifting its focus to becoming a significant exporter of capital, that a new wave of BITs were signed. In these ‘2nd’ and subsequent generations of Chinese BITs, the arbitration clause was extended to “any disputes concerning an investment” so as better to protect China's outbound investments.

The Tribunal's ruling on the Chinese Treaty departed from prior awards interpreting identical language in other Chinese treaties and similar language in communist-era treaties of Russia, Bulgaria and the Czech Republic. In support of its position, claimants had relied on arbitral awards in Tza Yap Shum v. Peru, EMV v. Czech Republic, Renta v. Russia and Sanum v. Laos. In Sanum, the Singapore Court of Appeal held, in September 2016, following extensive treaty-based arbitration proceedings, that a “narrow interpretation” of the dispute resolution clause of the China-Laos BIT (containing the same language) could “render illusory the availability of access to arbitration” and leave the clause without meaningful effect. In Tza Yap, the arbitral tribunal also agreed that the Chinese claimant’s “interpretation, the broader one, is the most appropriate.” 

The Tumurtei arbitration was the first in which a respondent-State had put forward the argument that international arbitration would be available for the determination of quantum following an expropriation formally “proclaimed” by the State. In the arbitration, Mongolia submitted substantial of China's historic use of such proclaimed expropriations, whether through ordinances or decrees, when its 1st Generation treaties were entered. Thus, Mongolia argued that the critical treaty language had meaningful effect even if construed so as to exclude international review of its revocation of the Tumurtei license.

By unanimous decision, the Tribunal accepted Mongolia’s position and found that the China-Mongolia BIT “restrict[s] the jurisdiction of an ad hoc arbitral tribunal to encompass only disputes which involve the amount of compensation for expropriation.” The Tribunal disagreed with Claimants’ view that the arbitration provision of the BIT would be deprived of any effect in practice, because “[a]rbitration before an ad hoc arbitral tribunal would be available in cases where an expropriation has been formally proclaimed and what is disputed is the amount to be paid by the State to the investor for its expropriated investment. In other words, arbitration will be available where the dispute is indeed limited to the amount of compensation for a proclaimed expropriation.”

Gold rebounds on North Korea’s nuclear testing, Fed minutes in focus www.mining.com

Gold prices picked up Wednesday on North Korea's successful test-launch of an intercontinental ballistic missile, and gloomy US economic data.

Mongolia calls for Northeast Asian countries to hold security dialogue www.montsame.mn

Ulaanbaatar /MONTSAME/ Under the theme “25 years of CICA: For Asian Security and Development”, the second non-governmental forum of Conference on Interaction and Conference-Building Measures in Asia (CICA) took place in Beijing, China on June 28-29. The forum was attended by over 300 delegates including CICA member states, observer states (organizations) and concerned countries in the region and discussed issues such as security situations in Asia, on how to achieve common, comprehensive, cooperative and sustainable security in Asia and jointly build the Belt and Road.

Hungary & Gazprom agree gas supplies via Turkish Stream pipeline www.rt.com

Russian energy major Gazprom has signed an agreement with Hungary to deliver gas via the Turkish Stream pipeline, the MTI news agency reported, citing Hungary’s Foreign Minister Peter Szijjarto.

Drilling Rig Contract Signed, Drilling Targets identified www.petromatadgroup.com

Petro Matad, the AIM quoted Mongolian oil explorer announces that further to the press release on 31 May 2017, a comprehensive drilling contract has now been signed with SINOPEC INTERNATIONAL PETROLEUM SERVICE MONGOLIA CO. LTD ("Sinopec") and that the initial drilling targets have been selected.

2017 exploration drilling programme

The first exploration well will be located on the Irves (Snow Leopard) prospect in the Taats Basin of Block V and will spud in September 2017. The well will be drilled to a total depth of 3150 m and have an expected duration of 50 days. The Irves prospect comprises a series of tilted fault blocks, with multiple stacked reservoir targets, and has an estimated potential of 160 million barrels of oil-in-place (mean-case) and an upside of 350 million barrels of oil-in-place.

Irves-1 is an important 'basin and play opening' well. It will be the first deep exploration well drilled in Central Mongolia to test the hydrocarbon potential of the highly prolific Early Cretaceous 'syn-rift' play already proven in neighbouring Chinese and eastern Mongolian basins. Success at Irves-1 would open the Taats Basin for further exploration and potentially access over 1.8 billion barrels oil-in-place (mid-case estimate).

Once the Irves-1 well has been completed, the rig will mobilise to the second well location, which is the Takhi (Wild Horse) prospect within the Baatsagaan Basin of Block IV. Takhi-1 will be a shallower exploration well, with a total depth of 1850m and an expected duration of approximately 20 days. The Takhi prospect comprises a large faulted anticline with several stacked reservoir objectives. The well is designed to target 280 million barrels of oil-in-place (mean-case), and has an upside case exceeding 650 million barrels of oil-in-place. Success at Takhi-1 would likewise, open the Baatsagaan Basin for further exploration and potentially access over 1.2 billion barrels oil-in-place (mid-case estimate).

For both the Irves and Takhi prospects there is significant stratigraphic upside potential, which is not included in the prospect volumes stated above. More details on the drilling targets will be provided nearer the commencement of drilling operations.

The Taats and Baatsagaan basins are just 2 basins out of a total of 12 basins that the Company has identified within Blocks IV and V. Petro Matad has so far mapped over 65 structural prospects and leads across these basins and based on these alone the 12 basins have the potential to contain over 20 billion barrels of oil in place. These basins may also offer significant upside potential from stratigraphic traps and unconventional oil plays. All volumes are the Company's internal estimates.

Further announcements will be made on progress leading up to the spud of the first well.

Ridvan Karpuz, the CEO of Petro Matad, said:

"I am very pleased to have executed the rig contract which is a significant milestone as we head toward exploratory drilling later in 2017. With the signature of the agreement with Sinopec, the Company is now poised to deliver on its commitment to undertake a high impact exploration drilling programme in 2017."

Korea Tourism Organization opens Mongolia office www.koreatimes.co.kr

The Korea Tourism Organization (KTO) opened an office in Mongolia, Tuesday, as part of its efforts to diversify the country's tourism market beyond neighboring China and Japan.

Russia & China sign $10bn investment fund to ease ruble-yuan settlements www.rt.com

The Russian Direct Investment Fund and the China Development Bank (CDB) have agreed to establish a Russian-Chinese investment fund worth 68 billion yuan ($10 billion).

Mongolia seeks to buy public buses on South Korean loan www.akipress.com

AKIPRESS.COM - Cabinet authorized Finance Minister of Mongolia B.Choijilsuren to conclude a loan agreement with South Korea during its Tuesday session in Ulaanbaatar, state media report.