Three Chinese companies, two of which are state-owned, have appealed to a New York federal court on September 28 to revive their claim against Mongolia over the revocation of an iron ore mining license at Tumurtei mine.
The appeal to a New York federal court is on the heels of a unanimous decision to dismiss the same claim made to the Permanent Court of Arbitration of The Hague in June 2017.
The recent dismissal in June marked a seven-year case between China Heilongjiang International Economic & Technical Cooperative Corp., Beijing Shougang Mining Investment Co. Ltd. and Qinhuangdaoshi Qinlong International Industrial Co. Ltd against the Government of Mongolia.
In 2010, the three Chinese investment companies filed a suit against the Government of Mongolia for annulling thier joint venture Tumurtei Khuder LLC’s license at the Tumurtei iron ore mine in Khuder soum of Selenge Province. The companies were seeking damages of one billion USD. The mine has a reported reserve of 250 million tons of iron ore.
“The case against the Government of Mongolia was filed on February 12, 2010 to the Permanent Court of Arbitration at The Hague. On June 30, the arbitral tribunal dismissed the claimants’ request in full,” reported G.Bayasgalan, the representative of Mongolia in the arbitration case and State Secretary of the Ministry of Justice and Internal Affairs.
G.Bayasgalan noted that with the victory, Mongolia was able to avoid paying one billion USD in damages. In the past, Mongolia has been called as a defendant in five arbitral cases. With the dismissal and before the appeal to revive the claim, Mongolia had no outstanding arbitral cases it was involved in as a defendant.
The revocation of the mining license was due to the company not repaying the government for exploration fees and not planning or implementing any environmental rehabilitation efforts, reported the government.
The three Chinese companies believe that the arbitration tribunal was incorrect when it dismissed their claim for lack of jurisdiction in June. The tribunal had concluded that it could not decide the question of whether Mongolia had expropriated their investment in the joint venture that held a license to mine the Tumurtei iron ore deposit.
The tribunal found that the relevant treaty between China and Mongolia required that the latter country’s national courts had to first declare whether there had actually been an expropriation before an arbitration could be initiated, or the Mongolian government had to admit an expropriation had occurred. But the Chinese companies argued that the question of whether Mongolia expropriated their investment has to be resolved in arbitration and that any other result would be “illogical”.
The three companies together had held a 70 percent interest in the Mongolian joint venture called Tumturei LLC. Production began in 2006, at which time exports to China commenced.
According to the complaints, the Mongolian government had revoked the license the same year that a new government came to power and as the price of iron ore began to surge.
“As the price of iron ore began to climb, the new Mongolian government began trying to find a way to take back this now much more valuable concession,” stated the complaint.
This is in contrast to the reasons given by the Mongolian government of not repaying the government for exploration fees and not planning or implementing any environmental rehabilitation efforts.
The Chinese companies claim that the license was eventually revoked after the Mongolian government concluded that the license belonged to the state-owned enterprise Darkhan Metallurgical Plant.