On 2 March 2015, an arbitral tribunal composed of Professor David A.R. Williams QC (President), The Hon. L. Yves Fortier PC CC OC QC (Claimant appointee), and Professor Bernard Hanotiau (Respondent appointee) issued its award on the merits in an arbitration under the 2010 UNCITRAL Rules, Khan Resources Inc., Khan Resources B.V., and CAUC Holding Company Ltd. v. The Government of Mongolia. The Tribunal awarded the Claimants damages of USD 80,000,000 plus interest at the rate of LIBOR plus 2% compounded annually, as well as legal and other costs of USD 9,074,143.51, arising from the Respondents’ breaches of the Mongolian Foreign investment Law (FIL) and the Energy Charter Treaty (ECT).
II. FACTUAL BACKGROUND
Between 1988 and 1995, Priargunsky, a Russian State-owned company, extracted uranium in the Dornod region in northeast Mongolia. Following the break-up of the USSR, the mine closed in 1995 due to a combination of insufficient funds and falling demand for uranium. The same year, Priargunsky, Mongol- Erdene (Erdene), a Mongolian State-owned entity, and a U.S. private company, WM Mining, formed the joint venture Central Asian Uranium Company Ltd. (CAUC) in order to develop uranium exploration and extraction in the region. Initially, each of these parties held equal one-third shares in the joint venture.
Claimants came to obtain their interests the Dornod Project following a lengthy series of transactions and corporate restructurings. In 2003, Khan Resources Inc. (Khan Canada), the first claimant, became the indirect holder of WM Mining’s shares in CAUC.