Oz mining company Kingsgate to pursue ISDS case against Thailand
Tuesday April 2, 2019: Despite winning a political risk insurance payout of US$58.5 million from Zurich Insurance Australia, the Australian mining company Kingsgate Consolidated has decided it will also pursue compensation from the Thai government for the closure of its Chatree gold mine in 2016. It has already notified a dispute under the Investor-State Dispute mechanism in the Thai – Australia Free Trade Agreement.
Kingsgate has not said how much compensation it is seeking, but an executive once said the company could have earned another A$1.3 billion if the mine had continued to operate to 2028.
TAFTA came into force in January 2005. Article 912 Expropriation states:
Neither Party shall nationalise, expropriate or subject to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as “expropriation”) the investments of investors of the other Party unless the following conditions are complied with:
- the expropriation is for a public purpose related to the internal needs of that Party and under due process of law;
- the expropriation is non-discriminatory; and
- the expropriation is accompanied by the payment of prompt, adequate and effective compensation.
Article 917 2 (b) allows for an investor from the other country to sue a government using the rules of the United Nations Commission on International Trade Law (UNCITRAL).
In May 2016, Thai Prime Minister Prayut Chan-o-cha ordered a production suspension at the mine under Section 44 of the interim constitution, based on reports that the mine produced toxic leaks that affected groundwater and local paddy fields. Public pressure from villagers suffering illness was the main driver for the closure. Kingsgate disputes these reports and asserts its mine has been “expropriated”.
The open-cut Chatree mine began production in 2001, was Thailand’s biggest gold mine employing almost 1,000 workers, with its concession due to run until 2028.
The first arbitration hearing is expected in November 2019 in Hong Kong.
Mining companies are frequent users of ISDS. There are 152 ISDS cases in the global mining sector, according to the United Nations Conference on Trade and Development database.