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KazTransGas may Demand Returning Investments Put in Georgian Subsidiary

Kazakhstan’s KazTransGas may demand Georgia to return investments made in 2006-2009 in its subsidiary KazTransGas-Tbilisi, according to a message from the company.

KazTransGas, Kazakhstan’s national gas and gas supply operator, created KazTransGas-Tbilisi in 2006, pursuant to an investment memorandum signed between KazTransGas and Georgia’s Economic Development Ministry on Dec. 26, 2005, to ensure the supply of natural gas to the capital of Georgia and adjacent regions.

KazTransGas said that on Sept. 21, the global law firm Baker & McKenzie, acting on its behalf, delivered a letter to Georgian officials proposing that the parties begin negotiations to settle the dispute over the company’s investments in KazTransGas-Tbilisi LLP without resorting to arbitration.

“Between 2006 and 2009, the total investments of KazTransGas JSC in the development of KazTransGas-Tbilisi LLP and in the gas transit system of Tbilisi amounted to approximately $130 million,” said the company.

“Despite KazTransGas JSC’s 100 percent ownership of KazTransGas-Tbilisi, the Kutaisi City Court, by its March 16, 2009 ruling, satisfied a request by the National Regulatory Commission of Georgia for Energy and Water Supply to approve the appointment of a special administrator of KazTransGas-Tbilisi LLP,” said the company.

KazTransGas further noted that, as a result, it is no longer able to participate in the business operations of its subsidiary.

“In the opinion of KazTransGas JSC, the Georgian authorities have breached its rights as a foreign investor under Georgian national law, as well as international treaties for the protection of investments,” said the company. “KazTransGas JSC hopes that the Georgian party will take a constructive approach and that the dispute will be resolved without arbitration.”

KazTransGas also noted that if the dispute can’t be settled through negotiation, it will refer the dispute to investment arbitration in line with the Energy Charter Treaty, dated Dec. 17 1994, the greement between the government of Kazakhstan and the government of Georgia on Encouragement and Reciprocal Protection of Investment, dated Sept. 17 1996, and other international treaties as well as Georgia’s national legislation.

KazTransGas also said that in such a case it will also seek the recovery of control over KazTransGas-Tbilisi LLP, as well as the reimbursement of damages equal to or greater than the amount of its investments.