Israeli company files international arbitration against Uzbekistan

Israeli company files international arbitration against Uzbekistan

Uzbekistan, Tashkent, Jan. 28 / Trend D.Azizov /

The Israeli Metal-Tech Ltd., a metal-based hydrometallurgy and chemical company, filed for arbitration against Uzbekistan, related to the country's unlawful treatment of Metal-Tech's 50 percent investment in Uzmetal Technology, a joint venture (JV) to produce high-quality molybdenum products, the company reported.

The request for arbitration, filed with the International Center for Settlement of Investment Disputes (ICSID) based in Washington, D.C., asserts Uzbekistan's breach of the Israel-Uzbekistan Bilateral Investment Treaty, as well as violations of various standards of treatment under international law and Uzbek legislation.

"It is unfortunate that we have not been able to resolve this dispute amicably with the

Uzbekistan government," Metal-Tech's Business Development and General Counsel Vice President Maayan Bar said. "Resorting to international arbitration will allow us to pursue our claims on an impartial forum."

The JV was founded in 2000 by the Israeli Metek Metall Technology (50 percent), Almalik MMC (30 percent) and Uzbek Refractory and Heat-resistant Metals Plant (UzKTZhM) (20 percent) with a statutory fund of $1 million.

In 2002, under the JV, the Israeli company has upgraded molybdenum production in Uzbekistan worth $19.39 million. Based on the project, the company launched the set of primary constructed facilities for molybdenum production (molybdenum trioxide) with a capacity of 600 tons per year at the UzKTZhM.

Simultaneously, the company established a workshop for producing molybdenum products. Prior to this final product molybdenum production at the AMMC was the molybdenum concentrate, which was delivered for further processing to UzKTZhM.

In accordance with the business plan, annual production of molybdenum should have reached about 350 tons by late 2006. It is also expected to send 240 tons for export, as well as 250 tons of molybdenum products.

Metal Tech is seeking repercussions because Uzbekistan breached its obligations by denying Uzmetal Technology necessary inputs of molybdenum concentrate in mid-2006, thereby forcing the joint venture to become idle for lack of raw materials to process.

The damage to Metal-Tech was exacerbated when Uzbekistan and its state-owned companies, which owned the other 50 percent of Uzmetal Technology, later forced the joint venture into bankruptcy and eventual liquidation.

In December 2007, the property complex of the joint venture was put up for auction starting price of $10 million, but then the assets were withdrawn from the auction due to lack of buyers.

It is the first time when the foreign investor appeals to the international arbitration with a claim against Uzbekistan.

Uzbekistan has not yet commented on the issue.

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