Unfavorable decision for Armenia to be a burden for state budget: economist

Lydian International Limited announced that, in connection with the ongoing blockades of road access to the Amulsar Gold Project, Lydian U.K. Corporation Limited and Lydian Canada Ventures Corporation, subsidiaries of the Company, have formally notified the Government of the Republic of Armenia of the existence of disputes with the Government of Armenia under the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Armenia for the Promotion and Protection of Investments, in force since July 11, 1996 (the “UK BIT”) and the Agreement between the Government of Canada and the Government of Armenia for the Promotion and Protection of Investments, in force since March 29, 1999 (the “Canada BIT”), respectively.

Under the UK BIT, Lydian UK may submit the dispute to international arbitration three months after such formal notification, and under the Canada BIT, Lydian Canada can do so after six months. In the meantime, the Government of Armenia has an opportunity to continue amicable discussions with Lydian with a view to the prompt settlement of the disputes.

Aysor.am has conducted interview with economist Haykaz Fanyan about the created situation.

- Mr Fanyan, do you consider launch of arbitration process in the created situation possible?

- In reality it is difficult to say whether such process will start or not. First it depends from the actions of the government on how it will react on the statement of the company. We know that additional expertise is set in the sidelines of case launched in the Investigative Committee. So, it is necessary to wait for the processes.

A case has been filed at the Investigative Committee for conducting additional expertise within the framework of which it has been decided to conduct additional expertise to evaluate the risks. The government, in essence, stated about allocation of means to the Investigative Committee for signing contract with an international organization.

In general, launching arbitration process definitely depends on the activity of the government. The government stated about its wish to sign a contract but with unknown reasons this process is delayed which, in its turn, has a negative impact on the final way out. It may be viewed as unnecessary delay by the government.

- Mr Farmanyan, what consequences may the arbitration process have on Armenia’s economy?

- Not launching the project already affects Armenia’s economy. The final verdict will be made in a few years, because such like process take few years. As a rule, an agreement is being reached between foreign investors and the government. In any case, certain arbitration arrangement is being reached.

It is difficult to mention the amount of the lawsuit or what counterarguments the government will present. If unfavorable decision is made for Armenia, the main burden will fall on the budget with all the stemming consequences. No one wants unfavorable decision for the state, but the latter must not want it too. In any case, it is too early to speak about the sum of the lawsuit but as I have already stated, not launching the project already has negative effect on Armenia’s economy.

It is known that as compared with the past year in January we registered decline in export tempo while launch of this project will allow to essentially restrict the decline and even register growth.