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An alarming precedent is being created when the state can gain control over any, even the largest company in the country

May 8, 2021

On May 6, 2021, the Kyrgyz Parliament adopted three readings of a bill that allows, under certain circumstances, to give the government full control over the activities of a certain entity.

The draft Law of the Kyrgyz Republic "On Amendments to Certain Legislative Acts in the Sphere of Corporate Governance (the Law "On Joint Stock Companies", the Criminal Code)" provides for temporary external management of financial, organizational, administrative, personnel and other decisions of the company.

The amendments stipulated by the bill apply to joint stock companies exercising their right to use subsoil on the basis of a concession agreement. Under such conditions, only one enterprise, Kumtor Gold Company, operates in Kyrgyzstan.

After reading the text of the bill from the media, we were shocked and perceived it as an illegal arbitrary decision with far-reaching negative consequences,” said the head of the International Business Council Askar Sydykov. “This will lead to possible interruptions in the operation of the mine, violations of technical safety, corruption in personnel policy, financial flows, as well as to multibillion-dollar arbitration proceedings because the agreement of 2009 and other norms of the law are being violated,” he added.

The management of the most complex high-mountainous mine, strategic production for the country, in no case can be trusted by an external state manager, no matter how high-quality he may be. Previous experience and international practice show that this can lead to the withdrawal of assets from the company, disruption of business continuity and other long-term dangerous consequences. The bill refers to the suspension of the right to use subsoil. However, in the case of a shutdown of the mine, there is a possibility of movement of rocks, landslides, flooding and other technological consequences.

The law should not be directed at certain persons, and it is unacceptable to apply it to one specific legal entity. Business saw a lot of procedural violations in the adoption of the bill.

A very alarming precedent is being created when the state can gain control over any, even the largest company in the country. This sends a signal to investors that no company can consider itself protected by law and agreements with the state.

IBC expressed regret that the Parliament passed three readings of such a controversial bill at once without discussion, within a few hours, as some MPs said.

We really hope that the head of state will listen to the opinion of the business community and will not sign this law,” Askar Sydykov expressed the business’s opinion.

It is very important for the economy and the country as a whole to ensure adherence to all norms of the law, guarantee the protection of business and investments, the rule of law and provide maximum assistance to economic entities and the private sector to overcome the economic crisis, create jobs and, and socio-economic stability in the country.

According to the recent presidential decree, it is planned to launch new mining projects in the country with a 100 percent state participation. Most likely, not a single conscientious investor will agree to such terms,” said the IBC head.

Therefore, it is necessary to pay attention not only to the situation with Kumtor, but in general to the further development of the mining industry, because it provides more than 20 percent of the annual state budget and has great potential for further growth.