Sergei Paushok, CJSC Golden East Company, CJSC Vostokneftegaz Company v Mongolia

Abstract

Paushok v Mongolia touches upon the delicate matter of investors challenging a country’s tax legislation. The case primarily concerns the introduction of a windfall profit tax (WPT) by the Mongolian Parliament, in times of skyrocketing gold prices, which levied a tax rate of 68% on any gold sales at prices exceeding USD 500 per ounce. The tax had a severe impact on the Mongolian gold mining industry and, in particular, on KOO Golden East-Mongolia (GEM), a company ultimately held by the Russian national Sergei Paushok. Its main competitor was KOO Boroo Gold, a gold mining company owned by Canadian interests. That company was not affected by the tax as it had entered into a stabilization agreement with the Mongolian government protecting it from tax increases as well as from the introduction of new taxes. GEM also applied for a sweeping stabilization agreement before the introduction of the WPT. However, negotiations...