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Thai junta's battle with Australian miner puts law under spotlight

Kingsgate brings mine closure dispute to international arbitration

Workers at the Chatree gold mine in Thailand's Phichit Province in 2011. Kingsgate Consolidated was forced to halt operations at the mine, which it had operated under its Akara Resources subsidiary, on Jan. 1, 2017.   © Reuters

BANGKOK -- An Australian gold miner’s arbitration case against Thailand’s ruling military junta has put the spotlight on a constitutional law that gives the government sweeping power to intervene on any matter it sees fit.

Kingsgate Consolidated has launched the first international arbitration case against the military government, which came to power in 2014, over the closure of one of its mines in northern Thailand. The company is seeking “hundreds of millions of dollars” in compensation.

Kingsgate filed for arbitration on May 31 under the Thailand-Australia Free Trade Agreement, according to Wisanu Tabtieng, director-general of Thailand’s Department of Primary Industry and Mines. The company last year said it would “commence arbitration proceedings.”

Sources said that both Kingsgate and the Thai government had been in talks for months over the closure of the mine but could not reach a resolution, prompting the move to arbitration.

The dispute stems from an order in December 2016 by the military government -- headed by Prime Minister Prayuth Chan-ocha -- to close the Chatree mine, located in the northern province of Phichit, citing environmental and health concerns. At that time, Prayuth imposed Section 44 of the constitution that allows him to issue any order without legal procedures.

Section 44 allows the prime minister -- as the head of the National Council for Peace and Order, as the junta is officially known -- to order, suppress, retain or perform whatever measures it deems necessary for actions that could subvert peace and order, national security, the monarchy and the nation’s economy.

The military government has used Section 44 -- dubbed the "dictator's law" for the sweeping absolute powers it gives the prime minister -- to remove the head of the Rubber Authority of Thailand, Titus Suksaard, in April. Section 44 has also been used to replace the governor and entire board of the State Railway of Thailand in February 2017.

Kingsgate had operated the Chatree mine since 2001 under Akara Resources, a Thai subsidiary wholly owned by Kingsgate. It had a valid mining license through 2028. The order issued to Akara was unusual, as it dealt with a private company.

“We are confident that we have strong information and data to defend our stance on why we needed to order Akara to close its mining operation there in Phichit,” Wisanu told reporters on June 1. Two days later, on June 3, the Thai military government said in a press release that it is ready to defend itself over its order to cease mining operations at Chatree, saying the gold mine had adverse environmental effects that harmed local villagers.

“Section 44 is not a typical civilian law, which could be the Thai government’s weakest point and prevent the country from winning this case,” Kannika Kittiwetchakun, a spokeswoman at FTA Watch, was quoted as saying on the Prachathai website earlier this year. “However, that is just one side of the coin,” she said.

“Section 44 can be used immediately to protect the villagers [affected by the Chatree mine], but it might not look good in the eyes of foreign investors. In contrast, other standard civilian laws sometimes are designed to promote investment and care a great deal about foreign investors instead of caring more for Thai citizens,” she said. “It implies that sometimes even the elected government cannot protect Thai people immediately, although it is an acceptable practice.”

Thai authorities have not disclosed any details about the Kingsgate arbitration case -- including the timeframe for the arbitration, the venue, or where the first hearing will take place -- saying that information cannot be leaked or published.

Kingsgate, which was forced to halt operations at the mine on Jan. 1, 2017, has defended itself, saying some toxic chemical and dangerous metals found in the area could have come from pesticides used by farmers on their nearby lands.

Health and environmental issues have been at the heart of the dispute. The Bangkok Post has reported that in 2014 researchers from Rangsit University found that 51.6% of more than 1,500 locals had traces of metal in their blood, but the team had not concluded that mining was the cause.

Meanwhile, the government had ordered its own study, which earlier this year found “irregular electrical resistance was involved with residue leakage” from one of 40 waste residue ponds at the mine, according to the Bangkok Post. Akara has disputed those findings, saying that “cyanide was not detected in the monitoring ponds inside the gold mine,” but that the cyanide level in natural pounds outside the mine area was “3.5 times higher than the sampled pond,” according to the Bangkok Post.

The Bangkok Post reported that the government said it would “further monitor any changes in the water quality.”

The company also said it is ready to fight against the mine’s closure.

“The costs of closing the Chatree mine are in the order of many hundreds of millions of dollars, and we are entitled to damages as well,” Ross Smyth-Kirk, executive chairman of Kingsgate, said in an email to the Nikkei Asian Review on June 4.

 

After entering arbitration, the two sides are not permitted to release any data on operations, damages and potential compensation. However, Akara previously claimed that it had to lay off 1,000 employees since mining operations were halted, leaving 50 employees to work on machines and equipment maintenance.

Akara was quoted in the Bangkok Post in January 2017 as saying that based on the company's exploratory findings, an estimated 40 million tons of gold ore are underground at Chatree. Akara has a mining capacity of 6.2 million tons a year, and it said that ceasing operations there would result in losses of 39 billion baht ($1.22 billion) for the company, according to the Bangkok Post article.

Separately, Kingsgate is involved in legal action in Australia for its claim against insurers under its political risk insurance policy. That case is pending.

Kingsgate and the Thai government remain open for a possible settlement over their dispute.

“We have met with the Thai government on two previous occasions,” Smyth-Kirk told Nikkei. “We have told them we are prepared to meet at any time, so it is up to the Thai government. As we have said before, Kingsgate remains open to a negotiated settlement.”

Wisanu, the official from Thailand’s Department of Primary Industries and Mines, told Nikkei: “The arbitration would take about two years for the tribunal to reach a verdict. Meanwhile, we would be glad if Kingsgate wants to negotiate with us to seek a better solution.”

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