The Russian company Nordgold, which wants to open the Montagne d’Or mine in French Guiana, is suing the French government in an international arbitration court. The company is seeking nearly $4 billion from France for blocking this environmentally destructive project.

Cayenne (French Guiana), connection

A new chapter is beginning in the massive Montagne d’Or case. Following the ongoing legal proceedings before the French administrative courts, France will now have to justify its refusal to allow this mining project to move forward before an international arbitration tribunal.

The information was revealed last week by the media outlet specializing in international arbitration IAReporter, and confirmed by documents in our possession. Two Russian investors—Severgroup and KN Holdings—are suing the French government, which they accuse of preventing them from operating the Montagne d’Or mine. Citing a 1989 Franco-Russian treaty, known as the «investment protection», they are demanding nearly 4 billion euros from France. This amount is said to be half the estimated value of the mine, set at 9.13 billion dollars. The deposit, located in western French Guiana, is estimated to contain 85 metric tons of gold.

A Russian oligarch pulling the strings

Severgroup and KN Holdings are the companies that own Nordgold, which in turn holds a 55% majority stake in Compagnie de la Montagne d’or (CMO), the company behind the mining project. The other shareholder is Orea Mining (formerly Columbus Gold); it acts as a junior company in the Montagne d’Or project, investing in the exploration and administrative permitting phases. According to a standard distinction in the mining sector, Nordgold is considered a major company, positioning itself once the deposit has been confirmed and capable of investing the hundreds of millions of euros needed to bring the site into production, thereby reaping the majority of the profits.

Owned by the family of Russian oligarch Alexei Mordashov, Nordgold—which currently operates gold mines in Russia, Kazakhstan, Burkina Faso, and Guinea—is one of the world’s twenty largest gold producers. The Russian company «took charge of operations» of the Montagne d’Or in 2016, «by committing to spending 30 million euros over three years» "Starting in 2017," according to the CMO website.

Mining at Montagne d’Or would result in the deforestation of more than 1,500 hectares of tropical rainforest in the immediate vicinity of two strict nature reserves, the excavation of a pit more than 2.5 kilometers long and approximately 300 meters deep, and the use of cyanide to extract the gold trapped in the bedrock.The town hall of Saint-Laurent-du-Maroni, the municipality where the Montagne d’Or site is located. © Hélène Ferrarini / Reporterre

In 2018, the project was the subject of a public debate following a referral to the National Commission for Public Debate (CNDP) by France Nature Environnement. The mining company had understated its costs in an attempt to fall below the minimum threshold for holding a public debate, set at 150 million euros. While the cost of the project had been estimated at 266 million euros, it had inexplicably dropped to 80 million!

Today, Nordgold is indeed suing the French government on the grounds of investments. The mining company maintains that several provisions of the 1989 Franco-Russian bilateral agreement have been violated, namely the guarantees regarding «the admission and promotion of investments, fair and equitable treatment, national treatment, and full and complete protection and security», according to a document from the Ministry of Foreign Affairs. Investors view the non-renewal of mining concessions as «expropriation measures».

However, the French administrative courts are ruling in favor of the mining company regarding its right to have two mining concessions renewed, including the one for Montagne d’Or. Last July, the Bordeaux Administrative Court of Appeals upheld the first-instance ruling of the French Guiana Administrative Court ordering the government to issue the mining concessions. The Ministry of the Economy has filed an appeal with the Council of State.

International arbitration, «a dangerous mechanism»

But Nordgold did not wait for these rulings to initiate legal proceedings. As early as September 2020, investors Severgroup and KN Holdings were seeking «at least 500 million U.S. dollars» (429 million euros), such as «harm» to the French government, due to «the non-renewal of mining permits». To no avail.

Russian investors therefore sought international arbitration, which was filed in June 2021. This special form of justice is administered by «referees» designated by the parties and is based on bilateral treaties. It allows private investors to challenge sovereign decisions made by states when they believe such decisions harm their investments.

It is «a dangerous mechanism» The Nicolas Hulot Foundation for Nature and Mankind and the Veblen Institute for Economic Reform have sounded the alarm, issuing a joint statement in response to revelations by the website IAReporter. These organizations «regret that this procedure is possible» and «call on the French government to withdraw from the approximately 100 investment protection treaties that allow for this type of attack on French public policies through an exceptional legal mechanism».