Rio Tinto has initiated a formal international arbitration process to resolve a tax dispute with the Mongolian Tax Authority (MTA) over the Oyu Tolgoi project.
In January 2018, Oyu Tolgoi received a tax assessment for approximately $US155 million ($234 million) from the MTA, regarding an audit on taxes imposed and paid by the project between 2013 and 2015.
Oyu Tolgoi paid $US4.8 million to settle unpaid taxes, fines and penalties for the accepted terms.
“We have worked diligently with the government and tax office representatives in Mongolia to find a mutually acceptable settlement and came to the conclusion that arbitration is the best way forward to resolve this issue,” Rio Tinto chief executive copper and diamonds Arnaud Soirat said.
The arbitration will be heard in London before a panel of three arbitrators, as per the dispute resolution provisions set out in the 2009 investment agreement (IA) and the 2015 underground mine development and financing plan with the Government of Mongolia.
Oyu Tolgoi was accused of evading tax and penalty payments in 2014, when the MTA claimed unpaid taxes, penalties and disallowed entitlements in an audit report sent to Rio Tinto’s subsidiary Turquoise Hill.
Turquoise Hill rejected these allegations and with Rio Tinto reviewed the detailed tax claim, warning that any breaches of the IA could lead to an international arbitration.
Under the United Nationals Commission on International Trade Law (UNCITRAL) arbitration rules, all parties agree that the arbitral award shall be final and binding on the parties and that they will carry out the award immediately.
Oyu Tolgoi is jointly owned by the Mongolian Government (34 per cent) and Turquoise Hill Resources (66 per cent). Rio Tinto owns 50.8 per cent of Turquoise Hill and manages the operation.