New York (September 29, 2017, 5:11 PM EDT) -- A trio of Chinese companies asked a New York federal court on Thursday to revive their claim against Mongolia over the revocation of an iron ore mining license, arguing that an international tribunal wrongly interpreted an underlying treaty when it dismissed the arbitration.

The three companies — two of which are state-owned or connected to state-owned entities — told the court that the New York-seated Permanent Court of Arbitration tribunal erred when it dismissed their claim for lack of jurisdiction in June. The tribunal had concluded that it could not decide the question of whether Mongolia had expropriated their investment in a joint venture that held a license to mine the vast Tumurtei iron ore deposit.

In fact, the tribunal found, the relevant treaty between China and Mongolia required that the latter country's national courts had to first declare whether there had actually been an expropriation before an arbitration could be initiated, or the Mongolian government had to admit an expropriation had occurred. But the Chinese companies argued that the question of whether Mongolia expropriated their investment has to be resolved in arbitration and that any other result would be illogical.

"Among the central purposes of [bilateral investment treaties] is to afford to investors the certainty of access to an impartial tribunal other than the national courts of one of the contracting states," according to the petition. "The award deprives petitioners of one of the essential benefits to which they were entitled. For that reason, together with the texts of the relevant treaties, the clear majority of other tribunals have reached the contrary conclusion under similar BITs."

The companies, China Heilongjiang International Economic & Technical Cooperative Corp., Beijing Shougang Mining Investment Co. Ltd. and Qinhuangdaoshi Qinlong International Industrial Co. Ltd., told the court that every other tribunal to address this question under other BITs involving China has rejected the narrow interpretation adopted by the tribunal that dismissed their claim.

They argued Thursday that the court in this instance has the power to determine whether the dispute can be resolved through arbitration because the relevant treaty does not specifically empower the arbitrators to decide on arbitrability. Indeed, the treaty did not mention the question of arbitrability, according to the suit.

Attorneys for the plaintiffs did not immediately respond to a request for comment on Friday. Representatives for Mongolia could not immediately be reached for comment.

The three plaintiff companies had held a 70 percent interest in a Mongolian joint venture called Tumturei Ltd., which held a license to exploit certain iron ore deposits in Mongolia. Production began in 2006, at which time exports to China commenced.

But a new government came to power in Mongolia that same year. As the price of iron ore began to climb, the new Mongolian government began trying to find a way to take back this now much more valuable concession, according to the complaint.

Ultimately, the license was revoked after the Mongolian government concluded that the license properly belonged to a state-owned enterprise called the Darkhan Metallurgical Plant, the Chinese companies claim.

The Chinese companies initiated arbitration in 2010, and the tribunal issued its award on June 30, concluding that it could only have jurisdiction if Mongolia admitted that it had expropriated the investment. Only then could the tribunal have jurisdiction over the claim, and only to decide how much the Chinese companies were owed for the expropriation, according to Thursday's complaint.

That tribunal was led by former International Court of Justice President Peter Tomka along with the claimant's appointee, Shearman & Sterling LLP partner Yas Banifatemi, and Mongolia's appointee, Foley Hoag partner Mark Clodfelter.

The plaintiffs are represented by Michael A. Granne, S. Christopher Provenzano and J.J Gass of Miller & Wrubel PC.

Counsel information for Mongolia wasn't available on Friday, but the country was represented in the arbitration by Gungaa Bayasgalan, state secretary of the country's Ministry of Justice, and by Michael D. Nolan, Elitza Popova-Talty and Kamel Aitelaj of Milbank Tweed Hadley & McCloy LLP.

The case is Beijing Shougang Mining Investment Company, Ltd. et al v. Mongolia, case number 1:17-cv-07436 in the U.S. District Court for the Southern District of New York.

--Editing by Kelly Duncan.

Published Date:2017-09-30