Canadian mining information mill putting together an excellent winning streak in international arbitration cases against foreign governments.
But their record of receiving full payment for those awards is a lot more mixed.
Late a week ago, a tiny firm called Gold Reserve Inc. shocked many onlookers by reaching a potentially favourable settlement using the Venezuelan government, so it continues to be battling in the court in excess of six years. However, Khan Resources Inc. and Stans Energy Corp. have won high-profile decisions against Mongolia and Kyrgyzstan and have yet to see any benefit from their efforts.
Gold Reserve spent much of the 1990s and early 2000s developing the Brisas project in Venezuela, while another Canadian firm called Crystallex International Corp. worked on an adjoining gold deposit called Las Cristinas. Each company invested hundreds of millions of dollars in Venezuela before Hugo Chavez’s government expropriated both of them in 2008.
Both firms filed international arbitration suits. As well as in September 2014, Gold Reserve won an award more vital than US$740 million. (The Crystallex case is still ongoing.)
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That is really a major bill for Venezuela, in which the economy is reeling because of weak oil prices and runaway inflation. However, if the government refused to pay for, Gold Reserve could potentially seize sovereign assets located outside the country. A refusal could also possess a negative effect on Venezuela’s credit reputation.
Venezuela decided to settle. The federal government said it formed a joint venture with Gold Reserve to build up both Brisas and Las Cristinas projects. Gold Reserve said Venezuela also decided to pay an arbitration award, although it didn’t specify the amount.
“We’re not commenting on the dollars,” leader Doug Belanger said, though he added that Venezuela “recognizes the award.”
At this time, the two sides have only signed a memorandum of understanding. If the settlement agreement falls through, Belanger said Gold Reserve would continue to try to claim its full arbitration award.
Meanwhile, Toronto-based Khan has failed in the efforts to get Mongolia to pay up or settle. The company won a US$100 million award early last year after the state seized its Dornod uranium project.
“It’s been a year now,” Khan chief executive Grant Edey said. “We’ve asked them to pay and they’re reticent. They do not respect Canadian companies or the rule of law.”
Mongolian officials come in Toronto next week, trying to solicit purchase of the country’s mining sector at the Prospectors and Developers Association of Canada (PDAC) conference. It will be a tough sell so long as the state will not shell out Khan.
Edey is going to be ending up in the Mongolians in front of the conference and hopes the two sides can finally reach a settlement. Until then, Mongolia is trying to annul the arbitration award with a legal challenge in France.
In the case of Stans Energy, the company won a US$118 million award against Kyrgyzstan in 2014 that got annulled by Moscow courts the following year. Regardless, the company is trying to get the award recognized by the Ontario Court of Justice.
Legal experts said that when countries have no choice but to spend arbitration awards, they usually do accept pay or settle. Argentina, for example, recently settled arbitration cases and ended a long-running dispute with creditors.
On the other hand, Russia indicates no willingness to pay for a US$50 billion award to the former shareholders of Moscow-based Yukos Oil Company, a company that in the past decade was allegedly bankrupted by the state and then had its assets nationalized.
“Most cases wind up seeing some form of settlement at the end of your day, since these awards are enforceable and also have some kind of bite,” said Robert Wisner, co-head of the international arbitration practice at McMillan LLP.
pkoven@nationalpost.com
Twitter.com/peterkoven
