Crystallex Files for Arbitration Following Contract Termination

Crystallex International announced in mid-February 2011 it filed a request for arbitration before the Additional Facility of the World Bank’s International Centre for Settlement of Investment Disputes following receipt earlier in February of a letter from Corporación Venezolana de Guayana (CVG) stating that Crystallex’s mine operating contract (MOC) for the Las Cristinas project in Bolivar state, Venezuela, had been “unilaterally terminated” by the CVG. As the basis for the termination, CVG cited Crystallex’s lack of activity to progress the Las Cristinas project for more than one year and “…for reasons of opportunity and convenience.”

In a statement following receipt of the CVG letter, Crystallex said it had fully complied with its obligations under the MOC and had advanced Las Cristinas to a shovel-ready state while awaiting issuance of a permit from Venezuela’s Ministry of Environment and Natural Resources (MinAmb). In June 2007, CVG had confirmed that approval of the Crystallex Las Cristinas environmental impact study, posting of the construction guarantee bond, and payment of the environmental disturbance taxes represented the final and conclusive step in the procedure for the issuance of the permit required to construct the Las Cristinas project.

“Notwithstanding Crystallex’s fulfillment of the conditions to receive the permit, MinAmb denied the request for the permit in April 2008. Despite the company’s compliance with the MOC requirements and the CVG’s confirmation in August 2010 that the MOC was in full force and effect, to date the permit to allow project construction to commence has not been issued,” the Crystallex statement said.

Crystallex filed its mid-February 2011 request for arbitration pursuant to an agreement between the governments of Canada and Venezuela for the “Promotion and Protection of Investments.” The company’s claim is for breach of the treaty’s protections against expropriation, unfair and inequitable treatment, and discrimination. Crystallex is seeking restitution by Venezuela of its investments, including the MOC, issuance of the permit, and compensation for interim losses suffered, or, alternatively, full compensation for the value of its investment in an amount in excess of $3.8 billion.

As featured in Womp 2011 Vol 02 - www.womp-int.com