Canadian mining company Gold Reserve commences ICSID arbitration against Venezuela
By Fernando Cabrera Diaz
December 6, 2009
Canadian mining company Gold Reserve has commenced arbitration against Venezuela at the International Centre for Settlement of Investment Disputes (ICSID) over the alleged expropriation of its Brisas gold and copper mine in the Bolivar State of Venezuela. Less than a week after the company filed for arbitration on October 21, 2009 the Government of Venezuela assumed control of the Brisas property.
According to company press releases, on October 26 Venezuelan personnel arrived at the Brisas property with an order to take control of the alluvial concession, which composes unconsolidated or weathered material near the surface. On November 9, the company received notice from Venezuelan officials that its hardrock concession, lying below the alluvial concession, was being cancelled by an Administrative Act dated October 21, 2009.
In a press release dated October 21, the company states that it filed for arbitration because Venezuela had wrongfully expropriated its Brisas project through unreasonable delays by the Venezuelan Ministry of Environment in completing the permitting process, the Ministry’s rescission of a March 2007 permit for the commencement phase of the Brisas Project, and the announcement by President Chávez in January 2009 that the Government was taking over the project.
According to the company, these and other actions have violated its right to fair and equitable treatment, and its right against unlawful expropriation as protected by the 1996 Canada-Venezuela Bilateral Investment Treaty. The company says it has invested US$ 300 million in Venezuela but estimates the projected profitability of those investments at US$ 5 billion.
ITN contacted Gold Reserve president Doug Belanger, who stated that the amount of compensation the company was seeking was to be determined during the process of arbitration.
In May of this year, the Venezuelan Minister of Basic Industry and Mining (Mibam) refused the company’s request to extend the Brisas project, and at the same time declared extinct part of the company’s mining concession, according to reports from Business News Americas (BNA).
BNA spoke to a Mibam official who said at the time that «these sectors are going to be part of the new joint ventures contemplated under government policy.”
Under President Hugo Chavez, Venezuela has sought to nationalize most of the extractive sectors. The government’s policy has been to convert private petroleum and mining projects into joint ventures with private companies under which the Venezuelan state retains majority ownership.
As reported previously by ITN, Venezuela was successful in renegotiating these joint venture contracts with most oil companies operating in its territory. Exxon Mobil and ConocoPhillips were the only holdouts and both launched ICSID arbitrations against Venezuela that are still pending.
When asked if Gold Reserve had been contacted by Venezuela to form such a joint venture for the Brisas project, Mr. Belanger answered that Gold Reserve “does not comment publicly to confirm or deny corporate issues.”
Gold Reserve sent the Government of Venezuela a notice of arbitration in April 2009, beginning the 6-month negotiation period required under the Canada-Venezuela Bilateral Investment Treaty before arbitration could be initiated.
ITN contacted Glen Ireland, partner at international law firm White & Case, who represents Gold Reserve, but Mr. Ireland declined to comment on the case.
Gold Reserve Company press releases, October 21 – November 9, 2009, available on the company’s website at: http://www.goldreserveinc.com
“Ministerio rechaza extender concesión de Brisas a Gold Reserve,” May 26, 2009 (Business News Americas)
The Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments, available from UNCTAD’s BIT archive at: http://www.unctad.org/sections/dite/iia/docs/bits/canada_venezuela.pdf
“Venezuela signs contentious new contracts with foreign oil companies,” By Damon Vis-Dunbar, Investment Treaty News, 1 April 2006, available here: