Crystallex International Corp. completed the easy part last week: It won an arbitration award against Venezuela worth nearly US$1.4 billion. Now comes the hard part: actually collecting that money.
Over the past couple of years, Canadian mining companies have won several international arbitration cases against governments in developing countries that expropriated their properties. A key lesson from these cases is that if governments refuse to recognize these awards, compelling them to do so is very difficult. The easier thing to do is settle for pennies on the dollar or reach a non-cash settlement.
In the case of Venezuela, the collection problems are compounded by the country’s massive economic crisis. Venezuela simply can’t afford to shell out US$1.4 billion to an insolvent Canadian firm that isn’t adding a penny of value to its economy.
So Toronto-based Crystallex may have no choice but to try to enforce the award. Experts who have been through this process said the company could be in for a very rough ride.
“When you start the case, you’re not looking at the collection end,” said Grant Edey, chief executive of Khan Resources Inc., which recently settled an arbitration fight with Mongolia. “But the collection end is very difficult, especially with third-world countries.”
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