NEW YORK -- A Federal Court in Washington, D.C. has upheld and registered a $1.4 billion award against Venezuela in favor of Canadian goldminer Crystallex for the expropriation of Crystallex's Venezuelan gold mining operations.
"Because none of Venezuela’s arguments suffice to vacate or modify the award under the New York Convention, the Court grants Crystallex’s petition to confirm the award and denies Venezuela’s motion to vacate," concluded U.S. Federal District Court Judge Rudolph Contreras, dismissing Venezuela's objections.
Hughes Hubbard & Reed led the successful legal team on behalf of Crystallex for the registration and verification of the award. Foley Hoag led Venezuela's defense team. Crystallex has also had the award upheld and registered in Canada.
"Crystallex is now free to enforce the $1.4 billion judgment against Venezuela's assets in the United States," says international lawyer Russ Dallen, who follows the situation closely as head of Caracas Capital and the $5 billion Venezuela Opportunity Fund. "Crystallex will now likely move to seize Venezuela's entities in the U.S., including PDVSA's Delaware company PDV Holding and its Citgo subsidiaries."
Crystallex is already suing Venezuela's PDVSA, PDV Holding and Citgo in U.S. Federal District Court in Delaware for the "fraudulent transfer" of billions of dollars of Citgo assets out of the U.S. Russia's state owned oil giant Rosneft has now also been named a defendant in that suit after an investigation by the Latin American Herald Tribune
uncovered that Venezuela had mortgaged 49.9% of Citgo to Rosneft in exchange for a $1.5 billion loan. That innovative lawsuit, led by Gibson, Dunn and Crutcher, is ongoing, and parts of it are already in the Federal Court of Appeals. The World Bank ICSID Judgment
In April of 2014, the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) had awarded the mining company Crystallex $1.202 Billion plus interest due to Venezuela’s unfair and inequitable treatment and unlawful expropriation of Crystallex’s investment in the Las Cristinas mining project in Venezuela.
Crystallex had filed its arbitration before ICSID on February 16, 2011, arguing that Venezuela had violated a Treaty between Canada and Venezuela for the "Promotion and Protection of Investments."
The ICSID Award upheld Crystallex’s claims that Venezuela breached Articles II(2) and VII(1) of the Treaty by failing to accord Crystallex’s investments in Venezuela fair and equitable treatment and by unlawfully expropriating those investments.
As a result of these breaches, ICSID ordered Venezuela to pay damages then amounting to $1.386 billion, based on a value for Crystallex’s investment in the Las Cristinas mine of US$1.202 billion on 13 April 2008 – the date when an environmental permit was denied by Venezuela – together with pre- and post-award interest from that date.
Among other things, the Tribunal criticized Venezuela’s Ministry of the Environment for its “arbitrary” and “non-transparent and inconsistent conduct” in connection with its denial of an environmental permit.
The Tribunal stated that it “cannot but conclude that the Permit denial letter and the Romero Report on which the first appears to be based are so fundamentally deficient that, to the eyes of a reasonable third person, they ‘surprise a sense of juridical propriety’….”
Venezuela, the Tribunal concluded, “frustrated Crystallex’s legitimate expectations …, engaged in arbitrary conduct in denying the Permit and rescinding the [Contract it had signed with Crystallex], and committed several acts lacking transparency and consistency.”
The Tribunal therefore found that Venezuela’s “overall conduct vis-à-vis Crystallex, thus violated the [Treaty]standard … and caused all of the investments made by Crystallex to become worthless.”
“On behalf of Crystallex’s board of directors, management, employees and all of its stakeholders, we are pleased that the Tribunal has recognized Venezuela’s unlawful expropriation of the Company’s investment in the Las Cristinas mining project," Crystallex CEO Robert Fung said at the time of the April 2016 judgment. "The company looks forward to collecting on the Award on behalf of all of its stakeholders. We thank our stakeholders for their deep understanding and support throughout this difficult and prolonged process, and our legal team, led by Freshfields’ partner Nigel Blackaby.”
At ICSID, Crystallex was represented by Freshfields Bruckhaus Deringer in Washington, D.C., Travieso Evans Arria Rengel & Paz and Wallis Guerrero in Caracas. Venezuela was represented by Foley Hoag.
Crystallex v Venezuela - USDC DC - Opinion Registering $1.4 Million Judgment against Venezuela - 25 March 2... by Latin American Herald Tribune on Scribd
Crystallex v Venezuela - ICSID - Award for Crystallex ($1.4 billion) - 4 April 2016 by Latin American Herald Tribune on Scribd
Crystallex v PDVSA - USDC Del - Amended Originating Complaint Including Rosneft & GLAS - 4 Jan 2017 by Latin American Herald Tribune on Scribd