Colombia and Panama hit with arbitration claims

Published by MAC on 2016-04-14
Source: Law360, IAReporter, others

Organizations condemn Eco Oro Minerals’ warning that it could sue Colombia

NY Mining Co. Hits Panama With $268M Arbitration Claim

Vidya Kauri

Law360 - http://www.law360.com/articles/777982/ny-mining-co-hits-panama-with-268m-arbitration-claim

30 March 2016

New York -- A New York-based mining company dragged the Republic of Panama into arbitration on Tuesday, seeking to recoup at least $268 million it claims to have lost after the country allegedly took away its mining rights, in violation of a bilateral investment treaty between the U.S. and Panama.

Dominion Minerals Corp.’s arbitration request, filed in the International Center for Settlement of Investment Disputes, claims that a newly elected Panamanian government began efforts in 2009 to claw back exclusive mineral exploration and extraction rights that Dominion held through its subsidiary in Cerro Chorcha, near the Costa Rican border, with the goal of handing over those rights to other investors.

Although that government is no longer in power, after having been dogged by reports of suspected corruption and bribery, the current government led by President Juan Carlos Varela since July 2014 has refused to acknowledge or compensate for the allegedly inequitable expropriation of Dominion’s concession rights and Panama’s subsequent “unjust enrichment,” Dominion said.

“The Varela government went so far as to refer to the mining industry as one of the key sectors of its strategic plan for the Panamanian economy. As such, it is likely that the Panamanian government will seek to capitalize on the major commercial discovery which [Dominion] made on Cerro Chorcha at its own great cost and expense,” Dominion said.

Exploration concession rights to the Cerro Chorcha mine were initially granted for a four-year term in February 2006 to a company called Cuprum Resources Corp., according to the arbitration request. One year later, Dominion entered into an exploration and development agreement with Cuprum’s sole shareholder, Bellhaven Copper & Gold Inc., under which it acquired a 65 percent majority equity stake in Cuprum and agreed to fund drilling and other mining activities, it said.

After commercial quantities of high-grade deposits of copper, gold and silver were found on the property, Dominion bought out Bellhaven’s 100 percent equity stake in Cuprum in April 2009 and became its sole shareholder, it said.

A few months later, President Ricardo Martinelli was sworn into office and individuals acting on his behalf began to pressure Dominion into giving up its stake in Cerro Chorcha, according to the arbitration request.

During acquisition discussions in New York in August 2009, Richard Fifer Carles, a prominent figure in Panama’s mining industry, verbally offered a deal that would have allowed Dominion to retain a 70 percent interest in Cuprum, but later sent a written term sheet that extended Dominion only a 30 percent minority stake in Cuprum, Dominion said. Carles allegedly reversed the deal after discussions with Martinelli and threatened Dominion with the entire loss of its mining rights if it did not accept the deal, Dominion said.

Dominion said that it turned down the deal and Cuprum meanwhile began efforts to extend its four-year concession rights by another two years. However, in April 2010, Panama issued a resolution declaring Cerro Chorcha as a “mineral reserve area,” effectively rejecting Cuprum’s application for an extension.

"This language was significant, as [the government] knew that the contract gave Cuprum the right to an exclusive extraction concession independently of its exploration rights, and that [Dominion] was in a position to bring the project into commercial production. The mineral reserve resolution was thus tantamount to an expropriation of the concession,” Dominion said.

Dominion attorney Michael Stepek of Akin Gump Strauss Hauer & Feld LLP said in a statement that discussions with Panama since 2010 to try to resolve the dispute have not been fruitful.

“Our client refuses to stand idly by and allow such abuses of state power, and the accompanying unjust enrichment, to go uncontested,” Stepek said.

Dominion said that it is still quantifying its losses from Panama’s alleged actions, but estimates a damage amount of at least $268.3 million.

Representatives for Panama could not immediately be reached for comment on Wednesday.

Dominion is represented by Michael J. Stepek and Matthew C. Bate of Akin Gump Strauss Hauer & Feld LLP.

Counsel information for Panama was not immediately available on Wednesday.

The case is Dominion Minerals Corp. v. the Republic of Panama, case number not immediately available, in the International Centre for Settlement of Investment Disputes.

--Editing by Stephen Berg.

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Glencore picks Freshfields as mining giant sues Colombia over coal deal

Tom Moore

http://www.legalbusiness.co.uk/index.php/lb-blog-view/5739-glencore-picks-freshfields-as-mining-giant-sues-colombia-over-coal-deal

21 March 2016

Mining and commodities giant Glencore has instructed Magic Circle firm Freshfields Bruckhaus Deringer to sue Colombia over claims the government sought to revoke parts of a coal mining license.

Glencore, which in March reported a 32% drop in annual profits after being hit by weak commodity prices, has filed an arbitration claim at the International Centre for Settlement of Investment Disputes (ICSID) in Washington DC over claims the Colombian government has sought to revoke parts of an amended concession agreement signed with government in 2010 to expand the mine.

The damages could run into billions of dollars, with a 1,637-page prospectus put out by Glencore as part of its $11bn IPO on the London Stock Exchange in 2011 stating it had spent $2.6bn on expanding coal production in Colombia.

The plan was to double production at its Calenturitas and La Jagua mines to 20.7 million metric tonnes per annum by 2015, with $1.5bn spent on mining concessions, mining equipment, transport, port and other infrastructure up until the end of 2010.

Two years after the amendment to the concession, then Colombian mines and energy minister Amylkar Acosta said Glencore must pay higher royalties after purchasing different companies operating in Colombia and reducing costs through integration.

A team from Freshfields, led by Washington-based Nigel Blackaby, is representing Glencore in a claim brought under the 2006 Switzerland-Colombia bilateral investment treaty. Blackaby is global co-head of Freshfields international arbitration group and its Latin America group.

Dechert has been instructed to defend Colombia, with Paris-based Eduardo Silva Romero leading a team that includes Washington-based international counsel Alvaro Galindo and Juan Felipe Merizalde Urdaneta.

Glencore's activites in Colombia have been dogged by scandal, with at least 10 people murdered when paramilitaries seized a patch of land called El Prado next to Glencore's Calenturitas coal mining concession in 2002, while communities have been rehoused over environmental damage and the firm has faced large-scale strikes by workers over low salaries.

In the past the metals firm has used Magic Circle firms Linklaters and Clifford Chance to implement plans to cut $10.2bn from the business' $30bn debt pile, in Glencore's biggest mandate since its $66bn acquisition of Xstrata in 2013. The legal team chosen by Glencore was the same team from Linklaters and Clifford Chance that executed the drawn-out Xstrata deal.

In disputes Glencore used Clyde & Co last year when it lost a high court case against Romanian oil company OMV Petrom. It was ordered to pay out just over $40m for fraudulently shipping oil of a lower than supposed quality to Romania in the 1990s.

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Colombia faces two more investment disputes, leading to a total of at least four that have come to light

IAReporter

https://www.iareporter.com/articles/colombia-faces-two-more-investment-disputes-leading-to-a-total-of-at-least-four-that-have-come-to-light/

17 March 2016

Two further investment disputes involving the Republic of Colombia have come to light in recent days, following on the heels of our earlier reporting about disputes centered on the Colombian mining sector.

Today, another mining dispute surfaced following the registration by the International Centre for Settlement of Investment Disputes (ICSID) of a claim by the Swiss mining giant, Glencore. The claimants Glencore International and its wholly-owned subsidiary, A.G. C.I. Prodeco S.A. invoke the protections of the Switzerland-Colombia bilateral investment treaty.

The dispute arises out of a now-controversial 2010 amendment that had been agreed between Glencore and Colombian mining authorities in relation to a contract governing one of Colombia’s largest coal mines, Calenturitas. The amendment paved the way for an expansion of activity at the mine, but also introduced royalty and financial calculations that have since sowed controversy, with critics alleging that the Colombian treasury has been short-changed.

Colombia’s Comptroller-General has more recently challenged the validity of the 2010 amendment, and levied an assessment for some $18 million US in additional royalties alleged to be properly owing by Glencore for the 2010 year. (It is unclear whether similar reassessments for more recent years may be in the offing).

Separately, proceedings have also been initiated by Colombia’s mining agency in Colombian courts seeking to annul the 2010 amendment. Unconfirmed media reports also suggest that officials allege irregularities on the part of certain former government officials who had shepherded through the 2010 amendments.

The mine at issue has been the subject of broader scrutiny from local non-governmental groups, leading to international headlines last year.

The claimants are represented by the law firm Freshfields Bruckhaus Deringer.

Fourth dispute comes to light, with Mexican investor filing Notice of Intent.

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Two new treaty-based disputes center on friction between Colombian mining and national parks – and highlight differing transparency rules in Canadian and U.S. FTAs

Luke Eric Peterson and Zoe Williams

http://www.iareporter.com/articles/analysis-two-new-treaty-based-disputes-center-on-friction-between-colombian-mining-and-national-parks-and-highlight-differing-transparency-rules-in-canadian-and-u-s-ftas/

9 March 2016

Following a request to the Republic of Colombia for disclosure of any disputes notified under the United States-Colombia Free Trade Agreement (FTA), Colombia’s Ministry of Trade has released a recently-filed notice of arbitration under that agreement.

The notice dated February 19, 2016 was lodged by three parties – Cosigo Resources (Canada), Cosigo Resources Sucursal Colombia (Colombia) and Tobie Mining and Energy Inc. (U.S.A.) – all professing to have interests in a gold mining concession.

Also as this article was going to press, a Canadian mining company, Eco Oro Minerals Corp, announced that it had lodged a Notice of Intent to arbitrate under the Canada- Colombia free trade agreement (FTA).

Eco Oro says notice given, but neither side releases it – and Canada-Colombia FTA seems to leave scope for non-publication

In an announcement on March 7, 2016, the Canadian junior mining company Eco Oro says that it has been hampered in exploring and exploiting a wholly-owned gold mining venture, the Angostura Project, due to the government’s “unreasonable delay in clarifying the limits of” a national park, the Santurbán Páramo, and whether that park overlaps with the Angostura Project.

The company also complains of the government’s “persistent failure to provide clarity as to Eco Oro’s right to continue developing its mining project in light of further undefined requirements and later as a consequence of the Constitutional Court’s decision of February 8, 2016, which has broadened the prohibition of mining activities in páramo areas.”

Colombia’s Ministry of Commerce has told IAReporter that they are not releasing, for the moment, the Notice of Intent in deference to the investor’s professed desire to seek amicable resolution of the dispute. Although the Canada-Colombia FTA brings some transparency to arbitrations under that agreement, the wording of the provision arguably leaves some scope for governments to decline to release preliminary filings, such as Notice of Intent.

Article 830 of the treaty provides for publication of all arbitral awards, but does not directly address Notice of Intent or Notices of Arbitration. Instead, Article 830 provides that “All other documents submitted to, or issued by, the Tribunal shall be publicly available, unless the disputing parties otherwise agree, subject to the deletion of confidential information.” (It’s not clear whether a Notice of Intent is a document submitted to, or issued by, a tribunal; even if it were, investors and governments appear to each enjoy a veto right over publication of such documents.)

Unrelated mining arbitration now pending under U.S. Colombia treaty

Apart from the Eco Oro dispute, Colombia also faces an active arbitration under the U.S.-Colombia FTA, after a trio of claimants filed a request for arbitration on February 19, 2016. That request follows an earlier filing of a Notice of Intent under the FTA.

Notably, the U.S.-Colombia FTA provides for broader transparency than the Canada-Colombia FTA, with certain categories of materials – including Notices of Intent and Notices of Arbitration – included within the scope of Article 10.21. That treaty articles obliges the respondent-state to “promptly transmit (such documents) to the non-disputing Parties and make them available to the public”

Colombia has accordingly released the Notices filed by the three claimants – Cosigo Resources (Canada), Cosigo Resources Sucursal Colombia (Colombia) and Tobie Mining and Energy Inc. (U.S.A.) – and we discuss the dispute below.

Claimants cite harm to gold mining investment

The three claimants all profess to have interests in a gold mining concession in the Taraira region near Colombia’s border with Brazil. The investors claim that Tobie, the US investor, “staked out” those interests in 2007, subsequently transferred a majority interest to the Canadian claimant Cosigo, only to take back most of that shareholding in 2015 from its Canadian co-claimant.

The claimants note that the prospect of extractive activity in the area sparked conflict among local indigenous groups, with long-standing associations coming out against mining. However, one group, the Association of Indigenous Communities of Tairara and Vaupés (ACITAVA) was more favourably disposed toward the project, and the notice suggest that they were granted a 20% ownership share of the concession. (An earlier Notice of Intent (click to download) lodged in relation to this investment had included that Colombian NGO as a prospective claimant, however ACITAVA is no longer cited as a claimant in the Notice of Arbitration).

Resolution creates national park encompassing claimant’s mining concession

The claimants say that the Colombian co-claimant initiated technical approval of their venture, and this was granted in December of 2008. The claimants say that final legal approval of the project was granted by the National Mining Agency in April of 2009. However, the claimants allege that an unexplained five month delay ensured that they were unable sign the mining concession until October 29 2009. In their Notice the claimants contend that, on the same day, a resolution was published which created the Yaigoji Apaporis national park, encompassing the area of the mining concession.

The claimants allege that the unexplained delay was thus a deliberate attempt on the part of Colombian authorities to slow down the approvals process until the park could be established, thus casting a shadow over the legality of the now-signed mining concession. The notice further claims that the consultation process for the approval of the park was conducted fraudulently by authorities who, for example, falsified the appearance of majority consent for the park, despite not carrying out the required consultations with all affected communities.

Claimants or their allies domestic legal challenges to the national park; constitutional court has ordered all mining activity to cease in park

ACITAVA filed a number of legal challenges to the park, including a nullification suit against the Network of National Natural Parks, and an accion de tutela (a legal mechanism for challenging alleged violations of constitutional rights) alleging that authorities had improperly conducted the consultation for the national park. For its part, the National Mining Agency filed a suit seeking to nullify the mining concession, despite, the claimants contend, having issued the approval of the licence before the park was created. While none of these domestic cases had been resolved at the time of filing, the Constitutional Court has subsequently ruled to suspend all mining activity in the park.

In their FTA claim, the claimants portray themselves as victims of a fraud, and note that they have received no compensation for the loss of their concession, as allegedly required under both domestic law and Article 10.7 of the US-Colombia Trade Promotion Agreement. Therefore, the claimants seek either the return of the concession or the fair market value of the project, which the claimants place at $16.5 billion. (They do not clarify how they have reached this sum.)

Notice is anomalous in some respects

The notice does not explain how Cosigo, a Canadian company, might claim under the U.S.-Colombia FTA. However, the notice does allude to a possible coming claim against Colombia under the Canada-Colombia FTA.

Indeed, the ownership interests of the U.S. and Canadian claimants is left vague in the Notice of Arbitration. Whereas the earlier Notice of Intent had given some description of the relative shareholdings of each claimant over time, the Notice of Arbitration omits such detail.

Further, while the Notice is couched as a request under the UNCITRAL rules, the claimants also express a desire that the American Arbitration Association serve as the “arbitrating authority”. The notice does not clarify whether this is a reference to a mere administrative role, or a proposal that the AAA rules be used for the case. (The U.S.-Colombia FTA does allow parties to agree to use rules other than those of ICSID or UNCITRAL.)

The claimants have nominated a Texas-based attorney, Brian Coleman, as arbitrator. Mr. Coleman does not appear to have served as investment treaty arbitrator previously. His website indicates that he has worked as a trial attorney, and domestic arbitrator and mediator. The claimants are represented by the Law Office of Kevin W. Boyd. This is their first known appearance in an investment treaty arbitration.

Colombia has not yet announced who it will hire as legal counsel.

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Organizations condemn Eco Oro Minerals’ warning that it could sue Colombia over water protection measures

Eco Oro Minerals joins the growing crowd of Canadian mining companies using international arbitration - or the threat of a suit - to bully countries into protecting their investments, rather than water or human health.

Statement from Interamerican Association for Environmental Defense (AIDA) - Committee in Defence of the Water and Páramo of Santurbán - Center for International Environmental Law (CIEL) - MiningWatch Canada - Centre for the Investigation of Multinational Corporations (SOMO)

14 March 2016

The Canadian company’s Angostura mining project in the high-altitude wetlands, or páramo, of Santurbán, has announced that it could file an international arbitration suit against Colombia over measures to protect the páramo, which are important sources of water in the country.

Washington/Ottawa/Bogotá/Bucaramanga/Amsterdam - Civil society organizations condemn Eco Oro Minerals’ announcement that it will initiate international arbitration against the Colombian state. Eco Oro has stated its intention to sue Colombia under the investment chapter of the Canada Colombia Free Trade Agreement over measures that the Andean state has taken to protect the Santurbán páramo and páramos around the country from harmful activities such as large-scale mining.

Eco Oro Minerals’ Angostura proposed gold mine in Santurbán has financial backing from the World Bank’s International Finance Corporation. The company argues that it will lose money because of the demarcation of the páramo and the recent decision from the Constitutional Court of Colombia reaffirming the prohibition against mining in all Colombian páramos. The company stated in a news release that it could bring the dispute to international arbitration and seek “monetary compensation for the damages suffered.”

“Since the Angostura project got underway, it has been clear that páramos are constitutionally and legally protected and that this project could affect Santurbán, such that it might not be authorized. States should not be sanctioned for protecting their water sources, given that they are doing so in accordance with national and international obligations,” remarked Carlos Lozano Acosta from the Interamerican Association for Environmental Defense (AIDA). The páramos are the source of 70% of the fresh water that is consumed in Colombia and are essential for mitigating climate change.

The proposed gold mine is already the subject of a complaint to the Compliance Advisor Ombudsman of the International Finance Corporation (IFC). The Committee in Defense of the Water and Páramo of Santurbán filed the complaint in 2012. The IFC is the part of the World Bank Group exclusively focused on the private sector. A report based on this investigation is expected in the coming months.

“The implication and the irony of Eco Oro’s statement is that the IFC’s investment in the company could be used to litigate against member states of the World Bank. It’s time for the IFC to withdraw its investment from this company,” stated Carla García Zendejas from the Center for International Environmental Law (CIEL).

“In 2011, the Colombian Ministry of the Environment denied an environmental permit for the Angostura project, demonstrating its inviability. The Constitutional Court’s decision reaffirmed this, finding that the right to water and the protection of the páramos takes precedent over the economic interests of companies trying to develop mining projects in these ecosystems,” commented Miguel Ramos from the Santurbán Committee.

“Just as has we have seen in El Salvador, where the state is being sued for US$250 million for not having granted a Canadian company a mining permit when the company did not even fulfill local regulations, the international arbitration system enshrined in neoliberal investment agreements is a real threat to the sovereignty of states and peoples to decide over highly important issues, such as water,” said Jen Moore from MiningWatch Canada.

The organizations call on the company to abstain from arbitration against the Colombian state and note the risk that other companies with projects in the Santurbán páramo could follow Eco Oro’s example.

Contacts:

    Carlos Lozano Acosta, Interamerican Association for Environmental Defense (AIDA), +57 300 56 40 282, clozano@aida-americas.org
    Miguel Ramos, Committee in Defence of the Water and Páramo of Santurbán, +57 3118806350, comiteparamosanturban@gmail.com
    Carla García Zendejas, Center for International Environmental Law (CIEL), +1 202 374 2550, cgarcia@ciel.org
    Jennifer Moore, MiningWatch Canada, +001 613 569 3439, jen@miningwatch.ca
    Ilona Hartlief, Centre for the Investigation of Multinational Corporations (SOMO), +31 20 639 1291