Crystallex vs. Venezuela: Future for public interest not so crystal clear
Photo by randomvariableintheuk CC BY NC SA 2.0
  • Amount demanded: US$3.2 billion
  • Outcome: US$1.4 billion with interests
  • Treaty invoked: Canada - Venezuela BIT
  • Sector: Mining
  • Issue: Environment, indigenous people

In September 2002, Canadian miner Crystallex signed a contract with Venezuela to develop gold mining concessions in the Las Cristinas area, located within the Imataca national forest reserve.

Between 2003 and 2008, Crystallex sought the necessary permits. To address certain concerns raised by Venezuela, Crystallex had to submit a revised environmental impact study. Afterwards, in May 2007, the Ministry of Environment requested Crystallex to post a bond to guarantee the implementation of the measures proposed in the document presented for the environmental impact evaluation of the project, which had been analysed and approved.

Even though Crystallex posted the bond and paid the environmental taxes, the Ministry of Environment denied the environmental permit in April 2008, based on concerns over the project’s impact on the environment and indigenous peoples in the Imataca reserve. In several public statements from 2008 to 2010, then-President Hugo Chávez and high-level officials expressed Venezuela’s intention to nationalize gold deposits, including Las Cristinas.

Crystallex initiated arbitration against Venezuela, in February 2011, for expropriation of its investments and failure to accord them fair and equitable treatment, and full protection and security, in breach of the Canada – Venezuela bilateral investment treaty.

In April 2016, the tribunal awarded Crystallex US$1.4 billion, ruling that Venezuela had “frustrated” the investor’s legitimate expectations. It accepted Venezuela’s argument that the expropriation had been carried out in pursuit of a public interest goal, but found that the country had not offered adequate compensation. The Canadian company said it had invested US$644 million.

As Venezuela did not pay the award, Crystallex tried to enforce it before US courts. In May 2020, a US judge ruled that the sale of the US-based Citgo refineries, a subsidiary of the Venezuelan state-owned PDVSA, could go ahead in order to satisfy the compensation ordered by the arbitration tribunal.

The ISDS claim was partly funded by the New York investment fund Tenor. The US firm paid Crystallex US$76 million, in exchange for 70% of any payments the Canadian miner would collect from Venezuela (US$800 million of the US$1.4 billion award).

Last update: May 2021