Compass Lexecon Client Awarded $1.39 Billion in Mining Arbitration Case

Compass Lexecon’s Manuel A. Abdala and Pablo T. Spiller served as experts for claimant Crystallex Corporation, which on April 4, 2016 obtained an arbitration award of US$1.39 billion (including pre-award interest) against the Bolivarian Republic of Venezuela (Venezuela). The tribunal found that Venezuela breached the Canada-Venezuela’s bilateral investment treaty by unlawfully expropriating Crystallex’s investments in the Las Cristinas gold mining project (Las Cristinas) and by failing to accord Crystallex’s investments fair and equitable treatment. Las Cristinas is among the 20 largest gold deposits in the world, as measured by its in-situ reserves.

The tribunal relied on Dr. Abdala and Professor Spiller’s submission to determine the fair market value of Las Cristinas on April 13, 2008, the date when Venezuela denied Crystallex an environmental permit, a measure which the tribunal found to be a breach of the fair and equitable treatment provisions in the Canada-Venezuela bilateral investment treaty and the first important act giving rise to creeping expropriation. The tribunal’s decision on quantum was based on two methodologies: the stock market approach and multiples from publicly traded gold mining companies in developing countries. In particular, the tribunal endorsed Dr. Abdala and Professor Spiller’s assessment that the market capitalization of Crystallex would have to be adjusted since June 14, 2007, the last clean date of actual stock price performance unaffected by Venezuela’s actions, and that such adjustment should follow the performance of an industry index. The tribunal discarded Respondent expert’s cost approach, choosing instead to focus on “forward looking methodologies [as appropriate] to assess the fair market value of Crystallex’s investment.”

Dr. Abdala and Professor Spiller’s Compass Lexecon team was led by Santiago Dellepiane and included Mark Sheiness, Jonathan Bowater, Carla Chavich, Nancy Cherashore and Erica Hoffmaster. Claimants were represented by Nigel Blackaby, Caroline Richard, Alex Wilbraham, Carlos Ramos-Mrosovsky, Guadalupe Lopez and others of Freshfields Bruckhaus Deringer LLP and Alex Yanos of Hughes Hubbard & Reed LLP.

Compass Lexecon’s economists and financial experts have worked in all areas of international arbitration, delivering independent economic analysis, valuation opinions, damages assessments, regulatory opinions, expert reports and arbitration testimony. Our international arbitration team includes economists based in Europe, Latin America, and the United States. A number of members of our team are listed among the most renowned expert witnesses in Who’s Who Legal. In addition, we have the capability of drawing upon an extensive network of specialist affiliates for additional capabilities in specific industries and niche areas, including within our corporate parent.