The court rightly rejected Citgo’s plea to conduct the sale itself, concluding, “Venezuela … has had every opportunity to pay its legitimate, Court-recognized debt to Crystallex, including before, during, and after the arbitration…[but instead] made Crystallex undertake a decade’s worth of extensive and expensive efforts to collect on its judgment…” This language sends a simple, powerful message: theft will never be tolerated. Despots and strongmen the world over ought to take note.
On Jan. 14, 2021, the United States judicial system took a powerful stand for property rights and the rule of law. Ten years after Venezuela’s socialist regime stole hundreds of millions of dollars’ worth of investments from Canadian mining company Crystallex, the U.S. District Court for the District of Delaware ruled that Crystallex is entitled to reclaim their due. Crystallex is now one step closer to selling shares of Citgo, which is owned by the despotic regime, in order to be compensated for its loss of property.
A decade ago, the nation’s leadership was no less harsh but temporary prosperity masked terrible government policies. Hugo Chavez’s regime came to power in 1999 and rode a surge of oil demand through the 2000s that filled government coffers and created illusory economic success. Chavez’s plan ensured that regime officials would profit off these temporary gains as much as possible via nationalization and bribe payments from companies fearing expropriation.
At the heart of the court’s ruling lies a tragic, complicated backstory that speaks to the perils of socialism and expropriation. As even occasional followers of the news know, Venezuela is currently run by the ruthless and vindictive dictator Nicolás Maduro.
Several years earlier, Crystallex had been given the right to operate out of the Las Cristinas mine. Unfortunately, after Crystallex had invested hundreds of millions of dollars in equipment, community development, and mining operations, Chavez’s government promptly ripped the contract to shreds in 2011 and sold off the rights to another company.
When oil proved insufficient to fuel growth, the regime set its sights on another lucrative sector: gold mining. In 2008, Fox News reported the impending takeover of “the nation’s largest gold mine, operated by Canada’s Crystallex International Corp., as President Hugo Chavez gradually brings mining operations under state control.”
Chavez’s successor Maduro wasn’t willing to cough up the money that his mentor stole. Fortunately, international arbitration rules concerning awards against governments recognize that states can be stubborn; consequently, the rules allow companies holding awards to pursue state-owned assets located abroad.
Yet, Crystallex wasn’t ready to simply write off its losses and kowtow to the predatory Chavez regime. In 2016, after several years of litigation, the World Bank’s international arbitration facility in Washington ruled in favor of Crystallex and against Venezuela for $1.4 billion, which accounts for the value of the investment, plus interest, lost by the company. Venezuela was now obligated to repay Crystallex for cancelling its contract, yet this was easier said than done.
It is troubling that a favorable judgment for the mining company took such a long time. A smaller company may not have had the wherewithal to get their day in court. Fortunately, Crystallex’s legal win creates a powerful precedent that can readily be deployed whenever a despot resorts to theft. The U.S. has a long, proud track-record in standing up for freedom and putting despotic regimes in their place. On Jan. 14, the Third Circuit reaffirmed that property rights cannot be usurped by despotic regimes. We hope that Biden’s Treasury Department agrees.
And finally, after a string of costly lawsuits, Crystallex is closer to reclaiming what was stolen from them. Now, the Treasury Department must stop its unilateral and unfounded blockade of Crystallex’s property rights and allow the sale of Citgo to proceed in the name of justice. Once confirmed, President-elect Joe Biden’s Treasury Secretary nominee Janet Yellen has an opportunity to make this situation right by directing her Office of Foreign Assets Control to immediately allow Crystallex to proceed with its claim.
By Ross Marchand
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Reposted with permission