Gold Reserve cuts damages claim 60% to mildly less outlandish figure

Gold Reserve, one of the mining companies that have taken Venezuela to international arbitration after losing access to the Las Cristinas/Brisas gold deposit, said it’s asking for $1.928 billion in compensation. This is a bit lower than the $5 billion damages they were talking about 11 months ago.

Opinion time: I suspect it’s still a goofy number. I think it’s targeted more at you as a potential retail investor than at the arbitration tribunal. The company may be trying to get you to invest in Gold Reserve in the hopes of getting fabulously rich when they win their suit in 3 or so years. By buying GRZ, you are bailing out the last round of get-rich-quick thinkers, the ones who thought they’d profit from gold in Venezuela, be they retail investor or insiders.

I like the people at Gold Reserve well enough, they have always been good to me, and they seem honest. But it’s my duty as a friend of my readers to tell you that this money is not likely to show up. Vannessa Ventures is a good parallel. That company (now Infinito Gold) has been in arbitration with Venezuela for a measly billion since 2004. Here’s how things have gone so far:

Date
Development
October 28, 2004
The Secretary-General registers a request for the institution of arbitration proceedings.
June 07, 2005
The Tribunal is constituted. Its members are: V.V. Veeder (British), President; Charles N. Brower (U.S.); and Jan Paulsson (French).
January 13, 2006
The Claimant files a memorial on the merits.
February 28, 2006
The Claimant presents an ancillary claim.
March 15, 2006
The Tribunal authorizes the presentation of the Claimant’s ancillary claim in accordance with Article 47(2) of the ICSID Additional Facility Arbitration Rules.
August 28, 2006
The Respondent files a memorial on jurisdiction.
May 07, 2007
The Centre notifies the parties of a vacancy on the Tribunal following the resignation of two arbitrators and of the suspension of the proceeding pursuant to Article 16(2) of the ICSID Additional Facility Rules.
October 29, 2007
The Tribunal is reconstituted. Its members are: Robert Briner (Swiss), President; Charles N. Brower (U.S.); and Brigitte Stern (French).
February 14, 2008 – February 15, 2008
The Tribunal holds a hearing on jurisdiction in Paris.
August 22, 2008
The Tribunal issues a decision on jurisdiction.
March 13, 2009
The Respondent files a counter-memorial on jurisdiction and the merits.
July 28, 2009
Following the resignation of Robert Briner (Swiss), the Centre notifies the parties of a vacancy on the Tribunal and of the suspension of the proceeding.
May 04, 2010
The Respondent files a request for the discontinuance of the proceeding pursuant to Article 50 of the ICSID Arbitration (Additional Facility) Rules.
The Claimant informs the Centre that it objects to the Respondent’s request for the discontinuance of the proceeding.
May 07, 2010
The Secretary-General issues an order for the continuation of the proceeding.
June 25, 2010
The Tribunal is reconstituted. Its members are: Vaughan Lowe (British), President; Charles N. Brower (U.S.); and Brigitte Stern (French).

You can map those dates yourself on this handy stock chart.

I don’t know all the details ever about Cristinas and Brisas. It does seem that Venezuela treated Gold Reserve in a rather capricious manner, and the company may be able to win some compensation. But just remember: they have an interest in making their case look watertight. You aren’t hearing everything that the tribunal is hearing. Reading the defense brief in a legal case is a great way to remind yourself that you don’t know how much you don’t know. Oh, you want the respondent’s brief from Venezuela? I hope you have friends in the legal field. Arbitration documents aren’t normally public.

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