Cerromatoso Mine, in Montelíbano (Córdoba).
According to portals specialized in international investment arbitrations, including CIAR Global and Global Arbitration Review, Colombia lost a million-dollar lawsuit with the Australian mining investor South 32. The country must pay the investor a total of US$ 9.5 million of dollars (more than 39,000 million pesos) for violations of the current trade treaty with Australia, which affected the interests of a mining company that extracts and produces ferronickel in the open pit at the Cerro Matoso mine, in Montelíbano (Córdoba).
In context: The litigation that Cerro Matoso SA is cooking
The decision was made by a group of arbitrators from the International Center for Settlement of Investment Disputes (ICSID), one of the judicial bodies before which Colombia responds for alleged violations of trade treaties. In this case, South 32 claimed compensation of US$ 94 million, for what it considered unfair and unequal treatment by the national authorities, which changed the rules with which it had to pay royalties to the country, in compensation for extracting natural resources. .
South 32’s lawsuit began as a result of the Comptroller’s Office’s fiscal responsibility investigation against it, announced in 2020, for an alleged non-payment of royalties between 1982 and 2012. This, following a resolution from the National Tax Agency. Mining of 2015, with which a new methodology was determined for setting the base price for settlement of nickel royalties and which forced the multinational to deploy greater resources. The Colombian State acted in such a way with South 32 that on April 25, the Comptroller’s Office sanctioned Cerro Matoso to pay $230,000 million for having failed to comply with the new royalty calculation rules.
Background: Comptroller’s Office opened a fiscal responsibility process against Cerro Matoso for nickel royalties
However, the ICSID arbitrators found that “Colombia had breached the fair and equitable treatment standard of the BIT (trade agreement with Australia) through several orders issued by the Comptroller General and the National Mining Agency of Colombia. They said that the measures had been ‘blatantly inconsistent’, unjustified and lacked legal basis,” says the Global Arbitration Review website.
The arbitrators also dismissed Colombia’s other technical defense mechanisms, such as that the Cerro Matoso project was not a protected investment. And, among other rejected arguments, that the Australian investor’s claim was premature, to the point that it had its origin in an internal dispute that had already been resolved in the country.
In context: For not paying royalties, Cerro Matoso received a sanction of $230,000 million
In another part of the decision, sources of information assure, it is ordered that South 32 be compensated for future damages that would arise if Colombia continues to apply measures considered to violate the trade agreement. “A claim primarily valued at US$276 million,” it reads.
“The mining company accuses the Comptroller’s Office of affecting its reputation ‘unjustifiably’ Cerro Matoso defends that in 2023 ‘it paid more than $486 billion pesos in royalties and in 42 years of operation it has contributed more than $3.6 billion to the country of pesos in this matter’”, adds CIAR Global.
According to an investigation by Razón Pública, Cerro Matoso is the largest open-pit ferronickel mine in Latin America and the largest nickel reserve in the country. “Thanks to mining extraction in Cerro Matoso, it can be said that Colombia participates with almost 10% of the world’s ferronickel production and 3% of the world’s nickel production,” explains the portal.
Although the ICSID arbitrators assured that Colombia did not support acting under the rules of legal security for investments, they did not consider it proven that South 32 should receive US$73 million in damages. For this reason, Colombia will only disburse US$ 9.5 million of the requested amount.
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