Jindal Steel Bolivia, an arm of Jindal Steel and Power (JSPL), has won in excess of $22.5 million arbitration judgment against state-run mining company Empresa Siderurgica del Mutun (ESM).
“Jindal Steel Bolivia has been vindicated in connection with its investment in the El Mutun project in Bolivia by an international tribunal ordering payment to Jindal of more than $22.5 million by ESM,” JSPL said in a statement on Saturday.
Jindal commenced arbitration before the International Chamber of Commerce (ICC) of Paris and sought recovery of $18 million principal, plus interest, related to the illegal encashment of the bank guarantees.
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JSPL had in 2007 entered into a joint venture pact with Bolivian state, ESM, and another state-run firm to develop and exploit El Mutun iron ore mine, having reserves of around 40 billion tonnes of iron ore in eastern Bolivia.
The company also planned to set up a 1.7-million tonne per annum capacity steel plant along with other facilities for backward integration with an investment of $2.1 billion.
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JSPL said it had invested ‘tens of millions of dollars’ in the project, including providing $18 million in project guarantees.
It said the project was impeded because it never received access to land where the project was to be developed, contrary to the contract.
In the statement, Jindal also said that bank guarantees, amounting to $18 million, were wrongly encashed.
JSPL said the Tribunal ruled that there was no entitlement ‘to encash the guarantees’ and “ESM breached, with its encashment, the Contract obligations in respect of Jindal.’’
“There was ‘more than sufficient evidence...to establish that ESM did not comply with the obligation to deliver the lands’ and this suspended Jindal’s obligations under the contract,” JSPL quoted the Tribunal as saying.
In addition to unlawful encashment in 2010, additional actions by Bolivia and its entities undermined the El El Mutun project and forced the termination of the project contract, it said.
“Jindal has commenced a second ICC arbitration related to the project, focused among other things on damages arising out of the termination of the El Mutun contract. Jindal is seeking damages approaching about $100 million. The case is pending. Jindal instructed the international lawyers of White & Case for both arbitrations,” JSPL said.
It added: “Bolivia’s treatment of Jindal and its representatives has reflected a pattern of maltreatment of foreign investors and their representatives in Bolivia in recent years.
“In response to its victory, Jindal observed that Bolivia and its entities broke Jindal’s trust, broke Jindal’s investment, and acted in violation of the contract and law. The case result vindicates Jindal’s efforts to develop the El Mutoject despite the circumstances in Bolivia.”