Antilles Gold Ltd (ASX:AAU, OTCQB:ANTMF) has had two significant wins in its long-running disputes with the Dominican Republic Government.
The first is a finding by the Dominican Constitutional Court that the company is not liable for taxation assessments on its completed Las Lagunas Gold/Silver Project.
The second involves the International Centre for Settlement of Investment Disputes (ICSID) being confirmed as the jurisdiction for Arbitration of Claims against the Dominican Government.
Claims against the government total approximately A$40 million including legal costs and interest.
Background to dispute
In 2004, a subsidiary of Antilles Gold, EnviroGold (Las Lagunas) Limited (EVGLL), entered into a contract with the Dominican Republic Government.
This contract required EVGLL to oxidise 5.4 million tonnes of sulphide gold tailings from the Pueblo Viejo mine that were stored in the Las Lagunas dam. This was the principal element of an environmental remediation program to limit acid mine drainage from the dam and permitted EVGLL to extract gold and silver from the tailings, with the expectation of a profitable operation.
The terms were that EVGLL would be exempted from any national or municipal tax, including income tax, but pay the government 25% of the cash flow generated after recovery of EVGLL’s investment in the project, plus a 3% royalty on precious metals.
A condition precedent to the contract was the requirement for EVGLL to gain approval from the Congress of the Dominican Republic for a waiver of taxation, which EVGLL received within the stipulated time frame.
The government, through its taxation department, has lodged numerous income tax and asset tax assessments against EVGLL over the past seven years, together with claims for penalties and interest.
This has required EVGLL to defend each assessment in the Dominican Courts, as well as subsequent appeals by the Taxation Department against Court decisions favourable to EVGLL.
Favourable Constitutional Court ruling
The Taxation Department ultimately challenged the legitimacy of the Special Contract in the Dominican Constitutional Court.
The Constitutional Court has recently posted on its website that it has upheld a previous Supreme Court Judgment in which the Supreme Court acknowledged the tax exempted status of EVGLL under the contract.
It also stipulated that both the sharing of cash flow and royalties are not taxes but rather considerations to be paid to the Dominican State under the contract.
The Constitutional Court Judgement should be issued within two to three weeks and there is no provision for the government to appeal decisions of the Constitutional Court.
EVGLL will claim damages against the government to recover its legal costs, overheads and other associated costs. These damages will add to the tally of previous claims against the government for breach of contract with respect to certain obligations under the contract.
Arbitration jurisdiction
Claims against the Dominican Government totalling approximately A$40 million including legal costs and interest are now being arbitrated at the ICSID, a unit of the World Bank in Washington DC.
Despite this, the Dominican Government chose to challenge ICSID being the jurisdiction and agency for settling disputes. The challenge was recently dismissed by a unanimous decision of the three-member Arbitration Tribunal.
Arbitration proceedings, interrupted by the jurisdictional challenge, can now continue at the ICSID, with its decisions on the claims expected in June 2023.
EVGLL’s London-based lawyers are extremely confident of achieving a positive outcome for the company.