Mexican cement giant Cemex says it will submit a complaint seeking international arbitration before the International Centre for Settlement of Investment Disputes over the Venezuelan government's confiscation of its assets and the expropriation of its Venezuelan business.
After negotiations broke down between the Hugo Chavez government and Cemex for the government to acquire a majority stake in the cement maker as part of a new policy nationalising cement, the Venezuelan government seized control of Mexican cement giant's plants and offices in Venezuela and brought it under the operational control to Petroleos de Venezuela S.A.to run on behalf of the government. (See: Venezuelan troops seize Cemex cement plant)
Cemex says the confiscation and subsequent start of the expropriation process is a flagrant violation of the constitution, law of expropriation and other laws of Venezuela. Cemex also believes the Venezuelan government's actions highlight a lack of respect for the principles of international law and the treaties relating to reciprocal protection of investments which forbid the occupation of goods and deprivation of rights without fair and effective compensation and without an expropriation procedure.
"Cemex has always been respectful of legally based sovereign decisions, as well as the legal and regulatory frameworks that exist within the countries in which it maintains an operational presence, but it has an obligation to its shareholders to defend its business interests," the Mexican cement maker said in a statement.
The Venezuelan government had paid $552 million for an 85-per cent stake in Holcim of Switzerland and $267 million for 89 per cent of the shares in Lafarge of France, but negotiations with Cemex reached nowhere, as the Mexican giant would not budge from its demand for $1.3 billion.
Cemex said that it could not accept the compensation proposal offered by the government of Venezuela as part of its ongoing process to nationalise its assets. "Cemex believes that the offer of US$650 million significantly undervalues its business in Venezuela."
It said that the offer presented to CEMEX is lower, proportionally, than the ones offered to the European cement companies, considering value per ton of installed capacity and EBITDA multiple.
"Cemex has always been open to engage in dialogue with the government of Venezuela and intends to continue to seek an equitable resolution for all parties", the statement said.