Canada’s Gabriel Resources announced on June 29 that it will file a CAD5.7bn (€3.8bn) claim in its arbitration case against Romania, accusing the country of violating investment treaties regarding its Rosia Montana project.

Since 1997, Gabriel Resources’s main focus has been the exploration and development of the Rosia Montana gold and silver project in Romania to operational status. It was anticipated that the project could, directly and indirectly, add over $24bn to Romania’s GDP. However, conflicts between rival political factions as well as strong opposition from environmentalists have ensured the project never got off the ground. 

It is currently the subject of international arbitration at the International Centre for Settlement of Investment Disputes. In addition, the Romanian environment ministry asked Unesco in January to include the site on the world heritage list, a move which would block the development of the gold project.

“By licensing and then blocking the implementation of the projects, without due process and without compensation, Romania has deprived Gabriel entirely of the use, benefit and value of its investments in Romania, including its rights to develop the projects,” the company said in a statement. 

Gabriel’s claim is based on violations by Romania of several provisions of the treaties, the Canadian company said. These include the expropriation of its investments in Romania without compensation, the failure to accord to its investments fair and equitable treatment and full protection and security and the impairment of its investments by discriminatory and unreasonable measures, its statement added.

“The Romanian government unlawfully blocked the permitting of the Rosia Montana Project and then acted in manifest disregard of Gabriel’s agreement with the state and existing license rights. The actions of the Romanian government are tantamount to expropriation of Gabriel’s investments in Romania,” Jonathan Henry, Gabriel’s president and CEO, said. 

“As Gabriel’s requests for conciliation and negotiation have been completely ignored by the Romanian government, the only recourse left to the company is to vigorously pursue this arbitration to its conclusion. Tomorrow we plan to file a robust, detailed statement of claim and seek compensation in the amount of CAD5.7bn,”  he added.

The Rosia Montana project is situated in the South Apuseni Mountains of Transylvania. The exploitation license for the project is held by Rosia Montana Gold Corporation, a Romanian company in which Gabriel owns an 80.69% equity interest, with the 19.31% balance held by Minvest Rosia Montana, a Romanian state-owned mining company.

Gabriel’s claims, if approved by the court, would put pressure on the Romanian budget. The country has already reported a general government deficit of 0.3%-of-GDP in January-May. The country targets a 3% of GDP deficit this year, but both the IMF and the European Commission have forecast higher deficits. Moreover, the whole situation may affect investors’ confidence in the country’s business environment.