Scotiabank Seeks $600 Million From Argentina
Scotiabank is seeking more than US$600 million from the Government of the Republic of Argentina under a treaty intended to protect the interests of investors of one country doing business in the other.
The Bank is claiming that expropriatory and discriminatory actions taken by the Argentine authorities caused the total loss of its investment in its subsidiary Scotiabank Quilmes, whose licence was revoked in August 2002.
The Bank filed a Notice of Arbitration today after the Argentine government failed to respond to three written requests from Scotiabank during the past 18 months to negotiate an amicable settlement. Scotiabank is now referring the dispute to arbitration under the terms of the Promotion and Protection of Investments Treaty signed by the Republic of Argentina and Canada in 1991. The arbitration panel will be comprised of one nominee from the Bank, one from the Government of the Republic of Argentina, and a third person agreed to by both sides.
This is the first time in the Bank’s 173-year history that it has made a claim of this nature, but a series of expropriatory and discriminatory actions taken by the Argentine government directly caused the loss of its investment and violated its treaty rights of fair treatment. As a result, the Bank and its shareholders experienced significant damages and as such it intends to vigorously pursue the right to compensation under the treaty.
Although full details of the claim are not a matter of public record, Scotiabank alleges that the Argentine actions violated the treaty protection against expropriation of investments without compensation and the protection against discriminatory treatment.
The expropriatory actions include:
– The mandatory conversion of U.S. dollar denominated deposits and loans into pesos at different exchange rates. Although the government promised compensation in the form of government bonds, Scotiabank Quilmes has never received the bonds.
Scotiabank also alleges the Argentine Central Bank discriminated against Scotiabank Quilmes by:
– Not permitting Scotiabank Quilmes to pay a medium-term note which came due, although it had the funds to do so. As a result, confidence in SBQ’s ability to meet its obligations was severely impaired.
– Not granting Scotiabank Quilmes financial assistance on the same basis as domestically-owned banks so as to make up for liquidity lost as a result of government actions and the economic crisis.
– Obstructing Scotiabank Quilmes’ attempts to restructure and reopen.
Scotiabank is seeking damages as compensation for the loss of its investment, the cost to it of winding-up Scotiabank Quilmes, and harm to its reputation.
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