Sterling Resources Ltd, a Canadian listed company, has issued a press release to inform investors and interested persons that on June 20, 2010 it has filed a Notice of Dispute under the Canada-Romania Foreign Investment Promotion and Protection Agreement (a bilateral investment treaty). The press release was posted on Canada Newswire -http://www.newswire.ca/en/releases/archive/June2011/20/c7447.html
What this means that Sterling Resources Ltd. has put the State of Romania on notice that it will commence arbitration proceedings regarding the treatment of its investment in Romania if the issues cannot be resolved amicably in the 6 month consultation period. If the issues cannot be resolved and Sterling files a Notice of Arbitration, Sterling plans claim monetary damages that reflect the entire and significant ultimate value of its offshore assets. This will be a large amount that Romania will have to pay if the arbitral panel agrees with Sterling.
Sterling alleges that the State of Romania has undertaken "deliberate and discriminatory actions ... against the Company's offshore investments on its Midia and Pelican Blocks in the Black Sea." The investments include offshore oil & gas exploration concessions.
Sterling alleges that its promising exploration activities have been negatively affected by actions by a number of government bodies Romania. Sterling alleges that the State of Romania has undertaken actions that have lead to media attacks against the company and have blocked the progress of their exploration and development of the concessions. The State of Romania is questioning publicly the legality of their original agreement with Sterling regarding the concession. The Romanian Prosecutor's Office Department for Investigation of Organized Crime and Terrorism ("DIICOT") has commenced an inquiry into the process followed by the government authorities when issuing the Concession agreement. The inquiry relates to Romanian officials and not the actions of Sterling's offices and directors.
In addition, Sterling alleges discriminatory and unfair treatment. Sterling alleges that government departments have refused to grant assignments to prospective assignees and environmental and construction permits. Sterling is also alleging that the Romanian government departments will not provide it with market prices for domestically-produced gas and and have negatively impacted their ability to benefit from their investment, including the inability to export gas or receive equitable access to the National Transmission System.
Canda entered into the initial Canada-Romania FIPPA on February 11, 1997. In 2003, the European Commission requested that acceding member states bring their FIPPAs with Canada into conformity with EU law. Romania joined the EU in 2007. On May 6, 2009, Canada and Romaina signed an amended FIPPA.
Many Canadian mining and oil & gas exploration companies operating in foreign jurisdictions find that when they experience success, the foreign jurisdiction gets in the way of their further progress. Disputes are occurring with increasing frequency. That is one of the reasons why the Harper Government has been negotiating foreign investment promotion and protection agreements as part of their trade promotion strategy (economic action plan).