World Bank tribunal rules against Canada’s Montauk in dispute with Colombia

A World Bank tribunal has ruled in favour of Colombia in a feud with Canada’s Montauk Metals (TSXV: MTK). 

A mining ban imposed by the Gustavo Petro administration on the Santurbán moor doesn’t violate the Canada-Colombia Free Trade Agreement signed in 2008, the tribunal said June 7. 

Montauk, previously Galway Gold, contended that Colombia breached obligations owed to the company, such as refusal or failure to compensate it for the losses incurred at the Reina de Oro gold project. The government prohibited mining in Santurbán, about 500 km north of the capital, Bogota. 

The company submitted the arbitration request to the bank’s International Centre for Settlement of Investment Disputes (ICSID) in March 2018 and demanded a compensation of about US$177 million.

The centre ruled that the mining ban is a legitimate regulatory measure and that Colombia did not expropriate nor violate the fair and equitable treatment standard, according to a communiqué issued by Colombia’s National Agency for Judicial Defense of the State. 

The tribunal found that the South American government acted in good faith and exercised regulatory powers to protect ecosystems on the moor, known as páramo in Spanish.

In its decision, the ICSID also noted that there was no legitimate reason for Montauk to expect that Colombia was not going to protect the páramos.

“Colombia celebrates the arbitral tribunal’s decision, which recognizes our country’s efforts and legitimate measures to protect the environment and general interest areas,” the media brief reads.

Precedent

This ICSID decision is in line with a March 2024 ruling by the same body in a similar lawsuit. Canada’s Red Eagle Exploration filed against Colombia for banning mining in the Santurbán headwaters.

Similar to the ruling in the Montauk Metals case, the ICSID found that Colombia did not violate the alleged reasonable expectation, nor did it act with a lack of transparency, unreasonably or arbitrarily, disproportionately or with discrimination. 

The tribunal concluded that Colombia had not acted in violation of the minimum standard of treatment. Nor was it shown that Colombia had indirectly expropriated Red Eagle’s mining concessions, as the company alleged in its claim.

Another case to finish

The Montauk and Red Eagle rulings prove that the country did not cause unnecessary uncertainty or take arbitrary measures in a similar lawsuit filed before the ICSID by another Canadian miner, Eco Oro Minerals (TSX: EOM), the National Agency for Judicial Defense of the State said. 

In Eco Oro case, the tribunal found in September 2021 that the Andean country acted in violation of investment protection norms enshrined in the free trade agreement between Canada and Colombia. The government issued new regulations that expanded wetland protections and cut in half the area where Eco Oro was developing the Angostura project. 

However, the ICSID also recognized that the measure was not discriminatory toward Eco Oro shareholders and was an effort to legitimately protect the environment. It requested more information from both sides.

The Páramo de Santurbán is a protected area of the Andes mountains. It is covered with sub-alpine forests above the continuous tree line but below the permanent snow mark, where water is naturally stored during the rainy season and released during the dry season.