Junior Mining | 27 September 2016
Gabriel Resources - Romania reverses prior VAT assessment / arbitration progress
Media release
London, England (FSCwire) - Gabriel Resources Ltd. (“Gabriel” or the “Company”) announces an update in relation to its ongoing bi-lateral investment treaty arbitration against Romania proceeding under the auspices of the World Bank’s International Centre for the Settlement of Investment Disputes (the “Arbitration”) and the previously announced disputed value added tax (“VAT”) assessment (the “Assessment”) levied against its majority-owned subsidiary, Rosia Montana Gold Corporation S.A. (“RMGC”), by the Romanian National Agency for Fiscal Administration (“ANAF”).
The first session of the tribunal constituted to conduct the Arbitration (the “Tribunal”) was held by teleconference on August 12, 2016 and on August 26, the Tribunal issued Procedural Order No.1 establishing certain procedural matters. The Tribunal is still to issue a procedural calendar with specific dates for the filing of submissions by the parties and other necessary procedural matters.
On September 23, 2016, the Tribunal held a hearing in Washington, D.C., to consider requests for certain provisional measures submitted to the Tribunal by the Company and its wholly-owned indirect subsidiary, Gabriel Resources (Jersey) Ltd. (together “Claimants”) relating to, inter alia, aspects of the Assessment and other actions being undertaken by ANAF (“PM Hearing”). The Tribunal has not indicated a timeframe to issue its decision in regard to the matters addressed during the PM Hearing.
As announced on July 14, 2016, the Assessment relates to a demand by ANAF for repayment of VAT deductions claimed by RMGC in the period 2011 to 2016 in the amount of RON 27m ($8.6m). In mid-September, ANAF issued a further demand against RMGC in respect of interest and penalties payable on the Assessment in the amount of RON 15.9 million ($5.1m). RMGC challenged the Assessment on the basis that it was contrary to well established Romanian fiscal laws as well as European directives, and was issued despite its basis being contradictory to the results of eighteen prior VAT audits conducted by various divisions of ANAF in relation to RMGC’s activities.
Immediately prior to the PM Hearing the Claimants were notified, through a filing made on behalf of Romania to the Tribunal, that the General Directorate for the Settlement of Challenges, a division of ANAF, had decided to partially quash the Assessment and to rerun the fiscal inspection for the same period but using a new inspection team. The Company is advised that the Assessment and the associated interest and penalties will no longer be due for payment by RMGC and debt recovery actions against RMGC accordingly must be withdrawn.
In parallel to the Assessment, a directorate of ANAF continues to pursue an investigation of a broad range of operational activities and transactions of RMGC over an extensive period spanning 1997 to 2015 (the “ANAF Investigation”). The Company believes that the ANAF Investigation is unjustified and has been initiated in an attempt to disparage the reputation of RMGC and the Company, in view of the Company’s dispute with the Romanian State and the Claimants’ filing for the Arbitration. Accordingly, the Company has brought this matter to the attention of the Tribunal as Gabriel continues to consider that such actions further evidence the discriminatory acts and bad faith conduct of the Romanian authorities with regard to the Company’s investment in Romania.
Jonathan Henry, Gabriel’s President and Chief Executive Officer, stated:
“We welcome the recent ruling by Romania’s fiscal authorities against the demand for repayment of prior VAT rebates, although we are cautious as to the ultimate result given the direction to re-run the VAT inspection. The various investigations have been time consuming, expensive, and in our view abusive in nature for the Company. The Company is committed to preserving the Claimants’ rights as well as those of RMGC throughout the Arbitration process. Unfortunately, Romania continues to take action seeking to ensure that the Project does not go ahead, such as its successful application for Rosia Montana to be included on the UNESCO World Heritage tentative list. The Company has always stated it remains ready to explore an amicable resolution of the dispute that includes development of the Project. Unfortunately, Romania’s actions demonstrate that it has no interest in engaging with a foreign investor who has consistently stated a desire for an amicable resolution to the issues at dispute and to improve the economic and reputational outlook for the country.”
