A Closer Look for ShareholdersOptimism about the future of AVZ Minerals' southern development project and a potential ICSID claim against the Democratic Republic of Congo (DRC) may be misplaced. While a successful outcome would be welcomed by shareholders, a closer examination of the situation highlights significant challenges and suggests a less favorable outcome.
Challenges to Successful ICSID Funding
The lack of interest from major international litigation funders casts doubt on the perceived strength of AVZ's ICSID case. These funders rigorously assess potential claims, seeking those most likely to succeed with substantial potential returns. Additionally, mining companies holding only exploration licenses have never been awarded damages based on a DCF methodology.
Limited Potential for Damages
Even if AVZ were to overcome the funding challenge and prevail at ICSID, the award is likely to be far smaller than some anticipate. With DCF and lost profits unlikely, damages would be calculated using primarily sunk costs (expenditures to date) and market comparisons for similar projects. While estimates vary, a realistic damages figure could fall in the range of $250 million.
However, securing funding for such a case comes with a high price. Funders would demand a considerable portion of any award due to the high-risk nature of the investment and the uncertain prospect of collecting against the DRC.
Obstacles to EnforcementThe unfortunate reality is that even if AVZ wins at ICSID, collecting the award from the DRC would be incredibly difficult. The DRC has limited overseas assets that could be seized, and historically, no award creditor has successfully enforced an international arbitration award against the country.
The Long Road of ICSID
Shareholders expecting a quick resolution to a potential ICSID case should adjust their expectations. The process from initial filing to a potential payout could easily stretch to 8-10 years. This encompasses the hearing itself, post-hearing briefs, the tribunal's decision, a likely annulment application by the DRC, and protracted enforcement proceedings. Litigation funders will factor this lengthy timeline into their calculations, further impacting AVZ's potential net gain.
ConclusionWhile the desire for a positive outcome for AVZ shareholders is understandable, the reality is that the path to developing the southern project or achieving a significant ICSID victory is fraught with obstacles. The lack of major litigation funder interest, the precedent for limited damages awards, and the challenges of enforcement against the DRC all paint a much less optimistic picture.
https://www.credibilityinternational.com/study/credibility-study-of-damages-second-ed/
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