An Indian tycoon has won the right to attempt to recover his investment in a mining project from the government of Uruguay, in a ruling that will test the country’s pro-business reputation.
The unexpected ruling on Tuesday by an appeal court in Paris means that businessman Pramod Agarwal can once again fight for his multibillion-dollar compensation claim, which he now puts at almost $4bn once interest is included.
“We are closer to getting justice with this judgment,” Agarwal told the Financial Times from his London home.
The long-running dispute dates back to 2016 when Agarwal’s attempt to develop one of the world’s biggest high-grade iron ore mines in the South American country collapsed and he lost his entire $365mn investment.
At $3bn, the so-called Valentines project would have been the largest-ever foreign investment in Uruguay, traditionally a farming nation with little history in mining.
Agarwal alleges that the project failed as the government’s requirements for Valentines kept changing. Uruguay has strongly rejected Agarwal’s claims and defended the country’s market-friendly reputation, saying it was his own fault that his Valentines project did not proceed and that he was not entitled to any compensation.
At the heart of the most recent Paris legal proceedings was the question of jurisdiction and whether Agarwal had the right to chase the compensation he says he is owed at all. The tycoon, a British resident, had filed his claim in 2017 under the investment protection treaty between the UK and Uruguay.
However, an arbitration tribunal ruled in 2020 that since the company controlling the Uruguayan assets was held by a Cayman Islands trust in the name of his children, this did not in itself constitute an investment, and they could not bring a compensation claim under the treaty. That decision has now been overruled by the Paris court.
Uruguay’s presidential office declined to comment.
News of Agarwal’s victory in Paris is likely to unnerve the pro-business administration of President Luis Lacalle Pou, which had considered this case — inherited from a previous leftwing government — as closed.
“The ball is in their court; what happens next is up to them,” said Agarwal’s lawyer Sandra González.
She argued that the political situation was “very different” to 2017 when the case was first filed, describing future proceedings as “unpredictable”.
Lacalle Pou is under pressure to safeguard the rule of law as the government grapples with multiple corruption allegations and a fake passports scandal that have rattled foreign investors and threatened Uruguay’s reputation for solid governance in Latin America. His conservative administration, which faces an election in 2024, denies any wrongdoing.
Agarwal argues Valentines could be a showcase sustainable project because of the proven reserves of high-grade iron ore, at a time when the steel industry is moving towards decarbonisation. Technological advances in production could also make the mine more attractive.
He still holds out hope for the project. “Until today, I don’t understand what happened,” he said.