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The Permanent Court of Arbitration in The Hague has upheld Latin America-focused UK power generator Rurelec's (AIM: RUR) claim that Bolivia breached its bilateral investment treaty with the UK when it expropriated Rurelec's 50% stake in local generator Empresa Guaracachi on May 1, 2010.
The ruling found that Bolivia was in violation of the legal framework established by the United Nations Committee on International Trade Law (UNCITRAL), according to a press release from Rurelec.
Bolivia's government must now pay Rurelec US$35.5mn for the unnegotiated nationalization of Empresa Guaracachi, which includes the 20.6mn pounds (US$33.6mn) Rurelec originally paid to acquire the stake in 2006, plus a compounded interest rate of 5.6% a year, the company reported.
Empresa Guaracachi itself owes Rurelec US$5.5mn in declared but unpaid dividends from before the nationalization, bringing total outstanding payment due to Rurelec to US$41mn.
Bolivia's attorney general Hugo Raúl Montero was quick to point out that Rurelec's original claim was for nearly US$143mn for the nationalization "and other totally irrational damages, valued with exaggerated data."
Bolivia will now determine the next legal steps according to the rules of the arbitration, Montero said on the attorney general's website.
Similar legal action against uncompensated nationalization is also being brought against Bolivia by UK energy major BP's Argentine oil subsidiary Pan American Energy, Spanish infrastructure group Abertis and Chilean boric acid producer Quiborax.