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Scotiabank files $600M US claim against Argentina

CBC News, Canada

Scotiabank files $600M US claim against Argentina

7 April 2005

TORONTO - Scotiabank has filed a $600 million US compensation claim against Argentina, claiming that "discriminatory" actions taken by Argentine authorities led to the total loss of its investment in its Scotiabank Quilmes subsidiary in 2002.

FROM APRIL 19, 2002: Scotiabank’s Quilmes suspended by Argentine central bank

The bank said it filed a notice of arbitration under the terms of a treaty designed to protect the interests of investors doing business in foreign countries.

"A series of expropriatory and discriminatory actions taken by the Argentine government directly caused the loss of its investment and violated its treaty rights of fair treatment," Scotiabank said in a statement.

The bank said it, and its shareholders, experienced "significant damages."

Among other things, Scotiabank alleges that the Argentine Central Bank prevented Scotiabank Quilmes from paying a note which came due, refused to provide it (but not other banks) with additional liquidity during Argentina’s banking crisis, and further obstructed Scotiabank Quilmes’s attempts to restructure and reopen.

The Argentine Central Bank subsequently pulled Quilmes’s licence to operate. Scotiabank took a $540 million after-tax charge to cover its exposure and loans through its Quilmes subsidiary.

Under terms of the 1991 Protection of Investments Treaty signed by Argentina and Canada, Scotiabank’s claim will be dealt with by a three-person arbitration panel. One panel member will come from the bank, one from the Argentine government, and a third panel member must be agreed to by both sides.

Scotiabank share were off 50 cents at $39.15 on the TSX.