EXHIBIT 99.1
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MACHULAK, ROBERTSON & SODOS, S.C.
A Limited Liability Service Corporation
MILWAUKEE OFFICE BROOKFIELD OFFICE
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JOHN E. MACHULAK - Court Commissioner Of Counsel
SUSAN R. ROBERTSON SIDNEY SODOS
EUGENE BYKHOVSKY SIDNEY SODOS, S.C.
HARVEY HELD
1733 NORTH FARWELL AVENUE TELEPHONE: (262) 785-5500
MILWAUKEE, WISCONSIN 53202 FAX: (262) 785-1100
TELEPHONE: (414) 271-0760
FAX: (414) 271-6363
November 17, 2011
Via Email
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Professor Emmanuel Gaillard, President
Professor Michael C. Pryles
Professor Christoph Schreuer
c/o Mr. Marco Tulio Montanes-Rumayor
Secretary of the Ad Hoc Committee
ICSID
1818 H Street, NW
MSN U3-301
Washington, D.C. 20433
Re: Commerce Group Corp. and San Sebastian Gold Mines, Inc.
v. Republic of El Salvador
ICSID Case No. ARB/09/17
Dear Sirs:
In response to Mr. Montanes-Rumayor's letter of October 24, 2011,
regarding the request for an advance of U.S. $150,000 for expenses in
this case, I am writing to you on behalf of Commerce Group Corp. and San
Sebastian Gold Mines, Inc. ("Commerce" and "San Sebastian"). Mr.
Montanes-Rumayor's initial request was made on August 17, 2011. While
Commerce and San Sebastian are actively engaged in efforts to satisfy
this request, with great regret I am advising you that they are unable to
pay the requested advance at this time.
I have had several telephone conversations with Mr. Montanes-Rumayor
regarding this matter and have tried to keep him abreast of developments.
However, I want to make certain that the ad hoc committee is also aware
of the current situation, which I hope to fairly summarize in this
letter.
Commerce and San Sebastian filed their submission for an annulment on
July 11, 2011. Both before and afterwards, they have been continually
engaged in efforts to obtain the resources required to pursue an
annulment of an award that they believe is very unjust. Historically,
Commerce and San Sebastian were engaged in exploration and production of
gold and other precious metals in the country of El Salvador since 1968,
interrupted by El Salvador's civil war
Professor Emmanuel Gaillard, President
Professor Michael C. Pryles
Professor Christoph Schreuer
November 17, 2011
Page 2
between 1978 and 1987. In 2006 the Republic of El Salvador declared a
country-wide moratorium on precious metal mining and revoked the
companies' permits for both production and exploration. As a result of
the moratorium, Commerce and San Sebastian were unable to obtain revenue
from the production of gold or to develop their business.
After efforts to resolve this situation with the Republic of El Salvador
failed, on July 2, 2009, Commerce and San Sebastian filed a Notice of
Arbitration under CAFTA-DR and the Foreign Investment Law of El Salvador.
The expense of these proceedings strained the resources of Commerce and
San Sebastian, but they persisted largely with the help of investors. On
March 14, 2011, the Arbitration Tribunal dismissed their notice of
arbitration on jurisdictional grounds, which are now being challenged.
Afterward, Commerce and San Sebastian sought to muster their resources
and move forward. However, a number of events have not only been
financially damaging, but also, have been very discouraging to investors.
On March 31, 2011, I sent the enclosed letter to the indicated ministries
in the Republic of El Salvador. One object of writing was to obtain the
$55,052.95 surplus from the payments that Commerce and San Sebastian had
on deposit for their IVA tax plus the security deposit in the amount of
$14,723.07 that Commerce and San Sebastian had on property owned by the
government and leased by Commerce and San Sebastian. Commerce and San
Sebastian never received the requested deposits from the Republic of El
Salvador, nor did I receive a response to my letter of March 31, 2011.
Commerce and San Sebastian had substantial real and personal property in
the Republic of El Salvador. In the last few weeks, Commerce and San
Sebastian were advised that their mining equipment at the San Sebastian
Gold Mine site was stolen and sold for scrap. Commerce and San Sebastian
have information that this equipment, which cost well over $200,000 (not
including accessories and the cost of transporting and installing it at
the San Sebastian Gold Mine) was sold for $50,000 or less. This was
reported to the National Civil Police of La Union in the Republic of El
Salvador, and apparently, an investigation was conducted on November 11,
2011. Before this occurred, threats were made to the companies'
representatives who reside in the Republic of El Salvador and who were
trying to do their best to monitor the situation. They have been
intimidated, called into question for remaining loyal to Commerce and San
Sebastian, and have even been prevented from entering the mine site.
Commerce and San Sebastian have also learned that in the last few weeks,
there has been aggressive, unauthorized mining at its San Sebastian site.
Commerce and San Sebastian have reports that as many as 500 local
individuals moved equipment to the site to conduct an unauthorized mining
operation. The police have been contacted on this. However, from 2006
forward, there has been continuous unauthorized mining at the San
Sebastian, while the
Professor Emmanuel Gaillard, President
Professor Michael C. Pryles
Professor Christoph Schreuer
November 17, 2011
Page 3
moratorium on mining precluded Commerce and San Sebastian from conducting
any mining activity.
I realize justice does not come without a cost, but respectfully submit
that Commerce and San Sebastian have been and are continuing to do their
best to satisfy the financial requirements of the ICSID. Commerce and
San Sebastian would certainly authorize the Republic of El Salvador to
send to the ICSID the $55,052.95 surplus and the $14,723.07 described
above.
Commerce and San Sebastian understand that under the rules if they cannot
make the advance payment required by the ICSID, these proceedings can be
suspended. If the Committee suspends these proceedings, Commerce and San
Sebastian pledge that they will continue to do whatever is possible to
muster the resources needed to put these proceedings back on track.
However, as matters stand, Commerce and San Sebastian are unable to wire
the requested payment.
Thank you for your kind consideration.
Respectfully yours,
/s/ John E. Machulak
John E. Machulak
Milwaukee Office
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JEM:emk
enclosure
cc: Mr. Luis Parada
Derek Smith, Esq.