A Dutch unit of the packaging company headed by chief executive Tony Smurfit filed a petition against Venezuela last year in the US in an effort to enforce an arbitration award made in its favour after the government of the South American country seized its assets there.
Between 2003 and 2018, the Venezuela government – first under president Hugo Chavez and later under his successor, Nicolas Maduro – “engaged in a series of actions and omissions, including expropriation” that “destroyed the value” of Smurfit Kappa’s investment in the country and deprived it of control of its business there, the packaging group told the New York court.
Smurfit Kappa finalised a deal last year to merge with US-based peer WestRock, with the enlarged group becoming Smurfit Westrock.
For a number of years after Venezuela’s economy started to collapse during the last decade, its government had zeroed in on Smurfit Kappa’s operations.
It had production plants in Caracas, as well as other cities to the west of the capital. It also operated paper mills, a forestry unit, a sales office and a recycling plant in the country.
Its operations in the country were seized by the government in August 2018, with some employees arrested.
Tony Smurfit, CEO of Smurfit Westrock. Photo: Bloomberg
The group said the Venezuela government subsequently failed to respond to its Vat refund requests in a timely manner, or at all. The packaging company said the government also impeded its ability to repatriate distributable profits in a timely manner, or at all.
The company then took a case to the International Centre for Settlement of Investment Disputes, which found in Smurfit Kappa’s favour on a number of grounds.
It awarded Smurfit $395m with interest compounded from 2018 until the date of the award in 2024. The company was also awarded $4.5m in costs, the interest on which is compounded from last year until the date of payment.
The defendant has not responded, and the plaintiff has taken no additional steps to prosecute this case
The government of Venezuela was deemed served of the notice of the petition filed in New York on February 1 this year. It had until April 2 to respond.
“The defendant has not responded, and the plaintiff has taken no additional steps to prosecute this case,” noted the New York court. “Thus, the court orders the plaintiff to file an affidavit of default by May 6, 2025, or show cause why the case should not be dismissed for failure to prosecute.”
Tony Smurfit said in 2018 that agents from Venezuela’s military counter-intelligence had also been harassing Smurfit Kappa workers in the country.
Although Venezuela’s economy was being devastated and marked by hyperinflation, Smurfit Kappa was able to keep manufacturing products at its facilities in Venezuela for export.
Mr Smurfit revealed in 2019 that the company spirited 23 employees – all Venezuelan nationals – from the country in 2018 to protect their safety.
The employees were moved from the country before its borders were closed and redeployed at other Smurfit Kappa facilities.
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